What is employee retention? [including benefits and tips]

Employee retention is often expressed as a statistic; the percentage of employees that remain in a company for a fixed time period (e.g. a quarter). To measure it, use the following employee retention rate formula:


Employee retention rate formula:

employee retention formula

What is an employee retention strategy?

Employee retention strategies are practices an organization follows to retain its staff (e.g. through compensation, policies, benefits, office perks, etc.). A company’s main intent when planning those strategies is to minimize employee turnover, in other words, the number of employees that leave a company during a certain period. 

Even though a small turnover rate can be healthy depending on the nature of each industry, higher percentages can be expensive both in terms of money and time. Replacing an employee can be expensive, costing approximately 6 to 9 months salary based on the position. Losing highly performing employees can also impact team productivity and employee morale, as it requires adjustments to the daily functioning and workflows of a department or team – particularly if the departing employee is a manager or higher.

Reasons why employee retention is so important for an organization

These are the most important benefits of effective employee retention strategies:

But, as an employer, how do you retain employees?

Having explored the employee retention definition and its importance, let’s look at which areas most companies usually focus on when crafting employee retention strategies and programs:

Wondering how to retain employees? See our tutorial on how to create an employee retention program.

Want more definitions? See our complete library of HR Terms.

See also:

Frequently asked questions

What does employee retention mean?

The retention of employees is an important organizational goal. It’s crucial to show appreciation and create a positive work environment in order for people to stay engaged with your company, and receive competitive pay/benefits packages that will keep them happy on top of allowing you to retain valuable talent.

What determines employee retention?

Employees are more likely to stay at a company if they feel valued by their workplace and the people in charge. This means providing them with benefits that accommodate what’s important for individual life, such as healthcare coverage or vacation days.

Why does employee retention matter to HR?

It is essential to retain positive and motivated employees because high turnover increases expenses while also having a negative effect on the company’s morale.

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