What is employee retention? Everything you need to know in 2023

No matter what way the job market is swinging, employee retention should always be a top priority for any organisation. Your staff are at the core of everything you do, so losing them costs – and in more ways than one.?

Taking the time to really understand what employee retention means, how to track it and most importantly, how to improve your employee retention rates, is essential to running a successful business.?

In this guide, we’ll take a closer look at the positive impact good retention can have and provide some employee retention strategies that will help you keep your staff happy so you hold onto them for longer.?

But first, let’s start with a quick employee retention definition.

What is employee retention?

Put simply, ‘employee retention’ is the term businesses use when talking about their ability to keep staff.

Employee retention is sometimes discussed in terms of ‘retention rates’ and is tracked as a percentage. For example, ‘employee retention increased from 78% to 92% between 2021 and 2022’.?

The opposite of ‘employee retention’ is ‘employee attrition’; in other words, the rate at which employees leave a company. When we talk about ‘good employee retention’ what this essentially means is low staff turnover and ‘bad employee retention’ refers to a high turnover rate.

Why is employee retention important?

There are a whole load of reasons why it’s important for businesses to have a good employee retention strategy in place. But in a nutshell, good retention keeps productivity levels high, and company costs low.

As any HR Manager will know, keeping staff in the job has become much harder in recent years. Since the Covid-19 pandemic, there’s been a strong trend in employees moving onto new roles, at new companies and in many cases, in entirely new industries. In fact, this trend is so strong that 2022 was?dubbed the year of ‘The Great Resignation’. In the US alone, attrition has?jumped 20% since pre-pandemic?levels.

Here are a few more specific reasons why employee retention is important:

• Retention is good for company culture and team morale?- The longer employees stay at your business, the higher positive impact this has on team morale. Retention and culture are closely linked, meaning that good culture has a direct impact on retention too. When attrition is high, the workload of leavers will likely land on the desk of existing employees. This is always going to be bad for team morale, because who wants to pick up the slack for people who aren’t as committed to the organisation as you are??
• High turnover is bad for employer branding?- If candidates can see you’re constantly hiring new staff – not just due to growth, but because staff keep leaving – this reflects badly on you as an employer. Retained employees tend to speak highly of their employer in public, and LinkedIn posts or reviews from long-serving staff on Glassdoor carry more weight than those from staff who only joined the company a few months before.
• Less attrition keeps productivity levels high?- Many studies have shown that good employee retention rates lead to higher levels of productivity, growth and company profits. If people keep leaving your organisation, this makes it difficult to reach wider company goals and achieve your company mission. The longer your employees stay, the more efficient they become as they are more familiar with your processes. Productivity levels will always naturally slow down when new staff join, as they need time and training to get up to speed.
• Low attrition reduces company costs?- As any HR manager will know well, recruiting and training new staff is a costly process. And it doesn’t just cost the business in money (studies have shown that the average cost of a new hire is as high as —) but time too. It can take up to two years for a new employee to be fully trained to reach the level that they achieve the same productivity levels as colleagues that have been in the company for longer.

How to measure employee retention rates

Employee retention rates are an important recruitment metric to track and always strive to improve on. While some businesses will only calculate retention on a yearly basis, tracking it monthly provides more opportunity to make an impact.?

To measure retention rates at your company, you’ll need two different data points:

1. The number of employees employed at the start of the chosen time period
2. The number of those employees who stayed until the end of that period.

Remember that you?don’t want to include new hires?in number 2, as this will skew the figures. Then, use this simple employee retention rate formula to get your rate:

Employee retention = (total employees – employees that have left) / total employees x 100

So essentially, you divide the number of employees who stayed at your company for your chosen time (a quarter, for example) by the number of employees you had at the start and multiply that number by 100 to get your retention percentage.?

So for example, if at the beginning of Q1 2021, your company had 52 employees then at Q2 2022 you have 46, your employee retention rate would be as follows:

Employee retention = 46/52 x 100 =?88.5%

6 proven employee engagement and retention strategies

Now that we’ve covered why employee retention is so important and how to calculate your retention rates - what can you do as an employer to improve your retention rates?

