How to Reduce Employee Turnover in Your Small Business

Employee turnover and retention are big challenges for small businesses. Here are nine strategies to help you motivate and retain your staff.

Reducing employee turnover is becoming an increasingly important issue for businesses. The combination of a booming economy, growing job marketplace, and low unemployment rates is giving many employees the confidence and desire to seek new job opportunities. According to a recent report, 43% of workers plan to look for a new job by mid-2020.  

That’s a scary statistic for two reasons. First, the cost of replacing an employee is high. Second, there’s a shortage of skilled labor in many industries. Those problems become major challenges for small businesses that need to compete with bigger corporations to attract good employees.

How much does employee turnover cost?

The answer depends on many factors such as the skill level of the worker, the frequency with which you need to replace employees and a business’s geographic location. But in general, replacing a single employee can easily cost thousands of dollars even if you don’t use a recruiting agency. The costs include things like hiring a temporary worker or paying staff overtime to take over the work of the departed employee, the cost of advertising the job, the cost of the time spent culling through resumes, interviewing candidates, and ultimately onboarding and training the new hire. 

On top of all of those costs are the losses that are harder to measure such as loss of any specialized knowledge or skills the individual brought to their position, and the effect on company morale or client relations that result from the loss of the employee.

Why is it difficult to replace employees?

Yet another reason that employee turnover is troublesome for small businesses is the increasing difficulty all businesses are having finding employees with the needed job skills. Very low unemployment rates create labor shortages in some industries and allow workers to be choosier about where they apply and what job offers they accept. A 2019 NFIB report noted that 88% of small businesses looking to hire workers found few or no qualified people to fill the positions.

The cost and difficulty in recruiting employees make it critically important for small businesses to focus on employee retention.

How to Reduce Employee Turnover

There’s no magic formula for retaining employees. But there are steps businesses – even small businesses – can take to keep their employees happy and keep turnover to a minimum.

Hire the Right People

The first key to reducing employee turnover is to hire the right people. When you have a job opening to be filled, you want to fill the position as quickly as possible. But if you don’t take the time to analyze the position and understand what skills the employee will and won’t need, you may wind up hiring someone who isn’t a good fit for the job. Before you write a job description or place an ad, put your requirements down in writing. Use our free Job Analysis form to help you define your needs.

When you are ready to interview candidates, plan your interviews in advance and have a list of questions you want to discuss with the job candidate. Doing so will help you focus on how well the candidate matches the job requirements, instead of being by less important details such as their appearance, who they know or where they went to school.  Finally, don’t forget to check references and ask former employers about job performance before you offer a job to an employee.

Offer Competitive Pay and Benefits

If you want to keep good employees, you have to offer wages and benefits that are in line with what other companies are paying in your location. Take the time to research the going rates for jobs in your company at least once a year. and have salary research tools that can be helpful in determining the going rates in your area.

Understand Employee Expectations

A good salary is usually at the top of the list of employee expectations. But it’s not the only thing that motivates an employee’s decision about staying with or leaving an employer.  Other key factors include the respect and recognition employees are shown, the nature of the workplace environment, the way they are treated by bosses and coworkers, and the training and support they are provided.

Provide Training and Orientation

A worker’s first day and first weeks on the job are critical to retention. An orientation and introduction to the firm and coworkers go far in putting the “new kid on the block” at ease and help them understand their new job. Be sure they are provided with adequate training, no matter how simple the job may seem. A written list of tasks that need to be done, guidelines for doing them and the contact info or resources needed to get the work done will help the new hire settle in more quickly.

Keep an Eye on Your Managerial Style

Let’s face it. Many people flee their jobs because of top management or the manager of their department The reasons are varied but include:

  • Negative or disrespectful words, attitude or actions
  • Micromanaging employees
  • Employee favoritism/inequities
  • Unreasonable workload or overtime demands
  • Rigid rules with no room for flexibility
  • Devaluing/disinterest in employees’ ideas or suggestions
  • Lack of communication with about goals, procedural changes, and company rules (“But Mr. Smith, the last time you said to do it this way. Now I’ll have to do the whole project over again.”)
  • Lack of praise for a job well done

Remember, always treat your employees the way you would want to be treated. 


Employees need to feel that their work is meaningful and beneficial to their organization. Keep the fire lit under their internal motivators of purpose and passion. Do this in every way you can. Start by sharing testimonials you receive from customers, particularly when a customer names an employee by name. Post those great testimonials on your bulletin board, your company website, and social media pages. They not only validate your business, but they also show named employees that you are proud of their accomplishments. Consider setting up a rewards program to recognize outstanding performance by employees, or providing training courses that will improve employee’s job skills and let them move up to higher positions.  And be sure to communicate your business’s future goals and how employees personally fit into and play an important part in conquering those goals. Recognition and praise go a long way in retaining your employees.  

RELATED: What Really Motivates Employees

Develop a Sense of Fun and Community

It doesn’t hurt to lighten up now and then. Like the Proverb says, “all work and no play makes Jack a dull boy.” And hard work should certainly be rewarded on occasion.

Start some company traditions like a once-a-year “Food of All Nations Day” where people bring in dishes from their native lands. If funds allow, have an annual company picnic or holiday party. As a change of pace, have an occasional in-office “social” where you bring in 6-foot heroes sandwiches and salads to give everyone a free lunch, or perhaps provide ice cream and make-your-own-sundae fixings for an afternoon break.

Spruce Up Your Workplace Appearance

No one likes to work in an environment that’s dull and depressing. Look at your space as someone who has never seen it before. Is it cheerful to walk into, or does the office need to be repainted or re-carpeted? What about the break room? Would a few plants make the space seem more inviting? What about seasonal decorations? 

Offer Flexible Work Arrangements

If possible, be flexible about the times of days your employees start or finish work. Could an employee who has to drop the kids at preschool start 15 minutes later each morning and work 15 minutes later in the afternoon? What about an employee who needs to leave an hour early? Could they start an hour early? Is there a way you could let employees work from home for a day or two if they have a sick child to care for?  If a true emergency happens, do you let the employee know it’s ok to leave … and that you won’t dock their pay?

Flexibility in work arrangements can be as important as the rate of pay for some employees. It’s an inexpensive way for small businesses to build employee loyalty and trust and minimize employee turnover.

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