Human Resource Manager’s Guide To Employee Retention

In an age where remote work is becoming the norm, employees can now quit and find a new job more easily than ever. And while that is great news, it poses another danger for business owners – they need to work harder than ever to retain their employees.

With most companies looking to downsize their spending, one of the best places to look at is hiring. The costs of hiring can be incredibly high, especially for more advanced and technical roles, going into thousands of dollars per hire.

This is why retaining your top performers should be one of your highest priorities. Let’s explain what retention is and what you can do about improving it in your business.

Employee retention: what is it and why is it important?

Put simply, employee retention is your ability as the employer to keep an employee working at your organization. In general, businesses retain their best employees by giving them the right kind of conditions to thrive, including compensation, benefits, work environment, perks, career growth opportunities, and more.

Models of employee retention

There is no single recipe to success when it comes to retaining employees in your organization. Three main models of retention have been identified in scientific literature.

Zinger model – according to this model, some of the primary drivers of retention are engagement and connection. In order to feel engaged, the company’s goals must be aligned with the employees’ personal goals. Employees should derive both personal and professional development from work.

ERC’s retention model – also known as the Employee Retention Connection model. It bases retention on three main factors:

  • stimulating work
  • leadership and recognition
  • award

Once an employee has all of these elements in their workplace, they are likely to stay there.

Integrated retention system – slightly more complex than the previous models, this one predicts the likelihood of retention on five elements: analyzing organization climate, designing stimulating work, training motivational leaders, competency building and career development, and lastly, recognizing and rewarding performance.

Note that in all three models, retention means much more than giving someone a raise and a promotion and is actually a very complex issue.

Why does employee retention matter?

It’s clear that retaining your best employees is not such an easy job. But there are a few good reasons why you should put an effort into it.

  1. Employee turnover is expensive

Every time an employee leaves and you have to replace them with someone else, you have to start a whole new hiring process, which doesn’t come cheap. According to research, hiring a new employee can cost anywhere from $4,000 to $7,000 per employee. If you have a sizable workforce, the numbers add up quickly and make up for huge losses. 

And that’s just for hiring someone new. When you’re replacing an existing employee, you’re losing out on their output while looking for a replacement. In other words, replacing an existing employee can cost 50-60% of their annual salary. If you pay an engineer $100k per year, finding a new one could set you back as much as $60k.

  1. Engaged employees are productive employees

If you want your employees to do great work, you need to make them engaged. According to one research, employees who are not engaged cost the USA around $500 billion each year. Moreover, an employee who is engaged will be 20% more productive than one who is not.

Employee engagement is one of the key aspects of improving employee retention.

  1. Your competitors benefit from your loss

When an employee leaves you, they have a specialized skill set that makes them a valuable asset for many other companies, but most of all, your competitors. While they could go for a role in a different company or industry even, your competition will be the ones on the lookout for your people. They are trained, well-versed in your industry and they know valuable information about your company. This gives your competition a serious edge if they hire them.

Primary reasons for employee turnover

If your employees are leaving you consistently, there could be a number of reasons why this is happening. Before blaming the employees for being greedy and going for a bigger paycheck, you should look into some of the things you can do on your own first.

Total rewards – this includes salary, bonuses, performance rewards, and more. Make sure to stay competitive and pay your employees fairly compared to industry and location standards.

Onboarding – research says that 28% of employees leave within the first 3 months of starting a role, which is exactly when the onboarding period should be done. Poor onboarding is a major cause of high turnover.

Leadership – strong and empathetic leadership will make an employee stay even if some other aspects of their work are not ideal. Make sure to frequently check in on the relationships your employees have with the senior staff.

Learning and development – without the ability to learn something new and develop themselves personally and professionally, your employees will quickly start looking at job ads during their lunch breaks.

Growth and advancement – if an employee sees no perspective in their role and work and if they can only stay in the same role for the upcoming months and years, they will have very few reasons to stick around and wait for nothing to happen.

Recognition – hard work is great, but it’s even better once you show your employees that you appreciate it. More on how to do this a bit later in this article.

Wellness and work-life balance – working long hours (and weekends), no options of flexible schedules, no remote work policies – these are all reasons why someone will leave you for a more modern company with a better work-life balance.

How to tell if your employee is about to quit

If you’re wondering whether your employees are about to quit on you, worry not. You may think that you can’t make any predictions, but there are some tell-tale signs that they’re about to leave.

