Unlocking the Secrets of Employee Retention

What makes an organization a good place to work? One indicator is whether workers stick around or quickly turn over. Your employee retention rate reflects your organization’s ability to keep talented workers and offers insights into your company culture and work environment. 

Discover what employee retention rate is, what a good rate looks like, and how to influence and improve employee retention in your organization.

Employee retention rates show how successful a business is at keeping its employees. A high rate means employees are happy and engaged, while a low rate could mean the business is having trouble creating a culture that attracts and retains talent. 

Companies can use their employee retention rate as one factor in measuring the effectiveness of their recruiting strategies, compensation and benefits packages, and workplace culture.

What a “good” employee retention rate looks like varies by industry. To see how your company stacks up, consider average employee turnover rates in your industry. By reviewing turnover, you can determine goals for improving retention.

The hospitality industry, for example, often faces high turnover, with averages in the 70% to 80% range or higher. High turnover may be a byproduct of the hospitality industry’s recovery following the pandemic, which took a heavy toll on travel-related businesses.

Professional services, such as consulting or accounting firms, typically invest heavily in employee development and career growth with the intention of retaining top talent for longer periods. However, professional services saw a turnover rate of 13.4% between 2021 and 2022, LinkedIn data reveals. This turnover rate represents a significant increase over the past decade. 

In the retail industry, on the other hand, turnover is typically built into the business model. Retail often experiences higher turnover rates because of factors such as seasonal employment and part-time positions, and it often relies on entry-level talent who aren’t looking for a career. According to Mercer research, the retail and wholesale industry had one of the higher voluntary turnover rates at 32.9% in 2023.

Turnover runs high in the healthcare industry, with the average hospital turning over 100.5% of its workforce in the past five years. Healthcare organizations strive to retain skilled and experienced professionals, as turnover can impact patient care and continuity. Therefore, higher retention rates are generally desired in this sector.

Want to learn more? Don’t miss these employee retention statistics you need to know!

To calculate your employee retention rate, you need to gather data on the number of employees at the beginning and end of a set timeframe, such as a calendar year. Then, divide the number of employees remaining at the end of the timeframe by the total number of employees at the start of the same period. Take the result and multiply it by 100 to get the retention rate percentage.

For example, if you had 50 employees at the start of the year and 40 employees at the end of the year, the retention rate would be (40/50) x 100 = 80%. This means that 80% of the employees who started the year with the company remained by the end of the year.

Several factors influence a person’s decision to leave their job. Discover the top five factors that can make or break employee retention rates — and what it takes to build a motivated workforce that sticks around for the long haul.

Compensation and Benefits

Compensation and benefits are among the top factors influencing retention because they affect employees’ ability to cover expenses and plan for the future. By offering competitive salaries, bonuses, and other forms of compensation, you can provide a sense of job security and financial security among employees. Benefits such as health insurance, paid time off, and flexible working hours also can help employees take care of personal needs, increasing their motivation to stay. 

Work Environment and Culture

Employees are more likely to stay with a company when they feel comfortable and supported by their manager and co-workers. Positive cultures practice open communication, offer meaningful work, and provide growth opportunities, all of which can increase employee loyalty. An environment of trust, respect, and appreciation helps improve employee retention rates.

Career Growth Opportunities

When employees can see a long-term career path in your organization, they’re more likely to put down roots. Opportunities for development and advancement improve employee motivation, engagement, and commitment to their work, since they know their efforts will be rewarded with new challenges, increased responsibilities, and upward mobility.

Manager-Employee Relationships

The manager-employee relationship often is cited as a negative by departing employees, so improving this dynamic is crucial to successful retention. Employees who feel respected and valued by their managers are more likely to enjoy a positive relationship with their manager, feel supported, and look to grow with the company. 

Additionally, managers who can effectively communicate expectations and provide feedback to employees can help create an environment in which employees feel respected and appreciated, leading to increased retention rates.

Feedback and Engagement Initiatives

Employee feedback and engagement initiatives aim to create a supportive and inclusive work environment where employees feel heard, valued, and connected to the company’s goals. Examples include regular performance evaluations, employee surveys, suggestion boxes, town hall meetings, and team-building activities. 

By actively seeking and acting upon employee feedback, organizations can address concerns, recognize achievements, and make necessary improvements, ultimately boosting employee morale, job satisfaction, and retention. When employees feel that their opinions matter and that they have a voice within the organization, they’re more likely to stay committed and engaged, leading to higher retention rates.

Here are six practical tips to inform employee retention solutions and create a more engaged and satisfied workforce.

Offer Competitive Total Rewards

By providing salaries that are competitive with other employers in the same industry, you can create an environment that encourages employees to stay with your organization. Offering additional perks, such as flexible scheduling or further education opportunities, also can be an effective way to incentivize employees to stay with your organization.

Foster Career Development

To foster career development and improvement, organizations should offer their employees opportunities to take part in training, educational programs, and new projects. Companies should also encourage employees to take on leadership roles and strive to achieve career goals. 

