What Is Employee Retention? Definition, Tips, Examples, & More

October 26, 2022 Workhuman Editorial Team
What is employee retention?

51% of reward and mobility professionals within the RES Forum cited employee retention as a challenge. So, what is employee retention?

The fact is that employee turnover rates have reached their all-time highs as employees are constantly comparing their jobs to new opportunities in a globalized social network.

Due to the substantial costs of high employee turnover rates, companies are looking into effective methods for retaining employees.

In this article, we’ll explain what employee retention definition is by highlighting its importance, strategies, and monitoring techniques. We’ll also mention relevant studies and respond to some of the most frequently asked questions.

What is employee retention?

Simply put, employee retention refers to the integral effort of employers to reduce the voluntary resignation of employees. In other words, employee retention reflects an organization’s ability to reduce employee turnover rates.

There are a number of reasons why employers invest in employee retention strategies. In addition to measurable benefits achieved by the company, employee retention programs can significantly reduce the potential negative impacts of high employee turnover.

Below are some of the most critical considerations regarding employee retention.

High performing employees

Why is employee retention important?

  • Employees are less tolerant of unsatisfactory work experiences because job security is on the rise more than ever before. According to the Bureau of Labor Statistics, the number of job openings has recently been on the rise.
  • Employee retention makes the recruitment process more efficient as it saves recruitment and onboarding costs, allowing you to keep talented employees long-term.
  • Retention policies can directly impact the organization’s revenue. Therefore, revenue can act as a metric of effective retention policies.
  • The employee turnover rate affects their morale and engagement within the organization. This in turn affects human resource management efforts that focus on motivating staff for higher productivity.

What are the benefits of retaining employees?

  • Experienced employees tend to deliver a better customer experience since they’re more adept at problem-solving.
  • Engaged employees speak positively about their companies, acting as brand ambassadors. Thus, the company becomes more attractive to in-demand talents.
  • High employee retention yields greater customer loyalty. This is due to the fact that satisfied employees deliver better customer experiences and build stronger customer relationships.
  • High retention rates increase productivity as it can take up to two years for new hires to become as productive as existing employees.

Impact of high employee turnover

  • Organizations lose an estimated $100,000 for every resigning employee, based on a Bersin by Deloitte report.
  • Employee turnover costs institutional experience and knowledge. In the case of senior employees, their resignation can negatively affect succession planning.
  • Employees with strong client relationships may drive clients out of the company. Clients put more trust in individual employees than in organizations, which affects the organization’s reputation.
  • Turnover has a contagious nature that can impact employee morale and drive other valued employees to leave as wel. When an employee leaves, others question their loyalty to the organization and start looking for better opportunities.
  • High employee turnover negatively impacts the morale of the remaining employees as they take on extra workloads. This might eventually lead them to resign.

training employees meeting

Employee retention examples & strategies

There’s no one-size-fits-all when it comes to employee retention strategy. Below are some of the most successful strategies and some successful examples to use as a starting point for your organization.

Top Strategies

1. Hire the right employees

A successful retention approach starts from day one. Make sure you set the right expectations for your employees from the beginning of the hiring process.

For assessing job applicants, include a sample task that reflects their daily roles. It’s equally important to introduce employees to the company culture and how to blend with the teams.

2. Recognizing employees’ efforts

Recognition is the language of the twenty-first century, especially in workplaces. In a study, 68% of HR managers agreed recognition affects retention.

With remote work in the lead, managers need well-thought recognition programs to fairly reward out-of-sight efforts. A study by Workhuman found that employees who were appreciated during the past month were less likely to consider a new job.

3. Embrace work-life balance

Work-life balance is this decade’s slogan. However, it shouldn’t be limited to remote working opportunities and flexible working hours. Instead, the key to work-life balance is workload management.

In this regard, managers should try to cut back on administrative duties and unneeded meetings. Moreover, they should encourage periodic feedback and reassessment of workloads.

In the end, the organization should weigh the cost of hiring new candidates against the cost of employee turnover rates.

