Subhi Dani – Business Consultant
When companies start a business in China, sooner or later they have to hire employees to work for them.
It is common for companies that have a business in China to experience high staff turnover. Employees are no longer bound to only one company for all their careers.
They can leave the company for different reasons, such as money or lack of satisfaction and professional growth.
Reducing the turnover rate and increasing the employee retention rate is becoming a challenge for many companies operating in China.
In this article, we want to give you an overview of the current situation and strategies that can help your company to increase the employee retention rate in China.
What is the meaning of employee retention?
In simple terms, employee retention is the ability of an organization to retain its employees.
It is the organizational goal of keeping talented and critical employees and reducing turnover by offering a positive work atmosphere to promote engagement, showing appreciation to employees, providing competitive pay, benefits, and healthy work-life balance.
It also refers to the various policies and practices which let the employees stick to an organization for a longer period of time.
In today’s environmental conscious behavior society, companies that are responsible for environment and sustainability practices can attract and retain employees.
This is because employees like to be associated with companies that are environmentally friendly.
A problem to consider is that whenever a coworker leaves the company, colleagues might start wondering if they should start looking for a new job too.
That’s why employee retention and job satisfaction should be on high priority for every organization.
Some numbers about employee retention in China
Employee retention is a big challenge in China. A large number of employees leave their jobs every year.
Hiring and employee retention seem like an easy and simple job with strategic approaches and mythologies but it’s not the same in China.
You must be good enough in the employee retention technique if you want to set up a business in China.
Research says that most of the employees leave the organization out of frustration or issue with the managers or other team members. In some cases, low salary, lack of growth, and motivation.
A study made by LinkedIn, for example, shows that the average time Chinese employees stay with one employer is 22 months.
Interesting data is the one related to big and small companies.
Usually, companies in tier 3 and tier 4 cities have a higher retention rate than companies in tier 1 cities.
One might argue that some employees in third- and fourth-tier cities do not have the educational background required to work in international companies and only commit to their employer because of a lack of mobility, but this does not explain the remarkable commitment throughout all ranks of employees.
One reason is the leadership style that is adopted in these small companies. A style that creates a personal attachment among employees.
A family-like relationship is created among employees and employer and this is one of the secrets that reduces employee turnover.
Employee retention and turnover in China – Two sides of the same coin
Employee retention and turnover can be considered two sides of the same coin. When you are able to reduce the turnover of the employees, you have higher chances to increase employee retention.
A study from AON showed that the employee turnover rate in China in 2016 was 20.6%, reaching almost 40% in some industries. We can also see that, despite the increase in salaries, a lot of employees still leave their jobs.
What are the motivations behind this?
Even if in most cases, money is a big motivation for employees to leave their jobs, it is not always like this. Factors like a friendly environment that let employees grow professionally and that take care of work-life balance is highly valued by the employees.
So, as we can see, the reduction of the employee turnover rate and the increase in the employee retention rate are two big challenges for companies in China.
Below we can take a look at three important factors that employees value on the workplace and that can help companies to increase employee retention in China:
- Employee Satisfaction: It means how satisfied employees are with the elements like their jobs, employee experience, and organization they work for. It’s a key metric that can help to determine the overall health of any organization. That is why many organizations conduct a regular survey to measure and track the trends over a period of time;
- Good work culture: It refers to positive workplace culture which improves teamwork, raised morale, and increase productivity and efficiency and helps in enhancing the retention of the workforce;
- Career Growth: Old Saying “If you are not moving forward, you are moving backward.” This plays a key role in employee retention. If an employee’s career grows faster, they understand the responsibility and sense the maturity with their employer.
Employee Retention benefits in China
Employee retention is an important aspect that employers have to consider when starting a business in China.
Retention of employees brings many benefits to the organization and the employees:
- High rates of employee turnover can harm organizations’ ability to carry out their mission. Diminished productivity and competitive advantage are among the biggest losses caused by employees leaving an organization. Focusing on employee retention – upfront – can help reduce the hassle and wasted time all around;
- Employee departures can also lower morale and spur more employees to leave the organization. Employee retention is important to build cohesion in the workplace, so workers can trust and depend on each other;
- Another negative effect of turnover is the impact on customers, who can notice that they are dealing with a continual flow of different people. Employee retention makes the employee feels happy. A happy employee passes the same feeling to their customers. They provide better service, anticipate problems, and give extra effort to make sure the company has a good reputation;
- Employee retention reduces the onboarding and training time of the new resources. No one other than HR knows better that it takes to find new employees, set up the interview rounds and salary discussions;
- Employee retention also increases overall productivity. Once an employee leaves the company the immediate impact is productivity. Most of the time the company has understaffing issues (positions are not filled for months means delays, overtime, and more frequent mistakes).
Formula to calculate employee retention
To retain employees, organizations use human resources technology for recruiting, onboarding, engaging, and recognizing workers and offer more work flexibility and modern benefits like physical and financial wellness programs.
Every organization invests time and money to groom a newcomer, make the newcomer ready to work and bring at par with the existing employees.
The organization is completely at a loss when the employees leave their job once they are fully trained. Employee retention takes into account the various measures taken so that an individual stay in an organization for the maximum period of time.
Before using the strategies below, it is better to check what is the current employee retention rate in your company. To do this, we want to share with you a formula that can calculate the rate:
- Take your total number of employees in the company. Then take your number of employees who left during the period you want to measure. Divide the number who stayed in the business by the total number, and express that as a percentage.
So, let’s say that you have 150 employees at the start of 2019, and 34 left during the year, you then have 116 employees at the end of the year. You divide 116/150 to get a 77.3% retention rate.
There is always room for improvement and below you can find some tips to increase the employee retention rate in China:
Tips and strategies to increase the employee retention
- Leadership – In China, employees are used to having a different leadership style. They mostly respect the leaders that show a lot of care, power, and strategy. Even if the employees want to be independent, they are still dependent on the leader’s guidance;
- Competitive Bonus System – This always motivates the employees to stay in the company and gives the opportunity to increase their salary. Based on how they perform company sets some sort of bonus to the employees;
- Chinese Company Culture Awareness – Chinese culture still plays an important role in the workplace. On holidays, employers give gifts to employees. During the Mid-Autumn Festival, for example, employers give a traditional kind of cakes called Mooncakes and some also give money in a red envelope;
- Employee Recognition – It’s always important in any organization to have a system that recognizes employee efforts. As the market is volatile, goal setting is always necessary.
How a PEO can help
Every company spends a lot of time and effort to train their employees so that they can do effective work that will be beneficial for both the employee and the company. After spending a lot of time and effort no company wants their employee to resign.
Every company wants a commitment from their employees so that they can grow in the market. Employees have the same expectations as their company that they will trust him and help him to grow as well.
Being a PEO company, HROne can help their client to grow in the market. Our approach is not just the growth of the company but also the growth of the employees as it is the major factor why employee resigns from any company.
We at HROne have dedicated the HR department which always helps their employees (including the dispatching employees) with all the updated policies so that each and every employee will get the benefit and even our customers will be able to retain their employees in a better way.
Being their nominal employer we help the dispatch employees to celebrate their birthday and other festivals and we always set up some meetings to know them, to check if they are satisfied with what they have expected with their job and whether they are able to maintain their work-life balance.
Contact us if you want to know more about our PEO services and how we can help you to enter China!