What is Employee Retention? A Comprehensive Guide

Employee retention is crucial for businesses as it brings cost savings by reducing turnover expenses and enables continuity and productivity through experienced employees. It helps attract and retain top talent, fosters a positive work culture, enhances customer satisfaction, promotes knowledge sharing and innovation, and contributes to the long-term success and competitiveness of the company.

Sofia Von Platen
Sofia Von Platen
15 min read



What is employee retention?

The meaning of employee retention is defined as a company’s capability to mitigate staff turnover. In other words, it encompasses the company's deliberate endeavors to retain their current workforce and retain their top-performing employees to achieve success in their operations.

As such, employee retention is highly valued and considered a strategic priority. It represents the ability to retain employees within the organization for extended periods, mitigating turnover and maintaining a stable workforce. 

A high level of retention can contribute to organizational stability, long-term growth, and the achievement of business objectives. Initiatives that help retain employees may include implementation of strategies, programs, and actions to attract, engage, and retain talented individuals. 

Employee retention is also sometimes conceptualized as a statistic; i.e. the employee retention rate. This rate is a statistical measure of the company’s ability to retain employees and talent. 

For more information on the meaning of employee retention rate, as well as the mathematical formula behind it, please read “What is employee retention rate?”.


Strengthen professional relationships and boost employee retention

The Empact app is your one-stop solution for facilitating retention initiatives. Gather feedback, encourage teamwork, and showcase your company’s values and culture in order to attract and retain top talent – all from one app. 



Why is employee retention important?

Employee retention is important for several reasons. A successful retention strategy will, among other things, reduce costs, enhance productivity, attract competitive talent, and contribute to a more positive work environment. 

As noted in an academic literature review on employee retention: 

“Staff turnover is vital for any organisation [sic]. It has a direct impact on the smooth running, productivity, performance and long-term sustainability of the organisation”. 

Read our full list of 15 Benefits of High Employee Retention to gain the full scope of how holding onto your employees is a great ide. The key areas of how employee retention can benefit your organization can be summarized as follows:


Cost savings

High employee turnover can be expensive for businesses. Recruitment, hiring, onboarding, and training new employees incur significant costs. By focusing on employee retention, businesses can minimize these expenses and allocate resources more effectively.


Productivity and continuity

When employees stay with a company for longer periods, they gain valuable experience and become more efficient in their roles. Retaining skilled and experienced employees leads to increased productivity and ensures continuity in operations.

This is somewhat intuitive. However, several studies have come to the same conclusion; Human resource management (HRM) strategies have a statistically significant effect on employee retention. 

Unsuccessful HRM may cause employees to leave, which in turn can lead to a decrease in productivity. For reference, see “Factors Influencing Employee Retention: An Integrated Perspective”.


Talent attraction and retention

In competitive industries, attracting and retaining top talent is crucial for a company's success. By prioritizing employee retention, businesses can create a positive work environment that attracts high-performing individuals. This enhances the organization's competitive edge and reputation as an employer of choice.


Organizational culture and morale

Employee retention contributes to a positive organizational culture. When employees feel valued, supported, and engaged, it fosters loyalty and commitment. A positive work environment and strong morale lead to increased job satisfaction, higher employee engagement, and improved overall performance.


Customer satisfaction

Employee retention indirectly affects customer satisfaction. Satisfied and engaged employees are more likely to deliver excellent customer service, resulting in positive customer experiences. Consistent service quality builds trust and loyalty among customers, leading to business growth and customer retention.

The link between customer satisfaction and employee engagement has been explored academically as well. One study, focusing on the car rental industry, found that “employee engagement is indeed positively associated with customer satisfaction and retention”.


Knowledge sharing and innovation

Long-term employees possess in-depth knowledge of company processes, systems, and customer preferences. Retaining these employees facilitates knowledge sharing within the organization, leading to smoother operations and the potential for innovation. Their experience and insights drive continuous improvement and contribute to the company's long-term success.

In summary, employee retention is important for several reasons. Humans are undoubtedly the greatest asset for many companies, and retaining talented and top-performing individuals has thus become a pivotal consideration for business leaders and HR managers. Download our white paper and find 15 Strategies to enhance employee retention. 

Streamline your human resource management and employee retention efforts with Empact's one-stop employee engagement app.


What factors can influence employee retention?

A great number of factors are at play when it comes to employee retention. These can be financial factors, such as pay, benefits, and promotions, or non-financial factors, such as job satisfaction, work-life balance, and social environment. 

In the study “Factors Influencing Employee Retention: An Integrated Perspective”, the authors identified a range of these factors that are positively related to employee retention:

Financial factors

  • Pay/compensation
  • Promotion

Non-financial factors

  • Training and career development
  • Job embeddedness
  • Job satisfaction
  • Flexible work arrangements
  • Organizational support and work-life balance
  • Job involvement
  • Job content
  • Organizational commitment
  • Relationship with immediate supervisor/boss
  • Organizational values, beliefs, and culture

In the next section of this article, we will look at how these factors and drivers can be used proactively in your company’s strategies surrounding employee retention.