4. Reward employee loyalty

To reduce the attrition rate, you should reward employees who spend the most time at your company. A study by the Bureau of Labor Statistics found that employees spent an average of 4.6 years at their current job.

The results show that employees have a higher chance of leaving their jobs on just about any anniversary. Therefore, it’s recommended that managers invest in anniversary reward programs to appreciate committed employees.

5. Advance employee’s careers

Benefits aren’t limited to monetary value. A 2018 report by SHRM indicated that 86% of employees derive job satisfaction from career development.

Managers should take note though, as career development isn’t limited to salary increases and performance reviews. Employees seek feedback on a daily basis, which can be facilitated through objective setting and advanced monitoring.

6. Nurture social ties in workplaces

Some employees would accept less compensation because of the social network they belong to in an organization. In general, employees are affected by their relationships with co-workers, managers, and teams.

A study by Gallup has found that retention and engagement rates were higher at workplaces where employees had friends. For this reason, organizations need to invest in employee-driven events and team building to build emotional connections within the workforce.

7. Reconsider benefits and compensation

Besides the value of compensation and benefits, employees are concerned about fair pay. Top performers believe their efforts should be rewarded with benefits that underperformers don’t receive.

To achieve fair pay, companies can shift a small percentage of the offered compensation to a pay-per-performance scheme. This approach has a higher return on investment in terms of retention, compared to traditional salary schemes.

In addition, this scheme encourages employees to work harder to earn more, which can increase productivity.

Successful Examples

There’s no better way to prove the success of an employee retention strategy than to put it into practice. Here are some companies with successful retention strategy examples to learn from.


Early on, Buffer’s team set the standard for remote work. A remote workplace can trigger suspicion toward unclear policies. Therefore, Buffer has worked on building trust by being transparent on crucial factors, such as salaries.

Luckily, Buffer’s retention rate reached 94% while the turnover rate dropped to 5.8%.


Hyatt retains its housekeeping employees for more than 12 years on average. In total, around 18% of Hyatt’s employees have spent more than 10 years working for the company.

The secret to Hyatt’s retention strategy is its top-notch training programs. Besides, the company has developed a reliable system that recognizes and promotes potential leaders from the existing workforce.


CarMax has nailed a positive employee experience by supporting its employees during tough times. When the recession hit in 2008, most companies cut down costs by reducing employee benefits and laying off staff.

However, during the recession, CarMax invested more in employee training and development programs to help promote existing employees and increase their salaries.

Additionally, the company introduced an employee recognition program to reward employees who actively contributed to the improvement of the customer service experience.

top performer considering their career path

What causes high employee turnover?

Seeking higher pay is one of the main reasons for high turnover rates. However, research has found that employees leave certain organizations to satisfy other major needs.

  • Thirty percent of employees are seeking more flexibility in new jobs after the shifts caused by the pandemic.
  • Unbearable stress at workplaces leads employees to consider making moves in their careers. A survey by Worhuman has found that 41% of employees experienced burnout in the past months.
  • Miscommunication between managers and employees causes higher employee turnover rates. The same survey by Workhuman showed that employees who received feedback within the previous month were much more likely to feel connected to their company.
  • Psychological safety has become a concern for more workers seeking inclusion in diverse workplaces. The survey results stated that 29% of employees who don’t feel psychologically safe seek new jobs. As for those who reported their satisfaction with psychological safety, only 11% of the employees sought new jobs.

meeting for new workers

Why is employee retention a problem for HR?

In today’s competitive career market, HR managers struggle to retain the company’s best talents. High-profile employees may demand salaries beyond the company’s budget, which puts the company at risk of losing experienced staff to competitors.

Additionally, training programs have significant costs that may not pay off if trained employees tend to leave. As individuals leave, their colleagues at the company question their own commitment to the organization and start seeking new opportunities.

Employee retention policy

An employee retention policy is a set of guidelines that define the strategies managers should use to retain employees at a certain company. Each company needs to define its own policies based on the return on investment while keeping turnover rates in mind.

For instance, paying higher salaries may not be as cost-effective as investing in employee recognition programs for some companies.

