As 2023 begins, experts are predicting a recession. During times of economic uncertainty, the need to focus on employee retention is a high priority for employers.
According to Citi Global Wealth Investment’s 2023 Wealth Outlook Roadmap, an estimated 2 million jobs could be lost nationwide, which could cause unemployment to rise above 5% this year if projections reach these estimates.
Even though the economic downturn may cause employers to lay off workers, employees may also choose to leave an organization voluntarily during this time to seek better opportunities.
However, retaining employees during a time of economic uncertainty is essential for preserving an organization’s performance, minimizing costs and supporting employee well-being. Skilled and experienced employees are crucial for maintaining and improving the quality of an organization’s products or services, and losing them can result in a decline in company performance. Further, losing employees can be costly in terms of the time and resources employers will have to spend on hiring and training replacements.
Retaining employees can also help to maintain morale and motivation within an organization, especially during times of uncertainty and stress. This article explores the impact of a recession on both employers and employees and discusses how organizations can retain employees during economic uncertainty.
Impact of a Recession on Employees
A recession can heavily impact an employee’s mental and physical well-being in the workplace due to the stress of financial instability and the looming fear of layoffs. Even with an increased chance of being laid off during a recession, employees may still choose to leave the workplace for a variety of reasons.
The following are some reasons an employee may quit during a time of economic uncertainty:
- A higher-paying job—In the face of a potential recession and layoffs, there may be a significant amount of job openings, and employees may quit their current jobs during economic hardship to look for higher-paying positions or roles with better benefits.
- Flexible working conditions—Employees may quit their current position if they feel the working conditions do not align with their needs. This often means seeking out hybrid or remote working conditions to achieve a greater work-life balance, which many employees seek during stressful times like a recession.
- Job security—Financial stress can create job uncertainty for employees. Particularly if employees are worried their organization may be conducting layoffs or downsizing, they may seek a new position offering more substantial career stability, which is often desired more than higher wages during economic hardship.
Impact of Employee Turnover on Employers
It’s evident that the potential for a recession in the near future may cause high rates of employee turnover. The impact of employee turnover during economic uncertainty can negatively impact employers in a number of ways, including the following:
- Talent shortage—Even without a looming recession, the current talent shortage is making it difficult for many workplaces to recruit candidates with an adequate skill level to perform vital job duties. A recession will only exacerbate these concerns, and finding new employees to replace talent may be increasingly challenging—making it all the more important for organizations to retain their staff.
- Increased costs—The cost of employee turnover is, on average, 1.5 times an employee’s annual salary. Hiring new employees means having to start the training process over with new hires, which can cost time and money.
- Negative shift in company culture—When employees leave organizations, there may be a negative shift in the workplace culture. Such a change in culture can affect employee well-being, which may cause remaining employees to become dissatisfied and potentially look for other jobs.
Strategies to Retain Employees
Retaining employees during economic uncertainty is crucial for the morale and productivity of a workplace. To help retain employees, employers can try some of the following retention strategies:
- Provide career growth opportunities. When employers invest in their employees’ professional growth, workers are more likely to invest in their careers at their current workplaces.
- Review current compensation packages. A compensation package includes employees’ salaries as well as other monetary rewards, including offered benefits. Both forms of compensation are aspects of a job that can both attract and retain employees.
- Recognize achievements. It’s essential for employees to feel that their hard work is appreciated. This can also help them feel a sense of purpose and belonging in the workplace. Employees who feel they are making a positive impact are more likely to stick around.
- Create open internal communication. During times of economic uncertainty, it’s crucial to be transparent and authentic with employees. Open communication helps build trust and teamwork.
- Promote work-life balance. With increased workplace stress, supporting employees’ mental health and well-being can go a long way in showing they’re valued both in and outside the workplace.
Conclusion
Retaining employees during economic uncertainty can be challenging, particularly if employees are looking for higher pay, job security and a change in working conditions. Prioritizing employee satisfaction and providing holistic benefits packages tailored to employee needs can help overall workplace morale and improve retention.
For further information on employee retention, follow our TIG Advisors blog or contact us today.
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