Employee Retention: How to better retain employees


It’s vital for businesses to understand why some employees leave and others stay in an increasingly competitive and fast-moving job market, not only to be profitable in the long run, but also to retain the best talent. Strategic advantages include knowing what employees value, calculating the economic effect of staff retention and turnover, and controlling and improving employee retention. Retaining employees that lend value to an organization and have a part to play in its success then becomes imperative if a business wants to survive in the long run.

What is Employee Retention?

Employee retention is described as an organization’s capacity to limit employee turnover, or the number of employees who quit their work, either voluntarily or involuntarily, within a given period of time. Employee retention has a direct impact on the performance and success of a company. The procedure by which a corporation ensures that its employees do not leave their positions is known as retention. Every company and industry has a different retention rate, which is the percentage of employees who stayed with the company for a specific amount of time.

Cost of Employee Retention

According to some studies, replacing a salaried employee costs a company 6 to 9 months’ income on average. Recruiting and training costs range from $20,000 to $35,000 for a manager earning upwards of $65,000 per year. To retain employees, you might have to increase their salary or even match an offer they have received from another company. Then there’s also the cost incurred to keep employees engaged and happy in their current role. While it’s difficult to associate a set cost for these engagement initiatives, they are essential if employee retention is something you’re striving for.

Calculating employee retention rate

The effectiveness of new initiatives, as well as employee engagement solutions and ideas, can be measured by monitoring your employee retention rate. Furthermore, it can assist you in determining employee quality-of-hire. A high turnover rate has more to do with your recruitment efforts than your long-term retention plan. Here’s how you calculate employee retention rate:

Divide the number of employees on the last day of the given period by the number of employees on the starting day to get your employee retention rate. Then, to convert that amount to a percentage, multiply it by 100. Here’s an example to help make the calculation easier for you.

Tencent Inc had 200 employees at the start of 2020 and 175 employees at the end of the year. The employee retention rate would be calculated as follows:

Employees on the last date (175)/Employees on the first date (200)*100 = 87.5%

Thus, the employee retention rate of Tencent Inc for the year 2020 is 87.5%

Why do employees leave?

Why do employees leave?
  • Relationship with Manager: Employees do not need to be friends with their manager, but they do need to establish a working connection with them. The manager is far too much of a part of their everyday lives at work for an uneasy relationship to develop. The manager offers guidance and feedback, meets with the employee one-on-one, and connects the person to the rest of the company. Employee engagement, confidence, and dedication are all harmed when they have a toxic connection with the person to whom they report.
  • Unchallenging or Routine Work: Nobody wants their job to be boring and unchallenging. If an employee is seemingly disinterested in the work they’re doing, it’s the manager’s responsibility to assist them in discovering their true calling. Employees want to have fun at work while being intellectually engaged. Since most people work for more than a third of their waking hours, it’s imperative that this time is spent doing something they’re excited about.
  • Salary: One of the biggest reasons why most people leave a job is unmet salary expectations. It goes without saying that the money earned at the end of a month is one of the primary reasons why people work. If they’re not satisfied with the compensation earned for all their hard work, it will drive employees to look elsewhere.
  • Organizational Culture: It’s natural to desire to be a part of a group of like-minded people and work towards a cause or effort that shares one’s values and beliefs. Someone who cares about environmental sustainability, for example, would prefer to work for a company that is committed to protecting the environment. As a result, it is critical that employees have a sense of belonging in their workplace and that can be brought about by an inclusive organizational culture.

Herzberg theory on employee retention

Frederick Herzberg examined employee retention and motivation in the 1950s and eventually came up with his twin dimensional work satisfaction theory. Dissatisfiers (which he referred to as “hygiene” difficulties) and satisfiers (also known as motivators) are the two components of job satisfaction, according to Herzberg. According to his thesis, employees may be kept through limiting unhappiness and enhancing satisfaction. Administration, business policy, working environment, supervision, relationships, and remuneration are all sources of dissatisfaction. The job, advancement, achievement, responsibility, and acknowledgement are all factors that contribute to employee satisfaction.

Benefits of employee retention

Benefits of employee retention

The benefits of employee retention can be seen company-wide. From the money saved by not having to constantly hire and train new employees to develop a skilled workforce that is happy to do the work they do, employee retention practices can alter the course of a company’s success. Here are some of the top benefits of employee retention.

