How HRM solutions improve employee retention and engagement

Our 2024 research report shows that we may be on the brink of the Great Resignation 2.0 – the largest workforce exodus since 2022. Employers are aware of this upcoming shift, with almost half (48%) of respondents expecting turnover to increase in the next 12 months.

While economic uncertainty has kept many employees hesitant to change jobs (a trend called ‘The Big Stay’), improving economic conditions is expected to trigger a wave of turnover. With inflation cooling and interest rates expected to fall, this shift could happen soon. Supporting this, Microsoft and LinkedIn’s 2024 annual report found that 46% of employees are considering quitting within the next year.

Data shows that engagement is essential if you want to increase employee retention. Or Workforce Pulse 2024 report found that a third of workers would even accept lower pay for a more engaging role. Yet engagement levels are declining, with 60% of teams reporting a drop over the past year.

It’s clear that employers need to prioritise engagement if they want to retain top talent – and that it needs to happen sooner rather than later.

Employee disengagement often stems from common issues like low pay, poor management and lack of recognition for their hard work and achievements. Addressing these pain points can dramatically reduce employee turnover.

Here are the key factors driving disengagement:

• Limited career progression: Lack of advancement opportunities is a top reason employees quit. In 2021, 63% of US workers cited this as their primary motivator for quitting. Our own research found that 27% of European respondents were job hunting due to a ‘lack of career progression opportunities.’

• Feeling undervalued: Employees want to feel recognised for their contributions. Our research revealed that for 27% of workers ‘a lack of recognition and appreciation’ was their main reason for leaving.

• Stressful work environments: Poor management and disorganisation create unhealthy workplaces and employee dissatisfaction. Nearly a third (30%) of our survey respondents pointed to ‘a stressful work environment’ as a key factor in their decision to leave.

• Disrespect and poor communication: A lack of communication and respect in the workplace significantly impacts employee retention. More than half (57%) of the Europeans we surveyed left their roles because they felt ‘disrespected at work.’

• Unfair pay: Compensation remains a leading cause of employee turnover. In 2021, 63% of US workers cited low pay as their reason for leaving.

One way of understanding the problem of employee turnover is through the three Rs of employee retention: respect, recognition and rewards. When employees feel that they have all three, they’re much more likely to experience high job satisfaction and remain committed to the organisation. Respect ensures employees feel valued for their contributions, while recognition highlights their achievements in meaningful ways. Rewards, such as fair compensation or development opportunities, motivate employees to stay committed. Together, these three Rs provide a framework for improving retention by addressing some of the most common drivers of disengagement.

A strong employee retention strategy starts with understanding and addressing the reasons employees leave. HR management software plays a pivotal role in creating a better employee experience by tackling these challenges head-on. From saving time on admin to fostering growth opportunities, HRM platforms provide the tools you need to build a more engaged, motivated and loyal workforce. Here’s how HRM software helps.

Time-consuming HR tasks like payroll, absence management and compliance tracking can pull focus away from initiatives that have a larger impact on the employee experience. By streamlining these processes, HRM platforms free up valuable time.

This extra capacity enables HR teams to prioritise initiatives that enhance employee satisfaction, create a positive company culture and promote a healthy work-life balance. Whether it’s implementing wellbeing programs, gathering employee feedback, or designing workshops to build stronger connections, these efforts contribute to happier, more motivated teams.

Investing in performance and development is key to creating an engaged workforce. Employees who feel their contributions are recognised and see clear opportunities for growth are more likely to remain motivated and loyal. 

HRM platforms simplify performance management through streamlined reviews, goal setting and progress tracking, helping employees stay on course toward their personal and professional goals.

Tools that enable structured feedback and performance tracking provide managers with the insights they need to support employees effectively. These features align with HR best practices, which focus on fostering a culture of growth and development. By creating personalised development plans and recognising employee achievements, organisations can build stronger, more resilient teams.

Engagement thrives when employees feel heard and valued. HRM software empowers organisations to run effective engagement surveys that capture real-time feedback and insights. These surveys provide a platform for employees to voice their thoughts on workplace culture, management and personal development opportunities. For example, after conducting a survey, HR might discover that employees want more development opportunities. In response, the organisation could organise quarterly skill-building workshops, such as project management training or access to industry-specific certifications. By acting on employee feedback, HR teams can implement meaningful changes that increase morale, address concerns and strengthen connections across the organisation. Regular feedback loops ensure employees feel their input matters, fostering a sense of trust and motivation that keeps them engaged and committed.