Here are 6 employee retention strategies that will keep staff in the business longer.

1. Offer good compensation and employee benefits

While a good salary will get top talent in the door, perks and benefits are a great way to keep them around for longer. A strong employee benefits program has been shown to have a direct impact on employee retention and for many, is worth more than a salary increase.?

As much as?75% of candidates?in one study said they were staying with their current employer specifically for the employee benefits they offered.

?2. Nurture a positive company culture?

It’s no surprise that those businesses with a strong, positive company culture have a lower staff turnover rate. If you have a clear mission and vision that’s easy for employees to buy into, this will create a strong sense of belonging amongst employees.?

Work policies that promote trust (allowing staff to work from home, offering flexible work hours, focusing on outcomes rather than work output, etc.) also naturally create a culture of trust. And if employees feel trusted to do their job, they will feel valued and less likely to consider a job move.?

3. Provide a clear career development path

If your employees can clearly see the structure of your organisation (as well as what they need to do to take their career to the next level and how close they are to reaching it) this will encourage them to stick around longer. When career progression feels tangible, this is motivating even for those who aren’t hugely ambitious.?

On the other hand, if your organisational structure is unclear or the company lacks structure when it comes to progression, you’re likely to lose some of your best employees to a company that can provide it.?

4. Promote a work-life balance?

Since the Covid-19 pandemic, work-life balance has never been so important to employees. In a global 2021 study by Statista,?work-life balance was cited as the most important organizational attribute?for employers (52%), ranking higher than career advancement opportunities and company benefits.?

Providing a good work-life balance for your employees includes things like offering good holiday allowance, permitting work-from-home options and flexible work schedules.?

Employee burnout is the biggest threat to retention.?46% of HR leaders claim?that burnout is responsible for up to half of their annual workforce turnover. Providing a good work-life balance is essential to preventing burnout from happening amongst your staff.

5. Build employee engagement?

Often when organisations talk about retention, they talk about ‘employee engagement and retention’ as a package. And the reason for this is that engagement and retention are very closely linked: The more engaged your staff are, the more invested they will be in the organisation, which reduces the chance of attrition.?

Employee engagement strategies are a whole other ball game, but they mostly involve putting structures in place that allow everyone at the company to have a voice. By running regular feedback surveys, employees can have a direct impact on where the company is going, the kinds of benefits they receive and the sort of work environment they’ll experience. You really can’t underestimate the positive impact this sort of engagement can have on your employee retention rates.

6. Recognise and reward hard work

Having a rewards and recognition program that celebrates milestones and achievements is guaranteed to have a positive impact on your employee retention rates.

Businesses that recognise and reward employee achievements experience lower attrition because staff feel seen and valued. If an employee’s hard work is publicly recognised, this doesn’t just feed their confidence and give them a sense of progression, but makes them feel more invested in the organisation too.

?Find out more??

?Employee retention FAQs

How do you measure employee retention?

The easiest way to track and measure employee retention rates is through your HR software. Your employee retention rate will be shown as a percentage.

How do you calculate employee retention rates?

To calculate your employee retention rate, divide the number of employees who stayed at your company during a chosen time (a quarter, for example) by the number of employees you had at the start of that period and multiply that number by 100. This will give you your employee retention rate as a percentage.?

What is a good employee retention rate?

Employee retention rates of 90% and above are considered a good retention rate.?

What are the 5 main drivers of employee retention?

The five main drivers of employee retention are good benefits and compensation packages, gathering regular employee feedback, recognising hard work, providing opportunities for progression and prioritising work-life balance.

What is an employee retention definition?

Employee retention is defined as an employer’s ability to prevent staff from leaving them for another organisation.?

What is an employee retention strategy?

An employee retention strategy is a plan that organisations put together and use in order to keep staff engaged and employed with them for as long as possible.?

How does employee engagement affect retention?

Engagement and retention are inextricably linked: Employees who are engaged with an organization are more likely to stay employed with them longer as they are invested in the company and establish a positive emotional connection with their employer.

A mobility budget is an employee benefit that has been proven to keep staff engaged and employed at an organisation for longer. Find out how offering a?mobility budget could improve your employee retention?rates.?

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