What is Employee Retention and How to Manage it?

The definition of employee retention is to keep staff happy by ensuring they feel positive and motivated. Acknowledging the importance of employee retention and how it can help a business thrive is key. Having an employee retention strategy can support the success of a business.

LumApps for Employee Engagement
What is Employee Retention and How to Manage it?

What is Employee Retention?

Employee retention goes hand in hand with job satisfaction. A business will retain employees if they’re happy in their work. Successful employee retention isn’t just about paying staff well. It cultivates the whole ‘going to work’ experience and encompasses:

  • Staff motivation
  • A strong company culture
  • Understanding one’s role
  • Benefits
  • Training
  • Professional development
  • A focused career path

Employee turnover is likely to be lower if a company acknowledges the above are essential to personal development. When a company experiences a high turnover of staff it’s time to ask why and consider introducing or updating the employee retention plan.

Employees leaving a company can have a severe impact on a business, especially if several leave at the same time. It can demotivate other staff and cause them to look for another position too.


How can a business increase its employee retention? The process starts before the hire, when deciding the role and the benefits it will offer. These can include:

  • A good salary and benefits
  • Flexible working (remote, full or part time)
  • Being family-friendly (helping with day care costs)
  • Providing a comfortable working environment (a comfortable office and chill-out areas)
  • Giving perks (free drinks, snacks, lunch, company discount, free product samples, clothing allowance, company vehicle)

The benefits should not be just good, but excellent, to attract top talent. Then it’s time for talent retention and to make sure employees see their role as meaningful.

Why is Employee Retention Important?

Employee retention is important as it breeds loyalty and commitment. If staff are content in their work, understand their roles, and are engaged in the company they work for they are less likely to leave.

This builds a knowledgeable workforce that grows with the business. This knowledge can be invaluable to the development and plans of a business. It’s far cheaper to train and build on existing knowledge than it is to hire someone new.

If employees feel appreciated and listened to they’ll enjoy their work. Many people have had that feeling of dreading going to work each day when we hate our job and want to leave. If this has happened to you, did you stay or go? If you left, what would have motivated you to stay with the company? More money, or more money and the feeling you were a valuable part of the business?


It’s human nature to feel wanted and that your skills are useful. If employees are happy they are more likely to stay with a company. Plus, motivated employees are company advocates – they’ll praise their employer if they feel inspired and look forward to going to work every day.

Another reason why employee retention is important is cost. High employee turnover is expensive. It can cost up the equivalent of an employee’s annual salary to hire someone new. This can include advertising, human resources, management time, training, and loss of productivity while the new employee learns how to do the job.

5 essential strategies to improve employee retention

Boosting employee retention can improve the bottom line and having a winning employee retention strategy to achieve this is essential. The strategy should be reviewed regularly, to check what’s working and what isn´t. Each of the 5 employee retention strategy ideas can be integrated to support the core of the business.


1. Communication

Are your lines of communication as good as they should be? Do people feel they can ask questions? The answers should be yes, as good communication is fundamental to a successful business. Everyone should feel they have a voice and can say what they feel and contribute ideas that will be listened to.

It’s also important to conduct employee surveys to find out opinions. They can be anonymous so people aren´t afraid to say what they think.

An intranet is a good tool to foster communication, as it reduces the need for formal meetings and allows for quick, easy chats and answers.


2. Rewards and Recognition

A standard way to improve employee retention is by offering a good salary, perks, and benefits. Bonus systems are a good way to maintain employee retention and don´t have to be in the form of cash. Other rewards can be:

  • Shopping vouchers
  • Extra time off
  • Weekend breaks
  • Free health club membership
  • Free parking
  • Event tickets

The list can be as creative as you want it to be. If people know they’ll be praised and rewarded for their hard work they’ll believe in the business. This is also a way to promote how fantastic your company is to work for.

People also want to feel recognized for the work they do. It costs nothing to say thank you for a job well done and can boost employee morale incredibly.


3. Define the Corporate Culture

Successful businesses are clear on where they’re heading and their long-term goals. This information should be fed to employees so they feel part of the team and the culture of the company.

If the culture is clear and employees understand where and how they fit into the company structure then this will benefit retention. How? When you’re clear about your role and know it’s important and appreciated, you feel part of the ultimate vision. Build a successful company culture and your employees will stay with you and not jump ship to join the competition.


4. Promote Loyalty

Loyal employees are invaluable. They are the people that understand and believe in the core roots of the company. Build employee loyalty and your business will benefit from:

Loyal employees will stick with your business through good and bad times. They’ll always do their best for you and work hard. Loyal employees don´t need to browse the job ads as they’re content where they are, which translates to good employee retention.


5. Create an Employee Retention Plan

For employee retention techniques to be successful you need a working plan. This should be available to all managers (the intranet is a good place to store it) so everyone works together to maintain employee retention. Measurable targets should form part of the plan.

When designing this plan it´s important to listen to employees’ views ‘ and talk to them about why they do or don´t like working for the company. This can be done through surveys or face-to-face meetings.


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How to Measure Employee Retention?

Employee retention is tangible and intangible. When a business knows it’s not placing many job ads and people aren´t leaving it’s intangible. When the metrics are measured and the numbers show good or bad employee retention figures, it’s tangible.

Here are 4 Simple Ways to Measure Employee Retention :

1. Analyze retention figures every quarter or year

Once you have this figure over say, 4 quarters, you can work out whether retention is going up or down. This will give an idea of how successful the company is at retaining employees. Take this further and analyze by department, age, or gender and you can spot your business’ weaknesses and address them.

2. Hold exit interviews

When people leave, record and monitor why they are leaving (better career prospects, more money, improved benefits…). This information can be invaluable to improve future retention.

3. Monitor

Read the industry media. Are other companies in your sector suffering from poor employee retention or is it just yours? Are others seeing employee retention success but you’re not? This can highlight if your business has an employee retention problem or not.

4. Why are people leaving?

People could be quitting their jobs because they’re unhappy, or because they’re being lured by the competition. Alternatively, some people will be retiring, having children, or not be replaced through natural wastage.


The Average Employee Retention Rate and How to Calculate it

According to the US Bureau of Labor Statistics, in 2018 the average time Americans had worked for their employer was 4.2 years. This hadn´t changed from two years previously. This figure perhaps demonstrates that people aren’t as happy as they used to be in their work and look for new challenges. It’s also a sign that the days of having a job for life are over, but does not make employee retention any less important.

The formula to calculate employee retention is: Divide the number of employees that have left by the number remaining. Multiply this figure by 100 to express it as a percentage.

Example of how to calculate employee retention: 25 people left a company in 2019 ÷ 75 people remained = 33% of the workforce have left


Employee retention matters and this quote from the Gallup 2017 State of the American Workplace report summarizes this perfectly:

“Employees want to feel good about their organization and what it offers the world. They want to be able to say, ‘I like what this company stands for.’ If employees do not believe in their company or do not believe the company can successfully uphold its brand or reputation, they are likely to look for a different job.”


LumApps for Employee Engagement


Asya Stamenova
Brand Content Writer


Employee Engagement Human Resources

Published on

May 26, 2020