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Employee Retention | Definition, Strategies, And Benefits

By Caitlin Mazur - Feb. 6, 2023
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Summary. Employee retention is essential to companies’ health, as it lowers costs and increases productivity and morale. Good employee retention strategies target common employee pain points, such as a lack of recognition by intentionally creating an enjoyable place to work.

After you hire a new employee, you may think your work is done. However, now you need to convince that employee to stick around as long as possible.

In this article, we’ll discuss what employee retention is and why it’s important. We’ll also share some common reasons employees leave their workplaces and provide some ideas for employee retention strategies.

Key Takeaways:

  • Good employee retention lowers expenses, increases productivity, and strengthens teams.

  • Three of the most common reasons employees leave their jobs are a lack of compensation, lack of career growth opportunities, and lack of recognition.

  • Employee retention strategies include creating good onboarding programs, providing competitive pay and perks, and promoting a good work-life balance.

What Is Employee Retention?

Employee retention is the organizational goal of keeping the company’s current employees from quitting their jobs. In other words, employee retention is keeping the status quo as far as employees are concerned rather than having high turnover rates.

Organizations must focus on increasing employee engagement, providing competitive pay and benefits, and encouraging career growth and good work-life balance to retain employees.

Employee Retention Strategies

Retaining employees doesn’t happen on its own, which is why many companies have employee retention programs. No matter how big your company is, you need to have at least a few of these retention strategies in place.

  1. Good onboarding and orientation programs. You can help employees feel valued and supported right off the bat by investing in your onboarding program. A clear training checklist, plenty of tours and explanations, and a mentor they can go to with any questions are key to a strong onboarding program.

  2. Fair and competitive compensation and benefits. Do your research to make sure you’re offering reasonable compensation for your geographical location and industry. You should also make sure you are keeping up with raises and not letting employees go years at a time without a pay bump.

  3. Perks. Free coffee and snacks, gym memberships, and retirement planning services can all go a long way in giving employees extra reasons to stick around.

  4. Flexible work options. Giving your employees the ability to adjust their hours or work from home if needed can go a long way in supporting a good work-life balance. Employees have other important responsibilities outside of work, so if you support them in taking care of those, they’ll be much happier with their jobs.

  5. Regular feedback and recognition. Create programs and standard practices that provide employees with feedback on and recognition for their work on a regular basis. This way, they’ll have more confidence in whether they’re doing well or not and will feel that their efforts are recognized and valued.

  6. Training and development programs. Not only do you need to provide plenty of training and professional development opportunities for all employees – no matter their level – but you also need to encourage them to take advantage of them. This means providing the time and money required to attend applicable classes and conferences.

  7. Good communication and transparency. Focusing on creating a culture of excellent communication and honesty between company leaders and employees will go a long way in boosting employees’ faith in and loyalty to the organization. Start now, and it will carry over into times of change or uncertainty as well.

  8. Track and recognize milestones. Create a system for keeping track of employees’ tenure, and figure out how to recognize each milestone. This includes retirements and promotions as well. Make sure you assign each milestone the honor it’s due, which means investing in something a little more substantial than ecards and paperweights.

  9. Encourage employees to celebrate each other. Many companies let employees award small bonuses to their coworkers to thank them for help on projects or recognize excellent work. These programs are vital to creating a strong culture that values teamwork.

The Benefits of Retaining Employees

Employee retention is vital for companies’ financial and cultural health for several reasons.

  1. It lowers costs. Recruiting, hiring, and training employees is expensive. Not only that, but those employees won’t add much value to your company for at least six months, if not a year, so keeping your employees around as long as possible results in a better return on investment.

  2. It increases productivity. When a department loses an employee, not only are that employee’s responsibilities not being covered, but now the manager has to take time away from other projects to hire and train a new person to fill the position. This is necessary and worthwhile at times, but it can start to take its toll if it happens too often.

    Keeping employees around helps keep projects moving, increasing productivity.

  3. It increases the skill level at the company. When a company can develop its current employees’ skills rather than having to regularly start fresh with new employees, it reaps the benefits of significant experience and up-to-date skillsets.