Lower productivity: if an employee is doing less than what they usually do and not hitting their KPIs, it could mean that they’re getting ready to jump ship. At this point, they may have found another position or they’re just looking to leave.

Less of a team player: the employee could be meeting their goals but they’re not cooperating with the rest of the team. They may be looking for ways to hide their intentions or just minimize their interactions and overall workload. Speaking of which…

Doing the minimum amount of work: if they’re looking to do the very basics just to barely hit their goals and go leave home, something might be up.

Less interested in building a relationship with their manager: if they’re avoiding you intentionally but still doing some work, they could be just waiting for the moment to tell you that they’re about to leave.

Less willing to commit to long-term deadlines: if they’re only looking to do quick work and refusing to talk about what happens several months down the line, it may mean that they’re not planning to be present at that time.

Strategies for building an outstanding employee retention program

If you want to build a great employee retention program, it will take a few things, but here are some pointers to get you going in the right direction.

Hire right the first time. One of the easiest ways to keep your retention on track is to carefully choose whom you hire the first time around. If they’re a great fit, they will stick around longer and be happier and the likelihood of turnover is decreased.

Benchmark and track your employee retention rate. How do you even know if your retention rate is good if you’re not even measuring it in the first place? You may be doing extremely well or you could use lots of improvement, but you won’t know until you start measuring.

What is a good employee retention rate?

It depends on many factors, such as your industry, company size, and role. However, the average retention rate is 90% in the USA and that’s the kind of value you should be aiming at. In other words, you should aim to have 90% of your employees with you at the end of the year – if they were all there at the beginning of the year.

How to calculate employee retention rates

It’s actually fairly simple. Take a time period that you want to measure, e.g. a year. At the beginning of a year, you have 100 employees and at the end of the year, 17 of them have either gone somewhere else or you let them go – and you have 83 left. For the period of one year, divide your total number at the end with the number in the beginning, and that is your retention rate.

In this case, that means 83/100 = 83%. In other words, you retained 83% of your employees in the period of one year.

Benchmark the cost of employee turnover

As mentioned before, turnover can be extremely expensive for any company, especially if it’s a senior, well-paid role. It is very much worth your time to track the costs of turnover in your company because A) you’ll have more data to base your decisions on and B) you’ll realize just how much cheaper it is to retain a good employee.

When an employee leaves you, there are plenty of costs involved. You have to pay for the new job ad, the sourcing and screening, the background checks, and the interviews. You could hire an agency or do it in-house with an HR department, but the costs add up.

When a new employee joins, you’ll have to train them, which sometimes takes months and requires another senior employee to teach them instead of doing their own job. On top of that, it can take months before the new hire becomes fully productive.

All of that adds up and the cost of turnover can be tens of thousands of dollars per employee and role. Make sure to track these expenses so you know exactly where the money is going and how much you can save with good retention strategies.

Identify the perks your best employees want

Making an employee stay is not rocket science. In the end, it boils down to giving them what they need and desire to be happy in their roles. The key thing here is in asking your employees because no two employees will want the same benefits and perks.

In the past decade, Google has influenced many companies to start offering “perks” such as foosball tables in the office, playrooms, slides, pinball machines, and other items and activities that will hardly make a dent in your retention rate.

Instead of those, try some meaningful benefits and perks, such as…

  • student loan assistance
  • flexible work schedule and remote work options
  • career development support and activities
  • child care support
  • improved work/life balance
  • provided lunch/other meals at the office
  • company-sponsored wellness programs
  • employee recognition and reward programs
  • half-day Fridays
  • on-site fitness center
  • casual Fridays (or even better, an entire week)

You can have one, several, or all of these perks, but don’t start with any of them until you find out what your employees desire the most.

Evaluate the health benefits

One of the most important benefits of all that often gets neglected is the health insurance and associated costs. Especially in the United States and especially for employees with families and children, health benefits are incredibly important. Instead of forking out money on expensive “perks”, invest it in great health insurance. That way, if something bad does happen, your employees can rest assured that you have their backs.

Provide different benefits for different employees

As mentioned before, employee retention doesn’t work on a one-size-fits-all basis. You really have to find what the majority of your employees want as perks and benefits from your company. Depending on their age, habits, family size, and many other factors, they will want one or more of the following types of benefits:

  • health insurance
  • life insurance
  • paid time off
  • family leave
  • 401(k) and retirement planning

If your workforce is largely composed of younger people without families, you may only need to focus on a handful of these. However, as your employees get older, they will appreciate extra family leave and especially 401(k) and retirement planning.

