The State of Employee Retention: How to Become an Employer of Choice in the New World of Work
As the Great Resignation is over and we welcome the Big Stay, do you have what it takes to be the employer of choice in the market?
During the Great Resignation, an unprecedented number of people quit their jobs. According to the Bureau of Labor Statistics, an astounding 47 million people quit their jobs in 2021 and 50 million people quit their jobs in 2022! While the reasons for this mass exodus are many, the tides have shifted, and worker turnover is down 16% from its peak in April 2022: from 4.3 million to 3.6 million in June 2023. As a result of this decreased quitting, this emerging trend has been coined the Big Stay.
The Big Stay: Why are people staying?
But why, after all this movement, are people now staying? And how can companies mobilize their workforce to its maximum potential now that the mass turnover has ended? This blog sums up key reasons behind the Big Stay and how companies can capitalize on this new labor force trend.
- Economic factors
Without a doubt, geopolitical and economic uncertainty are major players driving the Big Stay. High interest rates have caused many organizations to seek cost-cutting measures. Some include headlining layoffs from major tech companies. But they also extend beyond tech into companies like CVS, Robin-Hood, and others across industries. Interestingly, for blue-collar workers in industries like hospitality, construction, and retail, layoffs remain below pre-pandemic levels, likely because job openings continue to outpace available work for these roles.
- Workforce participation has rebounded
Workforce participation is near pre-pandemic levels for people 25 – 54 years old. Further, women, who dropped out of the workforce at significantly higher rates than men during the pandemic, have returned faster than anyone could have imagined. This means that the candidate shortage is waning. With more people returning to work, candidates have less leverage to negotiate historically large offers. In fact, pay gains for job switchers have decreased to 13.2%, down from its peak in April 2022 at 16.4% according to ADP Pay Insights. Now that companies are not struggling as much to find the best talent, candidates are losing leverage, and so the draw to leave has also decreased.
- Low tenure and high satisfaction are driving employee retention
Between the Great Resignation and the rebound in workforce participation, a huge portion of the workforce is new in role. Research shows that people tend to be highly engaged early on in their organizational tenure and have an average tenure of about 4 years before making a move. Further, The Conference Board found that in 2023, people are more satisfied than ever with work, especially amongst those who changed roles.
Beyond competitive compensation, they found that the cultural factors most linked to employee retention include flexibility, work-life balance, a reasonable workload, quality of leadership, and growth opportunities. So, while The Big Stay is partly reflective of market shifts, it is also a byproduct of the fact that many employees are new and satisfied with the culture and benefits of their employer.
Beyond competitive compensation, they found that the cultural factors most linked to employee retention include flexibility, work-life balance, a reasonable workload, quality of leadership, and growth opportunities.
How to become an employer of choice in the new world of work
During the Great Resignation, employers with the right culture and benefits edged others out to hire and keep the best talent in an ultra-competitive market. Now, workers are staying with companies that offer a flexible and growth-oriented culture. No matter the labor market, succeeding in the new world of work requires companies to build a culture focused on balance, wellness, belonging, purpose, development and progression, flexibility (hours/ location), and competitive compensation.
As the market tightens, it is likely that only the best talent will continue to have options for external mobility. This means that companies that fail to adopt these flexible and growth-oriented cultures will be vulnerable to losing their most critical talent. In contrast, companies that build this type of culture stand to keep their best people: those with the best ideas, the ability to execute those ideas, and those who will build institutional knowledge and strategy. Their people will be more engaged and put more of their energy into their work! They are more likely to become brand advocates, help recruit others, and take real ownership of their work—and they will stay with you to do that.
To learn more about how you can maximize your workforce as the labor market changes, join us on October 18th, where I will be discussing the Big Stay and how companies can create talent strategies that maximize employee retention and be the employer of choice.