What Is Employee Retention? (And How To Increase It)

By Indeed Editorial Team

Published 20 May 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

The success of an organisation depends primarily on the quality of the workforce. An intelligent hiring strategy is essential to retain the best-performing employees within the organisation. Understanding the causes of low employee retention and exploring various ways to retain skilled professionals is important to ensure the sustainable success of the organisation. In this article, we discuss employee retention, understand its benefits, analyse common causes for high employee turnover and list some effective retention strategies.

What is employee retention?

Employee retention refers to an organisation's ability to retain quality employees. Expressed as a percentage, retention rate is an important metric for an organisation's overall health and performance. A high retention rate or a low employee turnover rate is a major contributor to business success. For example, a retention rate of 85% means that the business was able to keep 85% of its employees over a specified period. Retention rates vary widely based on the type of business and the strategies it uses.

Benefits of retaining employees

Following are the benefits of retaining employees:

Improves business efficiency

When employees spend enough time in a company, they understand the vision, culture and skills required to perform well better. It takes considerable time for a new hire to adjust to the environment and work culture in an organisation to perform to their fullest. As a result, it is critical to retain employees who know the job well and can contribute efficiently to the growth of the business.

Increases employee loyalty and morale

When existing employees leave the company, it can have a negative impact on employee morale and affect the loyalty of existing employees. A work culture that encourages staff to stay can have a significant role in how employees feel about the company. When employees feel understood and welcome in their organisation, they usually continue working for the company for a longer period.

Lowers costs

Businesses can incur significant costs while replacing employees. Some of these costs may have to do with advertising for the open position, conducting employee interviews, selecting the right candidate, onboarding and training them for the job. In addition to these costs, the company loses a lot of precious time and resources which can otherwise contribute to achieving business goals.

Related: Motivation At Work: How To Motivate Employees In Their Jobs

Causes of high employee turnover

A variety of factors can lead to high employee turnover. Important causes include:

Low employee morale

One of the most important reasons why employees switch their jobs is low employee morale. The way an employee feels about working in an organisation can directly impact their desire to stay. For example, an employee might consider working elsewhere if the company gathers a negative public image or if there were recent layoffs. Some other reasons that affect employee morale are changes in corporate structure and changes in higher management.

Lack of clarity on career advancement

If employees work for a significant time period, they may expect the management to consider them for a promotion or a raise. This may be even in cases where employees have been excelling at their roles or taking on primary responsibilities consistently. If the higher management is unable to discuss career advancement with these employees, it may cause them to lose interest and consider searching for better opportunities.

Inadequate salary

Inadequate salary is a common reason for employees switching their jobs. If the salary is not enough for an employee to sustain their living standards, they may look for another opportunity that offers a better salary. Lack of regular salary hikes despite excellent performance and gaining skills are important reasons for demotivation of employees. Though there are other factors that contribute significantly to an employee's desire to stay with the company, salary is an important deciding element.

Limited development opportunities

Employees often seek career growth through training and development activities. Many employers offer employees regular training, courses and classes to help them grow professionally and personally. If a company does not provide these types of training, it may cause an employee to want to learn more and develop elsewhere. Having an outlet to explore their skills and abilities is critical to ensure employee satisfaction. In case of a lack of these opportunities, an employee may discover that the only means to grow is by changing jobs.

Inadequate benefits

Most companies offer benefits and perks to their employees. This may include health insurance, paid time off and equity. When employees do not receive these benefits or feel that these benefits are not in alignment with their expectations, they may consider moving to another organisation with better benefits. It is important that organisations review their benefits periodically to ensure overall workforce satisfaction.

Disengagement

Disengagement is a key reason many employees change jobs. Disengagement may be a lack of connection with company ideals or the overall vision of the company. This may occur when employees feel distant from decision-making processes in an organisation. It can also occur when they find it difficult to share their concerns and thoughts with decision-makers and the higher management within a company.

Boredom and monotony

Boredom in a particular role is another common reason that employees choose to change their jobs. Monotonous jobs that cannot utilise employee skills judiciously can cause a lack of interest among the employees. This can cause employees to lose their sense of purpose in a role. Employees may consider other exciting opportunities to experience more fulfilment and meaning in their work.

High stress levels

When employees feel overworked, it can cause them mental and physical distress. An increase in stress levels can demotivate and cause burnout at the workplace. This is a major factor that negatively influences the retention of employees and affects their long-term performance. Stress can cause an employee to feel disconnected from the company, as they are unable to align their goals with the organisation.

How to decrease employee turnover

There are various effective strategies to decrease employee turnover in a company. Following are some of the key ones:

1. Set up a more involved onboarding process

Having an interactive and more involved onboarding process can help new employees feel more enthusiastic about their work. Introducing the culture and vision effectively can make employees feel connected to the organisation. This can improve retention and employee loyalty.

Related: Guide: How To Write A Welcome Message For A New Employee

2. Offer in-depth training

Employees are more likely to stay longer when they understand the jobs they do and why they do them. Having a comprehensive training structure can make things easier for them initially. Offering other courses for career advancement is also a good idea to increase retention in an organisation.

3. Practice transparency

Encourage employees to discuss their problems and concerns openly. Ensuring that employees feel heard is key in helping them feel a connect with the organisation. Open-door policies can help employees discuss concerns and complaints with the higher management without the fear of disciplinary action.

4. Offer rewards and recognitions

Employees feel motivated when their superiors recognise and appreciate their hard work and contribution. It can boost employee morale and help them feel more valued. This can foster a sense of loyalty for the company and lower employee turnover. Happy and satisfied employees contribute positively to the overall growth of the business.

Related: How To Motivate Employees: 18 Steps For Workplace Success

5. Offer competitive salaries

Another way to increase employee satisfaction is to offer good compensation for the work they do. Ensure that employees receive compensation in line with industry standards, their experience level and skills. Offering regular raises, incentives and bonuses is also a good way to motivate workers to perform their best.

6. Offer a good benefits plan

Organisations that provide attractive benefits usually experience a lower level of employee turnover. Organisations must regularly review and revise their benefits plan to ensure alignment with various needs of employees. Offering benefits like corporate discounts, paid vacations, paid sick leave and health insurance can help retain and attract quality employees.

7. Provide flexible working hours

Employees also have a personal life and may require fulfilling personal obligations from time to time. Employers can encourage their staff to build a work schedule in alignment with their personal responsibilities to keep them comfortable and satisfied. Flexible time-off policies can encourage employees to maintain a good balance between professional and personal life, increasing employee satisfaction.

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