Employee retention models

An employee retention model is a specific approach to retaining employees. The models vary depending on what’s expected to motivate employees and which human needs are prioritized.

One of the earliest models is Maslow’s hierarchy of needs, which highlights self-actualization and job security as primary needs. Managers can build on such models by researching the primary needs of their employees to address them efficiently.

Today, employees are more aware of their needs for a high quality of life, so you need to address work-life balance by facilitating flexibility and reassessing workloads.

Employee retention program

An employee retention program sets retention strategies into practice. The program may include methods of delivering recognition or receiving peer-to-peer feedback for unbiased appraisal decisions. This is particularly important with the increase in remote workplaces.

In all cases, what determines the success of any retention program is the continuous monitoring and adjustment of the program.

Managers need to assess their approach based on data revealing employee feedback as well as the overall impact on the organization, such as changes in revenue.

positive work atmosphere

Measuring & monitoring employee retention

There’s no guarantee for success when it comes to employee retention programs and the success of a given strategy, so managers must constantly review and upgrade their approach. Otherwise, managers risk investing in employee retention strategies with minimal return on investment.

Additionally, continuous monitoring ensures that managers adjust their employee retention strategy before more employees are lost during experimentation.

Tracking employee retention

To start an effective measuring and monitoring process, managers need to collect primary data. To track data, top companies can use advanced tools such as HRIS or HRMS, but Excel can also serve as an effective tool for smaller companies with a limited budget.

Initially, managers need to record every employee joining the workforce and employees that leave. Managers also need to record the date on which employees joined or left.

Additionally, organizations need to know the factors making employees leave or stay. To find reasons, managers should attribute leaving decisions to specific categories.

After that, managers can simplify the information to find recurring trends that explain high turnover rates. As for the existing employees, managers can ask them to fill out a survey on why they choose to stay.

Employee retention risk

Managers may never know at which point their employees choose to leave. However, to mitigate the negative impact of unforeseen staffing deficiencies, managers can periodically assess employee retention risk.

Below are some considerations to determine the retention risk regarding a certain position.

  • The incumbent’s life stage.
  • Availability of internal successors for the job role.
  • The difficulty of externally recruiting a replacement.
  • The role of the incumbent in critical relationships.
  • The critical knowledge possessed by the incumbent.
  • Managers can also assess retention risk based on employee satisfaction. Here are some signals that an employee might be leaving.
  • The employee’s compensation is lower than the market average.
  • The employee’s skill level is higher than the skill level required by their role.
  • The employee’s role doesn’t satisfy their interests and capabilities.
  • The employee’s concern over career development in the organization.
  • The employee’s skills are in high demand in the market.
  • An unhealthy relationship between the employee and their supervisor.

Employee retention rate formula

To get a measurable indicator of a strategy’s success, managers can use several formulas to help assess a retention strategy more accurately.

Retention Rate

Retention Rate = (Number of existing employees after a specific time period divided by the number of employees at the beginning of this period) × 100

The retention rate is a measurable indicator of an organization’s ability to retain employees. However, managers shouldn’t expect more than 90% for their company’s retention rate, as some turnover allows for recruiting better talents.

Turnover rate

Turnover Rate = (Number of employees who left in a given period divided by the average number of existing employees during the same period) × 100

The turnover rate includes all the employees who left, whether voluntarily or involuntarily. A high turnover rate can indicate company culture or management issues.

Employee turnover costs

Turnover costs = Total of costs associated with turnover × number of employees who leave the company

Turnover costs vary depending on the industry of the organization. Managers should assess the various variables contributing to turnover costs, such as training programs for new employees and loss in productivity.





In short, what is employee retention?

Employee retention refers to the strategies used by managers for retaining employees in their organization. To reduce the turnover rate, managers should implement strategies, such as improved feedback and workplace flexibility.

While the effectiveness of retention strategies depends on the nature of each organization and the industry it serves, neglecting such strategies altogether has guaranteed costs.

Retention programs may require a significant budget, but they’ll surely deliver a rewarding return on investment.

In the end, organizations are based on individuals with human needs, so empathetic managers can drive change more than considerable salary increases.