Employee Retention Policies

by Dennis Hartman - Updated September 26, 2017

Finding and keeping a stable job is essential to a worker's financial future. Job uncertainty makes it difficult to borrow money and plan for the future. Employee retention policies seek to help workers, as well as businesses, by setting limits for how many employees a business must retain over a given time period or during a major transition.

Definition

Local governments, such as cities and counties, set and enforce employee retention policies. This local level of jurisdiction gives each community its own way of setting retention standards for different types of businesses. Employee retention policies state what percentage of a company's workers must keep their jobs during a transition such as a transfer of ownership. They sometimes also specify how long a new owner must keep current employees on the payroll.

Purpose

The primary purpose of an employee retention policy is to provide greater stability for workers and their families. Workers who serve in fields with a high rate of ownership change or contract labor, such as grocery stores and local governments, know that, under the protection of an employee retention policy, they won't suddenly lose their jobs because the government changes contractors or when a new owner buys the business. If such changes occur, workers will have additional time to find a new job before employers can legally replace them.

Video of the Day

Brought to you by Techwalla
Brought to you by Techwalla

Types

Employee retention policies can be standalone policies that only protect workers or provisions of a more comprehensive policy. Standalone policies apply to workers in specific jobs and within the local government's jurisdiction. Larger labor policies, such as living wage laws and labor standards policies, might include an employee retention policy along with other provisions that cover special employee rights such as termination notices and minimum wage laws for specific jobs.

Effects

Besides protecting workers whose jobs might otherwise be in jeopardy, an employee retention program has additional effects on business and the local economy. Workers might be more willing to take traditionally unstable jobs knowing that their positions will be secure in the near term. At the same time, employers will save money that it would cost to dismiss, recruit and train replacement workers. However, entrepreneurs might be reluctant to do business in a community with an employee retention policy because of the restrictions it imposes.

Considerations

High rates of employee turnover cost businesses a great deal of money. The costs of replacing a worker include dismissal benefits such as severance packages, administering an exit interview, money spent on advertising for the open position and the cost of screening and interviewing applicants, not to mention the loss of productivity when a new employee replaces one with greater experience. Even in communities without an employee retention policy, businesses might institute internal policies that seek to promote from within or retrain existing employees rather than allow employee turnover costs to cut into the bottom line.

Cite this Article A tool to create a citation to reference this article Cite this Article