Consider implementing an employee mentorship program, for example, where experienced employees are paired with junior staff members to provide guidance, support, and opportunities for skill development. This program can help employees gain valuable insights, expand their professional networks, and receive personalized advice to advance their careers within the organization.

Create a Positive Work Environment

Creating a positive work environment is key to improving employee retention rate. This can be done by fostering open communication between management and employees, providing clear expectations and goals, and recognizing employees for their hard work and contributions. 

Take employee recognition programs, for example. By acknowledging and celebrating employees’ hard work, dedication, and achievements, HR can foster a culture of positivity, motivation, and appreciation. This not only boosts employee morale and job satisfaction but also creates a supportive, encouraging atmosphere where employees feel valued and motivated to contribute their best.

Invest in Employee Well-Being

By providing employees with access to resources such as healthcare, mental health services, and other wellness initiatives, employers can foster a culture of support and appreciation. Use workflow management tools to deliver curated wellness resources to employees, such as stress management techniques for customer service agents. 

By investing in employee well-being through resources and support, you can help team members feel confident, empowered, and supported in their roles, leading to improved employee satisfaction and reduced burnout.

Encourage Work-Life Balance

Achieving a healthy work-life balance involves allocating time and energy to work-related tasks while also prioritizing personal well-being, family, hobbies, and other non-work commitments. 

HR leaders play a crucial role in developing policies and fostering a culture that supports work-life balance. By implementing policies around flexible work arrangements, such as remote work options or flexible scheduling, you can empower employees to manage their personal obligations more effectively. 

Build a culture that normalizes vacations, and make sure employees see company leaders using their allotted time off. Additionally, promoting open communication and setting clear expectations around workload and boundaries can help employees achieve a healthy work-life balance. By prioritizing work-life balance, HR leaders can enhance employee satisfaction, reduce burnout, and improve overall well-being.

Leverage Technology for Retention

HR software helps streamline processes within a business, making it easier for employees to stay on track with their tasks and better understand their roles within the company. By using employee experience management software, like the solutions provided by Enboarder®, you can better meet employees’ needs and create a more supportive work environment, ultimately leading to an increase in employee retention rates.

Check out our responses to four common questions about employee retention as well as helpful tips and strategies to keep your valuable employees engaged and motivated.

How Is Employee Retention Rate Different From Employee Turnover Rate?

Employee retention rates measure the percentage of employees who remain with a company over a given time, while employee turnover rates measure the percentage of employees leaving the company over a given period of time. Retention rates can help an organization understand the effectiveness of their recruitment and retention efforts, whereas turnover rates can help determine the overall health of the organization. 

Retention rates are used to show the stability of the workforce, while turnover rates are used to show the rate of change. Both are important metrics for organizations to track to ensure that they keep their best workers and hire the right staff.

How Does Employee Retention Relate to Employee Engagement?

Employee retention and employee engagement are closely linked. When employees are engaged in their jobs, they’re more likely to stay longer and be productive members of the team. Companies that invest in their employees’ engagement are more likely to experience higher retention rates, as employees who are engaged are more likely to feel a sense of loyalty and purpose in their work. 

Additionally, when employees feel valued and appreciated, they’ll be more likely to stay with the company, as they’ll be more likely to trust the company to provide a positive working environment and support for their career growth.

Should You Include Contractors and Part-Time Employees in Your Retention Rate?

Contractors, freelancers, and temporary staff shouldn’t be included in retention rate calculations because they aren’t employees. These types of workers typically are self-employed or work for an agency. They’re hired for specific tasks or times and have different expectations than employees. 

Part-time employees, however, should be included in retention rate calculations since they are technically employees. They have similar expectations as full-time employees and are part of the broader team.

How Do the Costs of Turnover Compare to the Costs of Retention?

The costs of turnover often are much higher than the costs of retention. The cost of recruiting, hiring, and onboarding a new employee can be high, especially when you factor in the time and resources invested in finding the right person. In addition, the costs of lost productivity, training new staff, and lost knowledge that occurs when an employee leaves all contribute to the price of employee turnover. 

On the other hand, the cost of retention is much lower and mostly consists of the cost of keeping an employee, such as providing competitive wages and benefits, offering professional development opportunities, and investing in employee morale. In the long run, investing in retention can be much more cost-effective than the pricy process of turnover.

Crunch the numbers and see how much turnover is costing your business. 😣 Find out now.

By understanding the factors driving employee turnover and implementing effective strategies to counter it, you can create an environment where employees feel valued and supported. 

But beyond these tangible factors, such as pay, benefits, and career development, fostering a sense of connection and belonging at work is equally important. When employees feel connected to their work and their colleagues, they’re more likely to stay committed and contribute to the organization’s long-term success.

Ready to take control of your employee retention rate? Discover how Enboarder supports a culture of connection and belonging.