More than five million new small businesses were started in 2021—a record year for entrepreneurship. And as these new businesses grow, so do their teams. More than half of small business owners say they plan to expand their workforce this year, according to data from QuickBooks. One in four says hiring new talent is their top priority in 2022.
But finding skilled employees is a challenge. In fact, 20% of small business owners say the skills shortage is the biggest threat to their business this year. And more than half say it's getting harder and harder to hire talented workers.
Keeping skilled workers has proven to be just as tricky. More than 40% say employee retention is a challenge. Today’s employees want more than basic benefits and pizza parties—and they’re not afraid to shop around. With so many options on the market, employers are having to work harder to keep employees engaged.
Going beyond basic benefits
To combat employee turnover, small business owners are increasing employee pay, benefits, and bonuses for new and existing employees. In fact, 50% of business owners said they plan to increase pay for existing employees at the next opportunity, and 42% plan to increase employee bonuses.
The majority of small businesses (75%) already offer employee benefits, including paid time off and basic health care. Many are beefing up their offerings this year to improve employee retention and attract quality candidates.
But a competitive salary and benefits package might not be enough to attract and retain talented workers—many employees consider these baseline requirements. Things like a healthy work/life balance, flexible work options, and an empathetic leadership team are key to your organizational culture and employee retention.
To find out what’s really keeping employees invested in their employers, we turned to a few businesses with a proven track record. These are their secrets to stellar employee retention rates:
1. Focus on diversity
Today’s employees crave diversity, equity, and inclusion (DEI) from the businesses they work for. According to data from Glassdoor, more than three in four employees say a diverse workforce is an important factor when evaluating companies and job offers. And nearly a third say they wouldn’t even consider working for a company with a lack of diversity.
DEI in the workplace enhances every employee’s sense of belonging, especially those in underrepresented groups. What’s more, teams with a focus on DEI tend to foster more diverse ideas and make smarter business decisions. When it comes to DEI, everyone benefits: diverse companies are notably more profitable, according to a recent McKinsey study.
The team at Pacaso, a second home real estate marketplace company based in California, landed the No. 6 spot on Glassdoor’s Best Places to Work this year, thanks in part to their focus on DEI. “Our crew loves working at Pacaso because we are a mission-driven company, have a seasoned leadership team with the expertise and vision to deliver on our mission, and cultivate a culture that’s focused on DEI and transparency,” said Nina Tran, CFO at Pacaso.
If diversity hasn’t been your top priority, 2022 is the year to make it one. Show your team you’re committed to DEI by being open and transparent about the gaps in your business, seek feedback from employees (especially those with diverse backgrounds), and clearly communicate your initiatives to improve.
2. Consider a remote or hybrid workforce
In the aftermath of the pandemic, nearly half of small business owners (49%) reported that they have remote workers. For small businesses looking to grow their workforce, offering remote work not only opens the door to a more diverse and talented workforce beyond your local community, but increases employee retention. According to research from Owl Labs, half of workers said they would not return to jobs that do not offer remote work.
The team at Pacaso have this figured out, as well. “We offer our crew flexibility and freedom of place through a distributed workforce,” said Tran. “All while still investing in moments that bring the crew together, both virtually and in person, for collaboration and connection.”