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9 Strategies for SMEs to Improve Employee Retention

9 Strategies for SMEs to Improve Employee Retention

Small businesses often believe their size limits their success. SME managers face many unique HR challenges, a leading one being talent retention.

Very often, existing employees quit small businesses to take jobs with larger companies that have more to offer in terms of brand equity or wages and benefits. As a result a small business ends up in an expensive and recurring cycle of hiring, training and replacing employees. Such a pattern gnaws away at their profitability and stability.

We all understand that retaining existing employees costs less than acquiring new talent. So how can small businesses make sure their employees don’t jump ship at the slightest temptation?

1. Offer Competitive Pay & Perks

Hands down, the biggest reason for employee attrition is money. Below market standard or stagnant wages are the top reason why employees want to quit a company – big or small. If annual increments are missing or minimal and bonuses aren’t happening, employees feel unappreciated and undervalued.

While a small business may not have very deep pockets, it still makes sense for them to offer competitive pay. One must keep in mind that the cost of attracting new talent, on boarding and training them can far outstrip any bonus/increment that your existing employee deserves.

What can sweeten the deal further is providing multiple benefit packages like health insurance, life insurance plans, retirement funds, and allowing employees to pick and choose which are best for them.

Yet, compensation is only a part of the solution, but not the whole solution. Employees aren’t all about money. The following non-monetary measures can help create an overall positive work environment and aid your small business in staying competitive and profitable.

2. Reward and Recognise

In addition to pay and perks, it's important to acknowledge that many employees are driven by recognition and a sense of being appreciated. Appreciation is a universal human need and key to employee engagement and productivity. A ‘pat on the back’ makes everyone feel good.

Employees acknowledge the appreciation expressed through recognition of their good work because it confirms that their work is valued. Employees who consistently perform well should be recognized and congratulated in front of other employees, as well as management. Rewards like special projects, training, event participation etc. can show that a company holds an employee in high esteem.

69% of employees would work harder if they felt their efforts were better appreciated Source:

Whether you give out gift certificates, paid time off, or take them out to lunch, the cost of a recognition system is quite small for a business. In fact, sometimes it is even free – e.g. a thoughtful email on the employee’s first day, birthday, work anniversary or project completion, will always be cherished.

It’s for you to decide how to most meaningfully appreciate your team members and with what rewards. Just make sure that the recognition is timely, frequent and publicly visible.

3. Offer clear and rapid career progression

Another driver of employee turnover is allowing them to stagnate in their current role. People who stay longer in the same job without a title change are significantly more likely to leave for another company for the next step in their career. It’s a no brainer, really.

By providing clear & definite paths for employees, moving them through job titles regularly, over time, organizations can boost perceived career opportunities for employees and curb voluntary attrition.

Directly addressing the career advancement needs of your employees will demonstrate that the company is dedicated to their growth. When employees feel invested in, they engage in work proactively. And engaged employees are happier, more productive, and almost 90% less likely to leave their jobs.

4. Clear Job Description

Do your employees have clarity about what is expected of them? Role clarity is an essential precursor of productivity, and a lack of it can cause undue stress and confusion.

When an employee has clarity about his/her role, they understand specifically what is expected of them. They know what tasks need to be accomplished, what their specific objectives are, how their work impacts the overall vision of the business, and how their work will be evaluated.

Organizations that offer clear cut job descriptions (and stick to them) have significantly higher levels of satisfied workers and lower rates of turnover. Having a clear understanding of roles affects more than productivity. It also improves trust and increases the odds of an employee committing to your company for a longer period of time.

Many employees at small businesses feel they get saddled with unsolicited work roles and responsibilities that were never discussed at the time of interviewing. Some small organizations don’t have any formal job descriptions at all. This translates to unpaid/unrecognized additional work that interferes with their employees’ work-life balance and increases stress. If staff members feel that they’re given the responsibility of too many projects with fewer resources, they’re going to burn out pretty soon. This is why many choose to move to bigger companies with more structure and predictability.

SMEs would, therefore, do well to draw up formal job descriptions. These should be well thought-out and should cover the majority of what you expect from that role. It is wise to hire professionals / consultants to do this, if an organization lacks an HR department of their own.

4. Low Relationship Conflict

It is often noted in HR circles that people don’t leave companies, they leave managers. You must have heard many stories around “horrible bosses”? They come in all sizes and shapes. Some are outright rude and hostile, while others may be just hands-off, passing on the blame for everything that goes wrong.

Bearing these everyday indignities over a long period can have a very detrimental effect on employee morale and often results in good employees quitting. Rude behaviour, micro-managing, blame-games, playing favourites and retaliations are among the top reasons that increase employee turnover.

It is, therefore, important that a small business keep an eye on the management practices of their managers/leaders. Regular 360 Degree Feedback surveys or even shorter pulse surveys can help get these insights.

Once a problem is identified with any of the managers, the organization must take proactive steps to fix it and stem the outflow of their team members.

5. Communicate – Open Door policy

The days of managers working in silos are long gone. Today’s employees want a seat at the table and rightly so. They expect employers to listen to their questions, address their concerns, provide timely feedback and implement their suggestions.

And, to be honest, such open, two-way communication is a win-win because it helps employees feel connected and accountable and employers also gain valuable insights into what their employees feel towards the work culture, clients and their co-workers.

