People are the lifeblood of small businesses. To help SMEs with improving employee retention and realizing the importance of engagement strategies, we asked 1,000 workers about what makes them happy in their job.

improving employee retention strategies

For small to midsize businesses (SMEs), understanding what makes employees happy at work is critical to retaining good people. It’s impossible to control every aspect of a job, but knowing how to improve satisfaction is a sure-fire way to improve retention overall.

We surveyed more than 1,000 employees at SMEs in Canada to find out more about this topic. In part one, we looked at the process of moving jobs and the importance of referral programs and onboarding.

This time, we explore the factors behind job satisfaction, how benefits and career development plans can influence this, and the roles that managers have to play in improving employee retention. We also see how tools, such as performance management software, may be able to help SMEs administer their HR programs and aid retention through career development initiatives.

You can scroll down to the bottom of this page for the full methodology.

Relationships and work-life balance rank higher than salary for many employees 

The desire to change jobs is usually driven by two things: the attraction of something new or dissatisfaction with the status quo. Employers that want to work on improving employee retention should be considering both. Does their organization provide an environment that people want to stay in? And does it offer the same or better prospects as competitors?

On a fundamental level, SME employees in our survey gave many factors that contribute to their overall feelings of comfort at work. The top responses mainly centred around emotional or psychological wellbeing, with healthy relationships with co-workers and management, a good work-life balance, and flexibility all being important. Salary was also a major consideration.

factors that could help in improving employee retention

The factors that contribute to discomfort at work also reflected the above data. One significant cause of discomfort was high stress levels, cited by 47% of surveyed employees. Disappointing salary (39%), poor work-life balance (30%), a lack of recognition (30%), and poor relationships with management (29%) also ranked highly.

It would be reasonable to assume that employees would like their employers to focus on culture-related initiatives, although this wasn’t necessarily the case. According to a plurality of employees surveyed, benefits should be the top priority for companies over the next two years. This doesn’t just mean bonuses or staff discounts; as we will explore later— flexible working, wellbeing, and support are also vital aspects.

priorities for improving employee retention in future
Top tip: The relationships and culture within a workplace have a significant effect on employees’ overall comfort at work. While material concerns (i.e. salary) are also important, that alone can’t compensate for a culture marked by poor interpersonal relationships and high stress levels. SMEs that want to build a better culture might want to look at employee engagement software. These tools help improve communication between and among management and employees. They allow SMEs to understand how employees are feeling via sentiment analysis features, and to recognise them for their efforts, as well as being a useful channel for corporate communication.

The role of recognition and benefits in improving employee retention

Employees expect to be acknowledged for good performance. A few kind words from a manager may mean more to some employees than a bonus for a job well done. Of course, others may value the opposite.

Half of respondents in our survey said they value performance-related bonuses, while 42% like positive feedback from their leaders and peers. Other forms of recognition were less popular. Notably, relatively few said they prefer being publicly called out for good work.

employee recognition methods that can be used for employee retention strategies

We have already seen that employees think that adding more benefits should be the highest priority for companies, and this is a tangible way for employers to recognize good work. But benefits come in many forms. Employees tended to appreciate those that contributed more generally to their wellbeing rather than purely financial rewards. Work flexibility came top of the list, followed by specific financial support, and wellness and health benefits. It is worth pointing out that the financial support here isn’t salary-related but covers areas such as transportation subsidies, retirement pension plans, bonuses, and shopping discounts.

best benefits for employees in canada

These benefit measures are already in place at many SMEs. According to our survey, 41% said their job has flexible working in place, 31% have health or wellness benefits, and 27% benefit from financial support. 

Top tip: Overall, more employees said they would appreciate various types of benefits than the amount that actually receive them. This suggests that employers could up their game in this area to better meet employees’ expectations and improve employee retention. Benefits software is one way to administer such programs. These tools can help HR departments to manage benefits schemes, maintain compliance with the law, and track expenditure. Of those who currently get benefits at work, just over half (52%) said their company uses some kind of digital platform to manage the program.

The majority of SMEs are not making the most of development plans

An important part of career satisfaction is personal development. 27% said that opportunities for learning, skill enhancement, and training were a top-5 contributor to their comfort at work, for example.

Despite this, formal development plans are lacking or unused in many SMEs in Canada. 40% in our survey said they do not have a personal development plan in their current company, and another 17% said they didn’t know. Perhaps more worryingly, 13% said they have such a plan but that it has not been useful, and 15% said they have one but they’ve not used it due to lack of interest.

Of those respondents who have used a development plan in their current company, 84% said their employers use software to deliver it. A range of tools come into play here, with training tools, video conferencing software, and onboarding software all being popular.

popular software for employee development

Where software is used, employees seem to value it. Two-thirds (67%) of employees that had used digital tools as part of their development said they were useful.

Top tip: For the most part, it appears that neither employers nor employees have got on board with personal development plans. This may be because such plans require effort to produce and maintain. Career management tools exist to help organizations draw up and track development plans for their employees. This may make it easier for both parties to get more from the process.

Employees expect managers to be cultural architects

Software can only do so much to help with retention. Especially within smaller organizations, people are the main architects of a good culture that employees want to be part of. And managers have leading roles to play.

Employees said that maintaining this culture was one of the major skills a manager should have to support them in their job. Acknowledging good work is the most valued skill, according to respondents, and fostering good communication is also seen as important.

most important skills for a manager to have

Conversely, when leadership fails to build and maintain positive cultures, employees feel less supported. The top three attributes of a manager who fails to support staff in their jobs were:

  • Inability to create a positive and collaborative work environment within the team (e.g. micromanaging or constant monitoring) (45%)
  • Non-recognition of employee's work (44%)
  • Not providing feedback and lack of effective communication skills (40%)
Top tip: Recognizing employees’ work is clearly a critical skill for good leaders, and software can play an important role in this process. 57% in our survey said their company uses a digital tool of some kind for performance tracking, for example. Although no software was particularly widespread, 17% do use dedicated performance management packages, and 13% use talent management tools. These tools can help with tracking employee performance, setting individual goals and objectives, and compensate accordingly.

Improving employee retention: the final word

This research reveals that job satisfaction (and dissatisfaction) is heavily influenced by psychological factors. Good relationships, open communication, a positive culture, and good work-life balance all make employees feel comfortable at work, while stress is a major cause of discomfort. As leaders, managers have a role to play by building a culture that recognises this.

Salary and other material benefits are also important. And, as we saw in part one, these are also a considerable draw in persuading employees to leave. Benefits are important, too, and don’t have to be in monetary form. Employees especially appreciate benefits like work flexibility or health benefits programs that contribute to their overall wellbeing.

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Data for Capterra’s Employee Retention Survey 2023 was collected in June-July 2023. Results comprise responses from 1,004 participants. The criteria to be selected for this study are as follows:

  • Canadian residents
  • Aged between 18 and 65 years old
  • Full time or part time employed at a company with 2-250 employees
  • Reports to a manager regularly 
  • In a junior to executive level role