    In addition, the more a company has to hire new employees, the higher risk they have of having to settle for less talented candidates, especially if the job market is in favor of job seekers.

  4. It boosts morale. When employees feel wanted and valued by employers who invest a lot in employee retention, they’re more likely to be more engaged and productive.

    On the other hand, when workers see their colleagues leaving every few months, they’re more likely to be frustrated with and less loyal to their employer – especially if they regularly have to cover for those employees when they leave.

Why Employees Leave Their Jobs

Employees leave their jobs for many reasons – lack of competitive pay, no clear advancement opportunities, and burnout are just a few of them. One of the first steps in employee retention is recognizing these reasons so you can create strategies to prevent them.

  1. Insufficient compensation and benefits. If someone feels that they aren’t being compensated fairly for their efforts, they aren’t likely to stick around long. This is especially true if your nearby competitors are paying more and/or have better benefits.

  2. No clear advancement opportunities. Knowing what their next career step is is a huge motivator for employees. If they see that they’re in a dead-end job, they’re far more likely to look for work at another company that does have room for growth.

  3. Poor work-life balance. While part of having a good work-life balance rests on the employees themselves, employers play a significant role in this as well.

    If your company policies and culture are making it difficult for workers to take time off, have the flexibility to take care of their families when needed, or even stay close to 40 hours of work a week, you run a high risk of burning out your employees. Burnt-out employees are likely going to look for greener pastures elsewhere.

  4. Lack of professional development opportunities. Employers that don’t provide easy-to-access training for employees to grow their skills are likely to have frustrated workers who won’t blink twice at taking a job elsewhere.

  5. Poor company culture. If the culture of the team or organization isn’t enjoyable to be a part of, employees will leave. This applies to organizations with a lack of culture, as well as those with unhealthy or toxic environments.

  6. Not feeling valued or recognized. When employees feel that their efforts have gone completely unnoticed or that no one would notice if they left, they aren’t likely to remain loyal to their employer for long.

  7. Not feeling like a part of the team. Sometimes companies and employees just don’t fit well, and when this happens, the employees are more likely to leave. This isn’t something a company can usually fix – it’s just a matter of working hard to hire the right fit in the first place.

  8. Lack of support or resources. When employees feel like they’re on their own to solve problems or implement ideas with insufficient training and resources or an unsupportive manager, they’re more likely to pack their bags as soon as an opportunity arises.

Retention Vs. Attrition

Companies can measure the rate at which their employees are staying or leaving with a retention rate or an attrition rate. Retention measures how many are staying during a certain period of time, while attrition measures the percentage who leave during that same period.

Improving Employee Retention FAQ

  1. What is the meaning of employee retention?

    Employee retention means how well a company does at keeping its employees. Good employee retention means a company has low turnover – its employees tend to stick around for a while.

    Poor employee retention means the company has high turnover, or employees tend to leave the organization pretty regularly.

  2. Why do companies want to retain employees?

    Companies want to retain employees because it increases their productivity and lowers their costs. Regularly recruiting, hiring, and training new workers takes a toll on companies’ productivity levels and bank accounts. Keeping employees around helps save money and creates a healthier and more productive organization.

  3. What are three ways to retain employees?

    Three ways to retain employees are:

    • Creating good onboarding programs.

    • Providing competitive pay and benefits.

    • Regularly recognizing employees’ work.

  4. What are the disadvantages of employee retention?

    The disadvantages of employee retention are a lack of new talent and giving too much power to employees. New employees can bring fresh skills and perspectives to an organization, so if employee retention is taken too far, it can cause companies to become stagnant and ingrown.

    Giving too much weight to employee retention can also force managers to give employees unnecessary raises or keep underperforming employees in positions they aren’t suited for.

References

  1. SHRM – Managing for Employee Retention

Author

Caitlin Mazur

Caitlin Mazur is a freelance writer at Zippia where she has written 140+ articles that have reached over 1 mil viewers as of June 2023. Caitlin is passionate about helping Zippia’s readers land the jobs of their dreams by offering content that discusses job-seeking advice based on experience and extensive research.

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