Retention of Employees in Swedish SMEs : The Effects of Non-monetary Factors

Abstract: Retention is an important aspect of human resource activities, especially for small and medium-sizedenterprises since they lack resources and face unique challenges when compared to larger and more established firms. Retaining key employees will allow firms to preserve their resources, sustain theireffectiveness and productivity, and thereby maintaining a competitive advantage. Despite this importance,it is a research area that is not yet fully understood, and therefore warrants further research.Taking into account the lack of resources in smaller firms, the purpose of this study was therefore toconstruct a theoretical model that can be used to research non-monetary factors and their effect onemployee retention. This was done to further elaborate on the research area. To achieve this, a quantitativestudy was performed, where data was collected from 96 Swedish small and medium-sizedenterprises,which was then used for a linear multiple regression analysis. The result was used to answerthe research question: “To what extent do firm-level, non-monetary factors affect the retention ratio inSwedish SMEs?”The result of this study shows that firm age and autonomy are the two factors which affect retention themost in Swedish SMEs. Older firms benefit from a higher retention rate than younger firms, with thepractical implication that younger firms would benefit from adapting the retention practices and policiesof older firms. The result regarding autonomy contradicts previous research, since the firms in this studywith higher degrees of autonomy face lower retention levels. This could be due to the fact that theoccupational group working at these firms often possesses specific knowledge, skills and abilities, whichmakes them attractive on the external labor market. An increased awareness of this relationship will allowfirms employing these occupational groups to implement preventative measures, in order to retain theiremployees.The effects of work-life balance, training, internal career opportunity, and pay on employee retention werenot statistically significant, indicating that previous research is not applicable to a Swedish context. Inaddition to researching a new context, a new research model based on previous research was developed toexplain to what extent firm-level factors affect employee retention, which can support further researchrelated to the research area.