Compensation is one of the most significant drivers of employee retention. When employees feel fairly compensated, they’re more likely to stay engaged, motivated and committed to their roles. Ensuring equitable and transparent pay practices boosts morale and fosters trust within the workplace.

With Personio, you can streamline compensation management by automating salary benchmarking, tracking performance-based rewards and ensuring timely, accurate payroll. These tools simplify complex processes and help organisations create compensation strategies that reflect employee contributions, keeping your workforce engaged and your business competitive.

Administrative hassles can create unnecessary stress for employees. Simple tasks like booking leave, accessing payslips or updating personal details can quickly become points of frustration if processes are inefficient. Self-service HR tools empower employees to handle these tasks on their own, saving time and reducing stress.

Functionality like Conversations by Personio provide employees with quick answers to common HR questions, such as holiday policies or payroll queries. By seamlessly addressing these needs, organisations can reduce friction and enhance job satisfaction, making teams feel supported and valued.

Imagine this: You’re the HR manager of a growing tech company, and you’ve just adopted HRM software to embed respect, recognition and rewards into your retention strategy.

• Respect: Using engagement survey tools, you collect real-time feedback on employee concerns, such as workload challenges and communication gaps. The insights enable your company to make data-driven decisions, like redistributing work and introducing regular team check-ins. Employees feel heard and valued, helping to foster a culture of mutual respect.

• Recognition: The HRM software helps managers track achievements and milestones through structured performance reviews. With clearer performance insights, managers more regularly recognise employee contributions in one-on-one sessions and during company-wide meetings. Top performers are celebrated with digital badges and shoutouts, creating a company culture of recognition that boosts morale.

• Rewards: Compensation management tools ensure pay equity by benchmarking salaries and linking rewards to performance. The platform also supports development programs, providing opportunities for employees to upskill and grow within the company. Transparent processes and growth pathways keep employees motivated and committed.

By leveraging HRM software, you effectively align the company’s practices with the three Rs, reducing turnover and creating a more engaged, loyal workforce.

Engaging and retaining employees helps reduce turnover while creating a thriving workplace where people feel valued, supported and motivated to contribute their best. In this regard, focusing on areas like performance, development, compensation and the overall employee experience can make all the difference.

Personio’s HRM platform is designed to help organisations tackle these challenges effectively. By simplifying administrative tasks, improving communication and offering tools that support engagement and performance, Personio helps HR teams create a more supportive and productive workplace.

Whether it’s ensuring fair compensation, gathering actionable feedback, or creating a frictionless work environment, Personio provides the tools to build an engaged, resilient workforce.

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Employee retention refers to an organisation's ability to keep its employees over time. It’s a measure of how effectively a company can prevent turnover by creating a positive work environment, offering competitive benefits and addressing employees' needs and expectations. High retention rates often indicate strong employee satisfaction and engagement.

Retention is critical because losing employees is costly – both financially and operationally. High turnover can disrupt workflows, lower morale and increase recruitment expenses. Retaining employees also means preserving institutional knowledge and fostering a stable, engaged workforce that contributes to long-term success.

HR can retain employees by implementing strategies that prioritise engagement, growth and recognition. These include:

• Offering career development and learning opportunities.

• Ensuring fair and transparent compensation practices.

• Creating a positive company culture with strong leadership.

• Gathering and acting on employee feedback through surveys.

• Using HRM platforms like Personio to streamline processes and improve employee engagement.

Choosing the right HRM software means finding a solution that addresses the key drivers of employee engagement. For instance, a single platform enabling you to gather feedback, manage performance and develop employees provides a more holistic employee engagement solution than one offering performance management only. 

The software should also be intuitive, integrate seamlessly with your existing systems and have the flexibility to scale as your organisation grows.

While it’s possible to run your HR department from spreadsheets, HRM software can unlock enormous benefits whether you’re a startup or a large enterprise. If you’re reading this article chances are you’re encountering frustrations that could be relieved by the right tools. 

The trick is finding a platform for your specific size and needs. And with so many tools available on the market, there’s likely a solution catering to your exact use case.