Your employees are the backbone of your business, therefore high employee turnover can have a negative impact on your business’s performance. It can also decrease productivity and reduce business morale.

It is crucial to address high employee turnover promptly, but more importantly, prevent it from happening in the first place. As a sole business owner, you will already have other pressures and other priorities to ensure the continued growth of your business, therefore you want to ensure that your employees are incentivised and retained so that you have a strong team driving your business forward.  
 

Some of the negative impacts of losing employees include: 
 

High employee turnover brings financial costs with it. When you take into consideration the costs of the recruitment process, hiring expenses, and the loss you might face by employees leaving, it creates a significant financial strain to your business.  

Decrease in productivity among employees

The departure of a key employee often leads to decreased productivity within a team or department. Colleagues may struggle to fill the gap, leading to burnt-out staff and incomplete projects.

Difficulty recruiting 

High employee turnover can impact the recruitment process as people may be put off by working for a company with such a high retention rate.  

Pressure on business owner 

As a sole business owner, you will find your time being sapped with recruitment admin. From creating job adverts to interviewing and creating successful employee morale, all of these tasks are eating into your time which you could be better spent growing your business. The financial burden can also bring stress and anxiety which could start affecting your personal life too.  

Low morale  

Losing a key employee can affect the morale of the remaining team. They may feel demotivated or anxious about the future, leading to decreased employee engagement and potentially creating a negative work environment. 

Difficulty retaining top talent  

Your key employees may not want to work in a constantly changing environment, where employees are coming and going… Not only can this impact losing your current key employees, but it can also affect your ability to attract new talent in the future.  

A solution to high employee turnover and to ensure that you are retaining employees, is bringing some key employees into equity ownership within your business. Although this may seem daunting, the outcomes you would benefit from are likely to outweigh your initial concerns. The main outcomes are: 

• Goal alignment and incentives for key employees 
• Retention of key employees  
• Employees benefit from long-term equity growth  
• Potential opportunity for short-term financial incentives as well as long-term 
• A great way to retain and incentivise key employees is by implementing an employee share plan. A lot of value can be gained from employees having an ownership stake in the business such as higher productivity, more leadership, less owner dependence, faster growth, and more innovation.  Employees are significantly less likely to consider jumping ship when they know that they have their own stake in the business, and should be considered as vital part of your strategy to retain key employees.  There are several routes of achieving this, and it is important you take professional advice. 

Staff turnover is an inevitable aspect of running a business, and it can impact business owners negatively. By addressing staff retention in your business and adopting strategic approaches to minimise the time, stress, and costs associated with employee turnover, you can maintain business continuity and keep your operation succeeding.  

As always, we recommend speaking to your advisors about the best steps before making any changes. If you would like to discuss employee share ownership, please get in touch. Our tax advisors are skilled in such areas and can navigate the process smoothly. For more information on how we can help you and your business, please contact us via info@oldfieldadvisory.com or call 02476673160 for support and advice. Let’s work together to grow and strengthen your business.

Please note: This article is provided for information only and was correct as at time of writing (19/03/24). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.