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HCM Founder/CEO Discusses Importance of Employee Retention and the Role of AI

Christopher Wood, CPP  

· 6 minute read

Christopher Wood, CPP  

· 6 minute read

Employee retention is a pivotal concern for organizations across industries, as high turnover rates can significantly undermine productivity, morale, and profitability. Human resource (HR) and payroll professionals play a crucial role in implementing strategies and leveraging data-driven insights to foster a positive work environment and mitigate attrition risks.

Effective strategies for improving employee retention

According to a joint Microsoft-LinkedIn report based on a survey of 31,000 people across 31 countries, 46% said they are considering quitting their current employment this year, which is higher than the 40% who said the same before 2021’s “Great Resignation” trend following the COVID-19 pandemic. LinkedIn studies also illustrated a 14% increase in job applications per role since the fall of 2023, with 85% of professionals considering a new job in 2024.

Employee turnover can be costly for an employer, as evidenced by a March 2019 Gallup Workplace journal that stated the cost of replacing an individual employee can range from one-half to two times the employee’s annual salary. The journal said that businesses in the United States are losing a trillion dollars a year due to voluntary turnover.

To improve employee retention and contribute to a business’s bottom line, Rick Hammell, SPHR, Founder & Chief Executive Officer of Helios, explained that HR and payroll professionals should prioritize “competitive compensation and benefits packages, flexible work arrangements, such as remote work options or flexible hours and opportunities for career development and advancement.”

At the global level, employees who are not engaged, or who are actively disengaged, cost the world $8.8 trillion in lost productivity, according to Gallup’s 2023 State of the Global Workplace report. Employee disengagement represents a significant drain on productivity and profitability for businesses.

Hammell also said that employee wellness programs, including mental health support and financial resources, recognition and rewards programs, and a strong company culture that prioritizes employee well-being and engagement can improve productivity and retention, in addition to addressing employee disengagement.

Implementing benefits and policies for work-life balance

Implementing work-life balance benefits and policies is important for attracting and retaining talented employees. HR and payroll teams play an essential role in fostering a positive workplace culture that prioritizes a work-life balance.

To promote such an environment, Hammell explained that “payroll professionals can collaborate with HR and leadership to implement benefits and policies that support work-life balance by analyzing payroll data to identify trends related to employee well-being and retention, advocating for competitive compensation and benefits packages and implementing flexible work arrangements and telecommuting options.”

He stressed the importance of employers considering “resources for financial wellness and mental health support, paid time off, parental leave and sabbatical programs.” Hammell stated that it is vital to communicate these programs effectively with employees and to provide adequate resources to help workers make the best choices for their work-life balance.

Leveraging payroll data and analytics to address turnover factors

In an October 2023 MIT Technology Review report about data analytics, Statista estimated that the amount of data in the world will grow to more than 180 zettabytes, commonly referred to by technology professionals as “big data.” The report explained that “from payroll processing solutions to employee onboarding tools, these technologies produce data whose potential is often underleveraged.”

The report provided an example of an organization that wanted to leverage data analytics to predict which employees are at the highest risk of quitting their jobs, painting the contrast between observing an employee’s attendance versus payroll information and benefits enrollment details and noting a more holistic approach for overall improvement.

Hammell said that “payroll data and analytics can be leveraged to identify factors contributing to employee turnover by analyzing turnover rates and trends to identify patterns and potential issues, examining compensation data to ensure it is competitive and aligned with industry standards, and monitoring employee satisfaction surveys and feedback to gauge sentiment on work-life balance.”

He took it a step further as a way “to identify correlations between factors like overtime hours and turnover rates and [how] predictive analytics can be used to forecast potential turnover risks and take proactive measures to address them.”

Collaborations between HR and payroll for AI-powered tools

The integration of artificial intelligence (AI) in HR and payroll operations is transforming traditional practices, enabling greater efficiency, data-driven decision-making, and a more personalized employee experience.

At the 2023 PayrollOrg Congress event in Denver, Pete Tiliakos, an analyst and strategic advisor on subjects that include HR and payroll, presented about the future of payroll where he noted how “payroll started to become a whole lot more important” during the COVID-19 pandemic where the industry emerged into a “golden age” regarding the use of generative AI.

Regarding AI collaboration, Hammell said that “payroll professionals can collaborate with HR to utilize AI-powered tools for employee development, productivity enhancement, and work-life balance by implementing AI-powered software for personalized training and development plans, using AI algorithms to optimize scheduling and workload distribution for better work-life balance and leveraging AI chatbots for employee support and feedback mechanisms.”

Also, Hammell said there is potential for collaboration regarding the use of AI-powered tools to analyze payroll data to identify opportunities for process improvement and efficiency gains, in addition to implementing AI-driven tools for performance management and goal setting to enhance productivity.

Ethical considerations regarding AI in employee retention

In September 2023, a first-of-its-kind settlement was announced by the Equal Employment Opportunity Commission (EEOC) regarding a lawsuit that claimed that the programming of a China-based tutoring company’s online software violated the Age Discrimination in Employment Act (ADEA). This announcement came just months after the EEOC released a new resource regarding AI used in the hiring process under Title VII of the Civil Rights Act of 1964.

Because the use of AI for employee retention involves collecting and analyzing vast amounts of personal employee data, ethical concerns should be raised around data privacy and security, as AI systems create new potential vulnerabilities that malicious actors could exploit, leading to data breaches and unauthorized access to confidential employee information.

Hammell said that the “ethical considerations and potential biases that payroll professionals should be aware of when implementing AI-driven systems include ensuring that AI algorithms are transparent and free from bias in decision-making processes, safeguarding employee data privacy and ensuring compliance with data protection regulations, and monitoring and addressing any disparities in how AI tools impact different employee groups.”

He again stressed the need for “providing clear communication and training on how AI systems are used and their implications for employees.” In addition, Hammell noted the need to be “mindful of the potential for AI to replace human judgment and empathy in sensitive HR matters.”

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