Cost of turnover

Employee turnover is an inevitable part of any organisation, but it can be a headache for HR departments. Every person that departs takes time to process, not to mention the time spent looking for their successor – collecting resumes, assessing applicants, holding interviews, and repeating the process until you find the right fit. Focusing on staff retention from the start can help you save time and money in the long run.

Morale Improvement

Employees may feel more committed to the company’s aims if they believe their boss supports and values them. Long-term employees put in a lot of time and effort into their jobs, so exploring strategies to keep them around longer might enhance loyalty. Employee loyalty leads to higher productivity and honest conduct. For example, an employee who truly cares about the company may be more likely to complete their work on time and report their hours accurately.

Increased Productivity

Concentrating on staff retention leads to happier employees. Customers pick up on the sentiments of happy and engaged personnel. They give better service, foresee difficulties, and go above and beyond to ensure the company’s success. In fact, according to a recent study, engaged staff are more likely to develop customer connections, resulting in more productivity than disengaged employees.

Skilled Team

After a period of time with the organisation, an employee’s skill set and relevant expertise can be expanded. Instead of beginning from scratch with a new employee, organisations can develop a productive workforce by investing in ongoing training and career progression for current employees. Employers can profit from promoting internally when hiring for a high-level position because their current employees are familiar with the company and may have the required skills.

Employee retention strategies

Employee retention strategies

1. Recognize Employees: Everyone wants to feel appreciated, and this is particularly the case at work. Despite the fact that 68 percent of HR professionals responded that recognition was vital for retention in a survey conducted by the Society for Human Resource Management, many firms lack formal recognition programmes.

Managers should be encouraged to recognise the efforts of their direct reports. They can also go a step further by recognising employees that go above and above on a department or company-wide basis. That acknowledgment is especially crucial during the pandemic, when many employees have been compelled to manage challenging situations in constantly changing conditions.

2. Key Communication: The pandemic served as a reminder of the value of effective workplace communication. Your subordinates should feel free to approach you at any moment with suggestions, concerns, or complaints. As a manager, you must ensure that you are doing everything you can to promote timely, productive, and good communication among your whole team, including on-site and remote workers. To obtain a feel of each team member’s workload and job happiness, make sure you communicate with them on a frequent basis.

3. Compensation: Compensation is an important part of every company’s employee retention strategy in today’s competitive market. No matter how highly valued an employee is, if they believe they are underpaid for their services, they are likely to look for work elsewhere. Companies that give pay transparency and a clear, uncomplicated pay policy are more likely to win over employees. A strategy to financially reward top performers, as well as a regular appraisal based on industry remuneration standards, is critical. Spot bonuses and regular compensation increases can help employees feel appreciated.

4. Work Life Balance: What is the message your time management sends to your employees? Do you anticipate workers to be available 24 hours a day, 7 days a week? Job happiness requires a healthy work-life balance. Employees must realize that their bosses recognize that they have lives beyond the office, and that preserving a work-life balance is considerably more difficult while working from home. Employees should be encouraged to establish limits and take time off. If late nights are required to complete a project, consider compensating them with additional time off.

5. Training & Development: You can assist employees in identifying areas for career progression, such as the need to develop new skills, as part of delivering continual performance evaluation. As technology revolutionises how we work, gaining skills is more necessary than ever. As business needs continue to evolve, workers train and develop to learn new talents and capabilities. Make investing in your employees’ professional growth a top priority. Allow them to participate in virtual seminars, cover tuition, or pay for continued training.

Employee retention programs

Employee retention strategies can assist you in safeguarding your most precious resource: your employees. High turnover costs time and money, and it suggests that your company is more of a stepping stone than a conclusion. According to surveys, replacing an employee costs roughly 6 to 9 months’ compensation, including recruiting, onboarding, and training. You lose the expertise of previous employees, and your continuing team’s performance may suffer as a result.

An employee retention program shouldn’t come into play when your employees start leaving but should be in place at all times. The components of a successful employee retention program are:

  • Compensation
  • Work environment
  • Manager Relationship
  • Growth & Development
  • Recognition
  • Support

A retention program that marries these different elements will help you retain employees and ensure they remain motivated to work.


It’s unavoidable that some employees of your team will depart your company sooner than you’d want. You can, however, make their decision a little more difficult. And, if those employees leave your company knowing they were respected and supported, they’ll likely speak well of it and, maybe even return to work for you in the future.

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In her free time Vani loves storytelling and helping talent meet their aspirations. She has been a part of enterprise, growth stage startups & VC firms. She is driven to make stories and startups matter.

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