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How to improve employee retention in small business

98% of all businesses in Australia are small businesses, such as sole traders without employees, micro businesses with 1-5 employees, and other small businesses with 6-20 employees. Over a third of all small businesses have one or more employees and may be affected by hiring and retention issues.

Having responsibility for employees has been rated among the top stressors of owning a small business. This can include a variety of different responsibilities like rostering and pay, meeting legal obligations, as well as hiring and retention. While turnover is a normal part of running a business, it still creates stress for both you as the business owner, and any other employees left to cover work in the meantime. It may also mean you do not have enough resources to take on new work or opportunities.

Hiring new employees can be time consuming and expensive, and take your attention away from other parts of your business. It can decrease productivity and morale, particularly if turnover is frequent. Reducing turnover is not only good for your business, but good for keeping your own and your employees stress levels down. It is therefore important you do what you can to retain your existing employees.

While employees may leave for reasons outside of your control, such as moving or wanting a career change, there are still many factors that are in your control, such as working conditions and management style. In fact, employees often chose to leave due to workplace factors rather than the job and its duties.

Many of these factors relate to whether you have a mentally healthy work environment. Essentially, this means your workplace is somewhere people want to work, and is often related to non-monetary components of the job. Some features of a mentally healthy workplace that can contribute to employee retention include:

  • Flexible working arrangements (e.g. adjustable start/finish times, work from home opportunities, job sharing or long breaks)
  • Good job design (e.g. suited to skillset, variety of tasks, ownership of work, decision-making control or support from supervisor)
  • Recognition and rewards (e.g. verbal or written praise, physical rewards, new opportunities or responsibility)
  • Autonomy and job control (e.g. having a say in how work is done, ability to offer input into workplace)
  • Good workplace relationships (e.g. team building exercises, group outings, shared projects/tasks, scheduling staff lunch breaks together)
  • Work-life balance (e.g. reasonable working hours, ease of taking leave, occasional weekends off (for businesses that operate on weekends)).

By creating a mentally healthy workplace, you are likely to increase employee retention, while also reaping the other benefits of a mentally healthy workplace like engagement and productivity. While it can be difficult to compete with larger companies that can offer higher pay and benefits, creating positive workplace factors can often be easier in a small business. Every small business is different, so have a think about what factors you can introduce into your workplace to make it more mentally healthy.

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