Set clear employees goals and expectations

How will your employees know if they’re doing a good job if they don’t know what “a good job” even entails? If you give your employees a clear set of KPIs that they can work towards, they’ll have palpable goals that they can envision. Not only will this make it easier to get work done, but it will also give them a feeling of satisfaction once they reach those goals.

Offer a clear career path

If your employee doesn’t see themselves progressing in their career in your company, you can expect them to become unsatisfied at some point and leave. One of the easier ways to keep your employees in your company is to tell them exactly what roles, raises, and promotions they can get if they do great work in their existing role. Put simply, they will have something to look forward to that will push them forward.

Invest in your managers

When an employee decides to leave you, it’s most often not because they dislike your company. It’s often because they have an issue with one of their immediate managers. While you can’t fix someone’s disagreeable personality, you can invest in them to become better managers. On top of professional courses, there are plenty of those that will help your managers build better relationships and work with the employees instead of micromanaging them.

Create a positive company culture

One of the biggest buzzwords in the HR world as of late is “culture”. It’s abstract and difficult to explain but it’s often what makes employees apply to you and stay with your company.

There are plenty of tips for building a positive company culture, but they most often boil down to this: determine a set of values that you believe in and live them through your management and behavior in the workplace. Only hire people who believe in those same values, be it providing exceptional customer support, only doing sustainable business, or something completely different.

Recognize contributions

Recognition is one of our top needs as a human species. In the workplace, recognizing your employees’ hard work is crucial. When they are recognized, your employees will be:

  • more productive
  • more motivated
  • more engaged
  • more aware of how good their work really is

What’s even more important, you’ll also be able to spot those who are underperforming quickly, so you can offer them support.

One model that can help you do this is called SBI, which stands for Situation, Behavior, and Impact. 

This model is excellent when you want to give constructive feedback that your employees will readily accept and that they can apply immediately.

Employee retention ideas

Now that you know what it is and how important it can be, let’s get into some practical employee retention ideas that you can apply immediately.

Engagement surveys – an excellent tool for measuring how someone feels in their everyday work situations. There are quite a few platforms nowadays that let you create these with ease.

Exit interviews – when your employees have decided to leave, it may be too late to talk them into staying. However, a great exit interview will be able to tell you everything about the reasons why they are jumping ship so you can learn from your mistakes.

One-on-one meetings – group meetings just don’t cut it when it comes to true engagement. When you talk to employees one-on-one, you’ll show them that you value them since you have time for them, and you’ll have a window of opportunity to discuss what would make them happier.

Stay interviews – just as their name says, these interviews are meant to make your employees stay. They are one-on-one interviews where you sit down with your employees to find out what they like and dislike about your company so you can work on improving what’s lacking.

Company review sites – if you’re not keeping an eye out on websites like Glassdoor, you should be. This is where employees can (anonymously) leave plenty of feedback on everything from the interview questions when they were hired to the relationship they have with the management.

Career development opportunities – this can be anything from giving them access to different courses and webinars to sending them off somewhere to get special training for their role. Choose carefully and in accordance with the goals that you set for this role.

Giving employees recognition – introduce an employee recognition program that will reward positive behaviors and make your employees feel appreciated. There are plenty of examples out there, so choose something that suits your budget and availability.

Tools for improving employee retention

If you’re ready to start working on your retention today, there are numerous tools that can help you out. We sorted them according to their intended purpose below.

HRIS (HR information system) – for managing your employees and keeping the bulk of your HR-related information in one place. Our top picks include:

Employee experience – for improving the experience your employees have in the workplace.

Communication – our top choices for communicating in the workplace, be it in the office or in a remote setting.

Surveys – for employee engagement and checking many other aspects of employee satisfaction, these are some excellent free and paid options.

Recognition – for showing your employees that their hard work matters and rewarding them in abstract or material ways.

Well-being – for ensuring that your employees stay physically and mentally well at all times.

Recruitment – for finding, sourcing, and testing new talent when you’re hiring new employees or finding replacements for those you could not retain.

Analytics – for learning how your employees feel about your organization and backing those opinions with actionable data and statistics.


Employee retention may sound complex after everything mentioned above but it’s actually fairly simple. Keep your employees happy, give purpose to their work and give them the perks and benefits they desire. Once you do that, your investment will return tenfold because you’ll have a happier workforce that appreciates your company and wants to stick around for the long haul.

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