What Is Employee Retention and How to Improve It (With Steps)

By Indeed Editorial Team

Updated 18 November 2022

Published 4 October 2021

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.

A company's team members are one of its most valuable assets and can play a significant role in its success. If you work in human resources (HR) or management, knowing how to keep talented professionals for the long term is critical for achieving the company's strategic objectives. Learning more about employee retention could help you create strategies to improve retention rates. In this article, we answer the question, "What is employee retention?" and show why it's important and how you may improve it during your career in HR or management.

What is employee retention?

Employee retention is a company's ability to keep its best-performing team members. HR professionals may use a percentage to express an employee retention rate. The formula for calculating an employee retention rate is:

Employee retention rate = ((total number of employees - number of employees who left) / total number of employees)) x 100

The higher the retention rate, the better the company is at keeping its best-performing team members. For example, an employee retention rate of 85% shows that the company retained 85% of its team members over a pre-defined period. The retention rate varies between different companies due to a number of factors, including the effectiveness of their retention strategies.

Why is retention important?

Retention is critical for the following reasons:

Increases efficiency

Team members who remain at a company over the long term understand the company's culture, vision and usually have the skills to perform their job functions effectively. It takes time to train new professionals and for them to get used to the company's culture and work requirements. When a company keeps its top-performing team members, it may become more efficient and productive.

Improves morale

When team members resign and leave a company, it can affect the remaining team's loyalty and morale. Ideally, when a company has a healthy work environment, the retention rate may be high. When professionals feel good about the company and enjoy working there, they often stay longer.

Lowers costs

Companies may spend large amounts of money to train and develop their team members. It's costly to replace a staff member. Some costs associated with replacing staff members include advertising the position, interviewing and selecting a candidate, onboarding the professional and then training them to ensure they can fulfil the job's function. It's more cost-effective to keep a team member than to replace them.

Related: The Importance of Training Employees (With 11 Benefits)

Reasons for high retention

There may be many reasons why your team has a high retention rate. Learning more about these reasons can help you better understand your team's retention, which can help you continue to improve it over time. Reasons for high retention include:

High staff morale

How the team members feel about working at the company influences their desire to continue working there. Professionals may want to stay with a company when it has a positive public image. If a company offers its staff a stable work environment, the morale may be high and individuals may not want to look for jobs elsewhere.

Related: How to Motivate Employees: 12 Effective Ways to Boost Morale

Excellent promotion opportunities

Team members who have been in their roles for extended periods or receive high ratings in their performance assessments may expect a promotion. Many professionals want to grow and develop their careers. When their managers discuss promotion opportunities with them, they may decide to stay with the company longer.

Related: 8 Positive Feedback Examples for Employee Performance

High salary levels

When professionals' salaries regularly increase to meet their needs, they may want to stay with the company for longer. High salary levels may make team members feel appreciated and increase their loyalty to the company. The risk of a high-performance individual leaving is lower when salary levels remain high.

Many opportunities for career development

Team members typically advance in their careers through training and development. When a company offers their staff classes or mentoring to develop professionally and personally, they have access to opportunities for growth. In such a case, professionals may feel that they're growing and may decide to explore jobs within the company to strengthen their skills further.

Excellent benefits

Most companies provide their full-time staff members with paid leave, health insurance or company stock. When a company offers these benefits to its staff, they may feel satisfied and stay with the company longer. If you work in HR, you may help design benefit plans to encourage team members to stay.

High levels of engagement

In small and medium companies, professionals may feel they can influence the decision-making process. They may find it easy to share their ideas or concerns. When individuals feel engaged with their team members and the company, they may consider remaining with the company for longer.

Related: Effective Communication: Definition, Benefits and Tips

Stimulation

Professionals may like to use their skills and develop their skills through work challenges. When an individual's work responsibilities are interesting, they may feel their work has meaning. Many professionals value jobs that stimulate them and develop their skills.

Support from superiors

When team members have many work responsibilities with sufficient time to fulfil their duties, it may increase their productivity and motivation. The ability to take frequent breaks from work may help professionals manage their stress levels and happiness. Team members may become more loyal to the company and work there for many years.

How to improve retention

HR professionals and team managers may use retention strategies to improve their retention rate. Here are some steps you can take to improve retention:

1. Have an involved onboarding process

The best time for a company to start its retention strategies is at the start of a professional's employment with the company. Managers can recruit professionals who understand the company's vision and are passionate about working at the company. Using the onboarding process to immerse new staff members immediately into the company's work environment and culture makes the individual feel like they're part of a team, which may increase long-term retention.

Read more:

  • What Is Employee Experience? (With Benefits and Tips)

  • What Is an Onboarding Process for New Employees?

2. Provide career-based training

A company can use training linked to career advancement to keep its high-performing team members. Career-based training provides staff members with a clear path for progression in the company, encouraging them to stay with the company longer. Such a training programme shows the team that the company is committed to investing in their development and their success.

3. Transparency is important

Transparency is essential for retention. It helps professionals to understand the company's goals and vision. It may include management having an "open door" policy that allows team members to discuss their concerns with their managers. Transparency can make individuals feel that the management team hears their voices when they want to make suggestions for improvement or share their concerns.

4. Team recognition and rewards

Many professionals perform well in their roles regardless of recognition. Recognition can contribute to individuals and groups feeling appreciated, which may increase their loyalty to the company. Recognising team members and rewarding them for their achievements may cause them to stay at the company longer.

Related: What Is Talent Management? (With Processes and Strategies)

5. Provide a competitive salary and benefits package

Many professionals want to feel their salary is reasonable for their job level, skills and experience. They may stay with a company longer if they receive a good salary with regular raises, bonuses and access to career progression opportunities. When a company offers attractive benefits, professionals may stay with the company longer.

Many individuals value benefits, such as employer-subsidised health insurance, many days of annual leave, paid sick leave and corporate discounts.

Read more:

  • What Is Job Satisfaction? Factors, Benefits, How to Improve

  • What Are Employee Benefits and 17 Types of Employee Benefits

6. Have flexible leave policies

When professionals experience burnout, they may want to change jobs. If a company has flexible leave policies, it encourages its team members to take leave to get away from work. Balancing work and life is essential for professionals' mental health. Flexible leave can help improve happiness and work-life balance.

7. Have flexible work hours

Sometimes professionals manage family or personal situations during their working hours. If you're a manager or leader, you may offer your team members flexible work hours to cater for these situations. In that case, they may be happier and stay in their role longer.

8. Provide amenities

Managers can show they appreciate their team members by offering amenities such as ergonomic desks, refreshments, break areas and subsidised canteens. When a company provides a healthy work environment where professionals can take breaks to relax, it shows that the company values mental and physical health. Managers can also organise team-building activities to build relationships between team members and between junior staff members and management.

Related: What Is a Good Work Environment? (Plus Other FAQs)

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