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How to Retain Employees During a Downturn

Ease layoff fears and sweeten the pot for employees you want to keep around.

From January through March, the U.S. Department of Labor says businesses have cut an estimated 232,000 jobs. Over the past 12 months, the retail industry has shed roughly 107,000 jobs. For a business owner trying to stay afloat, these numbers sound grim -- it's no fun swinging the ax, and it's harder keeping talented people who want to bail. So how can a small business retain its employees while the economy continues its downward slide?

"First and foremost, I think a company needs to determine which employees they want to retain," says Tom Darrow, founder and principal of Talent Connections.

Darrow recommends employers sit down one-on-one with each employee to gauge their workforce and spark communication: Find out how each employee is doing, ask if they have any concerns, see if they have any recommendations or suggestions and so on.

Darrow recommends a two-pronged approach. In addition to upper management sitting down and listening to employees, have an outside firm conduct an employee survey. This will allow the employee to speak with anonymity on things they believe need to be changed that may not come about in a face-to-face meeting with management.

Once a business owner has established which employees to keep, you next have to formulate a plan of action. First, you need to establish if money is your retention problem. If so, there are several steps you can take.

Making Dollars and Sense

Jo Prabhu, founder and CEO of International Services Group, says many insurance companies are now allowing employees to pay 100% of their insurance premiums, where before the employer was responsible for 50%. "That can be offset in other ways," says Prabhu. "An employer can give

the employee a higher salary to help pay it on their own."

Prabhu also says that if business owners can't keep all their employees full time, they can make them code 1099 employees (contracted workers) so they don't have to cover their taxes. "It's a benefit for employees to do this because they can take other jobs and work their own hours," says Prabhu.

Darrow and Prabhu agree that employers can help save money by being more flexible in allowing their workers to telecommute. This would help ease some business overhead expenses and relieve commuting costs for the employee, which they'll be happy about.

Another money-saving tip from Darrow is to consider subleasing the newly vacant office space. Darrow also suggests looking at employees who are not in revenue-generating positions and rethinking their responsibilities to find opportunities where they could generate revenue.

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As an example, Darrow tells a story where a zero-generating employee -- an administrative assistant -- in his office began earning about half of her salary. A client was seeking outside administrative help, and the administrative assistant in Darrow's office had the available time and was able to accept the contract and become a revenue generator. Because it was contracted, the administrative assistant could also do this work from home.

Recognizing and capitalizing on these types of opportunities is what makes small business owners tick. A recent survey by Global Strategy Group for Intuit found that nine out of 10 small-business owners saw growth opportunities in the face of the looming recession. Furthermore, over 75% expect to see growth.

For some, their optimism is more than peering through rose-tinted glasses. If you're in the food service industry, for example, employment has increased by 288,000 jobs in the past 12 months, according to the U.S. Department of Labor.

Perk It Up

If you happen to be in a recession-proof market in which retention of top talent requires more than flexible hours, it's time to look at the work environment you provide. And just because your business is still able to weather the economic storm, it doesn't mean the job stability of your employees' spouses or other outside influences aren't making life a little tougher for your employees.

"Anything you can do to show your employees you're concerned, that you embrace their burden, their challenges, would certainly be positive," says Darrow. "If gas prices are a challenge, you can give them a gas card or let them work from home a couple days a week."

Darrow says employers need to take the entire work experience into consideration from the commute and parking to the lighting and office equipment to see what improvements can be made to improve the work experience and make it more enjoyable for their employees.

"I know a company that Wednesday of every week, they cater in lunch for everybody," says Darrow.

It's the little acts of appreciation that add up. Other ideas offered by Darrow include relaxing the dress code, letting employees bring in their dog or pet to the office, offering recreation items like ping pong tables or pool tables and adding complimentary items in the kitchen, like sodas or popcorn.

Being a small business owner means being flexible and innovative, especially when it comes to human resources.

Steve Cooper spent over six years at Entrepreneur magazine and He was most recently the managing editor of and was previously the research editor for Entrepreneur magazine. He has a degree in journalism from San Francisco State University and runs his own business, Hitched Media, Inc.