The Number One Reason Employees Stay in a Small Business, According to Employers

If you’re like most small business owners, you’ve invested a sizable chunk of your company’s time and money into recruiting, onboarding, and training employees.  Naturally, you do not want to lose good people — because then your investment is wasted.  On top of that your business may be plunged into a mini-crisis by losing a great performer who is difficult to replace.

boss staff

But the question on the minds of small business owners like me is, what exactly does it take to attract and retain good employees today?  And can small employers compete with large employers able to offer bigger financial packages?

A recent survey has some good news.  Among employers polled, the number one benefit offered was … drum roll please:  paid vacation time.  That is the top benefit that employers surveyed in the GrowBiz Media Small Business Hiring and Retention Survey 2012 said they offered their employees.  Over sixty-seven percent (67.7% to be exact) said they offered paid vacation.

To me that’s not surprising — it doesn’t necessarily cost anything out of pocket to offer paid vacation.  So it’s within the reach of more small employers to offer paid vacation than to offer benefits that cost additional out of pocket.

If anything surprised me, it’s the percentage of employers who said they do NOT offer paid vacation.  I find it remarkable  that in this day and age, nearly one third of the employers said they do do not offer vacation.

The Top 5 Benefits Offered

And what about other benefits? The benefits most often offered by small employers with between 2 and 50 employees  include, in order:

  • Vacation time – 67.7%
  • Personal days off – 63%
  • Health insurance – 57.5%
  • Flexible working hours – 56%
  • Bonuses – 55.3%

The Number One Retention Factor Is Not Benefits At All

But if you really want to know what keeps employees around in a small business, it isn’t benefits at all.  It’s the relationship the employee has with management — at least, that’s what employers say.  Those surveyed said the following were the top factors influencing employees to remain:

  • Manager-employee relationships – 78%
  • Company culture – 66%
  • Employee benefits – 53%

The survey results did not include a question about salary, so we don’t know where pay fits into the mix.

No Upside to Burning Out Your Employees

When you look at this list, it shows you that investing in relationships and working conditions helps your business  compete against larger employers for the available talent pool.  From the employer side you are getting something good in return.  Refreshed, happy, well-balanced employees  are typically better performing.  They are more likely to stick around longer term, meaning less turnover and repeat hiring, onboarding and training for you.  As a result, your business runs more smoothly and there’s less churn.  That’s good for business.

Let me offer an analogy:  employees are an asset like anything else in your business.  You wouldn’t run a valuable piece of equipment into the ground without maintenance, until it breaks and is worthless.  Your employees deserve at least as much consideration and respect.

And remember:  this is not asking employees what factored into their decisions to stay with their existing employers, but rather focused on what employers thought influenced employees to stay.  Still, it points out that small business employers believe they have something to offer that employees want:  good working relationships and a good company culture.  Oh, and some benefits, too, especially quality of life benefits.  View the full employer survey results.

Are you surprised?  And employees, you’ve heard from the employers — now, what do you say?

Manager and Staff Photo via Shutterstock


Anita Campbell Anita Campbell is the Founder, CEO and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses.

14 Reactions
  1. Great post, Anita. I totally agree when it comes to the importance of strong employer-employee relationships and a positive work culture. Too many owners lose sight of this important dynamic on a daily basis. Thank you!

  2. Some people just want to avoid big businesses. The politics and hierarchy can be really frustrating, so in many situations you’ll already have an edge over bigger companies with deeper pockets.

    • Robert, I agree the absence of politics is a distinct benefit of working in a smaller shop! Yay for small businesses.

      – Anita

  3. Thanks Anita for this great Article, for myself it is important as a small business to ensure that my employees do two things:

    1. fill in a gap in the teams knowledge and skills
    2. Fit in with the team

    I personally think these are the two most vital elements. Once they are through the door, you need to understand each employee on a personal level, you need to know what motivates them and offer them a package to fit their personality type and needs.

    Investing time with your most important assets is extremely important. Thanks for sharing your useful insights.

  4. Great stuff Anita. Like you concluded, I would love to see the follow up study that gathers input from the employees but this is great. Relationships is where it’s at. I also like the concept of the employees as assets. We only go as far as the team can take us and a great team will take us farther every time than a not-so-great team – or the group that doesn’t operate as a team and work together.

  5. Martin Lindeskog

    Anita: I will go through the report and come back with my comments on it. Do you have any list on leading companies with great employee benefits?

  6. I think more companies should allow their employees regular work-from-home days, but I don’t think many do, right? It seems many combanies are still so distrusful of the teleworking concept. It’s better for the environment and better for your sanity to avoid the commute whenever you can!

  7. You say there is “No Upside to Burning Out Your Employees”. I wish the small company that I work for could realize that.
    I stay here BECAUSE I am so burned out from stress and 60-80 hour weeks, that I don’t have the (positive) energy or time to look for another job.

    BEFORE I became so burned out, my primary reasons for coming here:
    Company culture
    Promise of “great things on the horizon”
    Flexible working hours

    I would love to find a new small company to work for, where my dedication could make a positive, measurable impact on both the company and my family.

  8. Very interesting article. You touched on some major points that I completely agree with. Relationships and company culture is extremely important.