Conversation on personal and professional development of employees will make it easier for them to confide and open up to their senior leadership and will also give a perspective to the organisation regarding the employee’s future plans regarding the organisation – so they plan to stay or leave.

Companies who implement regular employee feedback have turnover rates that are 14.9% lower than for employees who receive no feedback.

Some easy ways to increase the communication between employees and the organisation is by scheduling regular staff meetings, encouraging supervisors and managers to routinely provide constructive feedback. An anonymous engagement survey is also a good place to start.

6. Flexible work schedules

The issue of work-life balance is a much-discussed issue when it comes to employee happiness, and for a very good reason. When workers are forced to fit both work and personal demands within the confines of a structured workday, it causes stress to skyrocket.

In fact, rigid 9-to-5 workdays are a leading barrier to women’s workforce participation and is a particular challenge for working parents. For employees who are also caregivers place more importance on flexibility than compensation.

Flexible work schedules enable employees to maintain their required hours while working around activities that would normally necessitate time away from the office. Access to flexible work arrangements can help mothers stay in the workforce or come back to work after taking a caring-related break. It creates an environment for better management of life’s demands.

And it’s not just employees who reap the rewards of flexi-work. From increased productivity to fewer missed days and significant savings to a more loyal workforce, employers also benefit greatly from adopting flexible schedules.

The most common flexible working arrangements used by organisations are moving from full- to part-time hours, variable starting and finishing times, telecommuting/virtual work and flexitime.

7. Invest in Training & Development

A good induction into the company, the job role, on-going training opportunities, etc. - can help the new hires feel valued. Employees who receive appropriate training become more valuable to an organisation, and also feel more valued in return. They feel empowered and confident in taking decisions and handling any task that may come their way.

45% of millennials are pleased with their career path, and 49% with training and development programs at their company (LaSalle)

This proves to be beneficial for the company too, and plays an important role in employee retention for long term. An organisation that invests in its people will gain a reputation for investing in their employees and being forward-looking. More often than not, this helps to attract some of the best talent in the market.

All around us we see large, multinational companies retaining their employees while ensuring their high performance. Training is one of the most important factors in employee retention in these organizations.

58% of employees (62% of Millennials and GenX) say that professional development contributes to their job satisfaction (CompTIA)

Training programs can be in the form of on-job learning, mentoring programs, individual training, giving access to apprenticeships, specific professional qualifications or soft skills training.

8. Market the advantages of working in a small organization

While it may seem like small businesses are inherently disadvantaged because of their size, their employees also enjoy some advantages that their peers in larger organizations don’t. Good workers are the proverbial big fish in a small pond. That means they have high visibility from their very first day and their creative ideas and hard work is seen directly by the people at the top.

Employees at small companies are also often able to gain exposure more quickly to different functional areas of a business. In a large conglomerate, they will likely just see a tiny piece of what keeps the business running.

In a small company, an employee would almost certainly get a chance to take part in projects that cross over into different areas. Small firms often provide great opportunities to their employees to gain different work experiences and discover new skills.

Small firms often offer more flexibility on how projects are carried out. In a small company, there isn’t as much bureaucracy, so ideas and projects usually get implemented at a faster pace. Small = More Agile.

9. Hire Well

Finally, every business, large or small, must focus on investing in and fine-tuning their hiring process.

Countless companies get caught in the trap of a hurried hiring because they felt they needed to hire someone quickly - urgency took precedence over quality. Sometimes a position truly can’t wait and other times we become so enamored by the seemingly “perfect” candidate that we don’t want to lose them to competition.

Whatever the reason may be, it is never advisable to rush a hiring decision, especially at senior levels. Take your time to explain the job and assess a candidate to ensure not just a skill-fit but also a culture and personality fit. Also run sufficient background checks – formal and informal.

A candidate who is a good fit is always less likely to leave the organization in a hurry.

Conclusion - Follow these employee retention strategies will help you retain your best, reduce costly turnover and create a more competitive workforce, for your small business.


1 : Why is employee retention important for small and medium-sized enterprises (SMEs)?

Answer : Employee retention is crucial for SMEs because it helps reduce the expensive cycle of hiring, training, and replacing employees. It contributes to profitability and stability, which are vital for the success of small businesses.

2 : What is the main reason employees leave companies, including SMEs?

Answer : The primary reason employees leave companies, regardless of their size, is often related to inadequate compensation. When wages are below market standards or remain stagnant, employees feel undervalued and unappreciated, leading to attrition.

3 : Besides competitive pay, what other non-monetary measures can SMEs adopt to improve employee retention?

Answer : In addition to competitive pay, SMEs can improve employee retention by offering recognition andrewards for good work, providing clear career progression paths, ensuring clear job descriptions, and maintaining low relationship conflict within the organization.

4 : How can clear job descriptions contribute to better employee retention in SMEs?

Answer : Clear job descriptions help employees understand their roles, objectives, and the impact of their work on the organization. They reduce stress and confusion, improve trust, and increase employee satisfaction, which ultimately leads to higher retention rates.

5 : What is the role of communication and an open-door policy in employee retention for SMEs?

Answer : Open and transparent communication, including an open-door policy, fosters a sense of connection and accountability among employees. It allows employees to voice their concerns, provide feedback, and feel valued. Such communication significantly contributes to employee retention in SMEs.



Ankur Manchanda

Director | Co-Founder