Improve Talent Retention Amid Frictional Unemployment

Apr 01 2024 | Perspectives
A woman in a white blouse sat at her desk, smiling up at someone.

As working culture continues to change, employees can feel they have more control over their employment, which can actually lead to an uplift in frictional unemployment.

What is frictional unemployment?

Often classified as ‘voluntary unemployment’, frictional unemployment is defined by people deliberately moving from one job to another, commonly known as employment transitions. These most often occur within a prosperous and robust economy, in which individuals feel emboldened to pursue better opportunities. And this can happen for a multitude of reasons.

Frictional and structural unemployment: what is the difference?

Another type of unemployment is structural unemployment. This differs from frictional unemployment as it is directly impacted by shifts in the economy, or industrial reorganisation, and is involuntary.

The biggest likelihood of causes of structural unemployment is a gap between people’s skills and requirements of a job. This can be impacted by technological change or advancement for example.

What causes frictional unemployment?

Employees choose to leave their jobs and remain temporarily unemployed for multiple reasons, common causes of frictional unemployment are:

1. Pursuit of a more suitable job fit: Perhaps the job they were in didn’t capitalise on their strongest skillset, and so they’re in a period of unemployment to find a new job that does.

2. Desire for a particular job requiring re-training: Often people aspire to switch careers, necessitating upskilling or re-training to secure that dream role. This pursuit of a new opportunity can result in a period of frictional unemployment.

3. Relocation: Sometimes employees need time to relocate, whether that be to a new city, state or country, which can lead to a bit of a delay in between jobs.

4. First-time job seekers: Recent graduates are often in a period of frictional unemployment as they search for their first-time job. In some cases, it can take a while to match skills and qualifications to a job and find one that they’re excited about.

5. Personal circumstances: Life gets in the way sometimes, and it can mean employees voluntarily leaving their job in particular circumstances, leading to a period of frictional unemployment.

Improving talent retention to reduce frictional unemployment

Unfortunately for businesses, frictional unemployment can lead to losing high potential employees. So, improving your talent retention process in the workplace can be key to reducing the rates of staff leaving and boosting business performance.

There are many strategies to enhance talent retention, and many of these can be direct inhibitors for frictional unemployment, targeting why many employees feel the need to leave.

1. Invest in employee coaching

In certain circumstances, employees might feel a little lost at work, seeking validation for what drives them, what skills are their greatest, and how best to develop in their career. We all question our job choices from time to time.

Any of these can lead to employees feeling the need to ‘take a break’ and enter frictional unemployment, ultimately leaving your business. By investing in employee coaching, rather than employees going off to find these answers themselves, personalised coaches can help employees figure this out on the job.

2. Provide professional and personal development opportunities

If employees feel they are developing and growing internally within a job, their satisfaction is likely to improve, and their need to look elsewhere is reduced.

Many employees might question their work-life balance with inflexible hours, structured working days, and late finishes, and how all of this reduces the chance for them to invest in their personal development – whether that be upskilling themselves, developing new hobbies, or becoming more cultured with trips and travelling. By providing your workforce with time and opportunities to personally develop, you reduce the chance that they’ll need to take time off of work to do so.

3. Look at boosting internal hiring

When employees feel stuck in a role that doesn’t match their skillset, they often feel they have very few options. So, by providing the opportunities for employees to move roles internally, helping them find something that matches their skills can seriously boost retention. This way, you reduce the risk of losing high-quality employees, but also you reduce the need for expensive and time-consuming recruitment processes.

4. Be flexible on allowing leave for certain circumstances

Having certain flexibility for particular situations, like personal circumstances and relocation needs, can help you retain high-potential employees who might otherwise feel the need to take time off of work in general because of a lack of leeway. This is of course down to timing, performance and many more factors, but opening up the potential for flexibility – whether that be extended holidays, or sabbatical leave – can help you reduce unwanted staff turnover.

5. Provide graduate roles or programs

For first time job seekers, coming out of education and straight into a new role with very little experience can be difficult. Which is why providing graduate roles or programs can really help reduce frictional unemployment for those starting out their career.

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