6 strategies for enhancing employee retention

Enhancing employee retention requires the implementation of effective HRM strategies. In the following sections, we will discuss 6 different approaches and strategies that you can implement in your company in order to boost employee retention. 

Remember, employee retention strategies should be tailored to the specific needs and culture of your organization. Regularly evaluate the effectiveness of your strategies and make adjustments as needed to create an environment where employees feel valued, supported, and motivated to stay with the company.

For more inspiration on employee retention strategies, see our article “10 proven strategies to enhance employee retention that you can implement today”.


Compensation and benefits

Offering competitive salaries and comprehensive benefits packages is essential for attracting and retaining top talent. Regularly reviewing and adjusting compensation to align with industry standards and providing benefits that meet employees' needs can significantly improve retention rates.

One way to achieve that is through benchmarking and employee surveys. Find out what the average compensation and benefits package is in your specific industry and use this information to benchmark your own offering. 

If you’re willing to pay above the average, you can expect a workforce with above average talent – the logic being that employees value compensation very highly when it comes to joining, staying, or leaving a company. 

In a recent survey conducted by Ernst & Young (EY), titled “The EY 2022 Work Reimagined Survey”, the authors found that the number one factor that employees consider is compensation. 

The survey posed this question to the employees: ”Select up to three primary reasons you would change jobs if you were considering another offer?”.
35% of more than 17,000 respondents chose “opportunity for increased pay”. 
Conversely, 37% of employers thought “learning and skills” are the number one factors that workers are in need of.

This only goes to show that there might exist a discrepancy between what employees actually want, and what employers think they want.

A way of tackling this discrepancy is through employee surveys. Pose valid questions and gather valuable information that is tailored specifically to your company and your workforce. Find out what moves the needle for your employees, and use this knowledge to increase retention and counteract possible turnover.

The Empact app is designed with this very principle in mind; knowing the core drivers of your workforce will allow you to initiate strategies that make a difference. Create your own surveys that employees can fill out with ease from the comfort of their app.
Everything to do with employee engagement and retention is all included in your one-stop app with Empact.


Career development and growth opportunities

Providing employees with opportunities for professional growth and advancement is crucial for retention. This can include offering training programs, mentorship opportunities, and clear career paths within the organization. Employees are more likely to stay when they see a future for themselves and feel supported in their career aspirations.

According to a study by Pew Research Center, a lack of career development opportunities is the second-most common reason employees leave their jobs – with low pay being the most common reason.

This indicates that employees value opportunities for growth and advancement in their careers, and if they are not offered these opportunities, they are likely to look for them elsewhere.


Positive work environment and culture

Foster a positive work environment that promotes employee engagement, collaboration, and work-life balance. Encourage open communication, recognize and reward achievements, and create a supportive culture where employees feel valued and appreciated.

In a recent research article published by MIT Sloan Management Review it is concluded that the top predictor for attrition – i.e. people leaving a company – is a toxic work culture. In fact, a toxic work culture is 10 times more likely to contribute to attrition than compensation.

So on the one hand, we have evidence suggesting that low pay is a major concern when considering a new job offer. On the other hand, we have evidence suggesting that a toxic work culture is the primary contributor to attrition.

Keep this in mind when you prioritize your employee retention strategies.


Flexible work arrangements

Offering flexible work arrangements, such as remote work options or flexible scheduling, can improve work-life balance and increase employee satisfaction. This flexibility shows trust in employees' ability to manage their work effectively, leading to higher retention rates.

Flexible work arrangements have become increasingly important after COVID-19, as the pandemic “has taught us that it is possible to achieve greater productivity, innovation, fluid culture and communication if employers set the right systems”, according to an article published by The HR Congress.

Setting the right system is paramount to reaping the benefits of flexible work arrangements. Whether your business needs a seamless channel of communication, a digital schedule, or an online board for announcements in order to create a feeling of cohesion and belonging for your flexible workforce – the Empact app encompasses all of that and more!


Regular feedback and performance management

Implement a robust performance management system that includes regular feedback and performance evaluations. Provide constructive feedback, recognize achievements, and offer opportunities for improvement. This helps employees feel valued and supported, fostering their commitment to the organization.

In order to get the most value out of feedback and performance management, your managers must be equipped with the proper tools. A management team that is educated about employee motivation, retention strategies, benchmarking, and best practices is critical to the success of the program

Feedback must be given frequently and continuously. The old days of having an annual review process is quickly giving way to more frequent feedback systems, as the benefits are manyfold. 

On the one hand, managers get the opportunity to review their employees on a regular basis, which allows them to correct and support their work, aligning their efforts with the company’s strategies and goals. 

On the other hand, managers also get the opportunity to recognize, appraise, and reward good work, which in turn can have a positive impact on job satisfaction, employee engagement, and, ultimately, retention.


Employee recognition and rewards

As mentioned in the previous section, employee recognition can play a pivotal role in keeping your workforce satisfied and engaged. In fact, employees are 2.7% more likely to be highly engaged, according to a Quantum Workspace study.

Besides the point of engagement, the study also highlights a number of interesting benefits stemming from employee recognition.

  • Organizations with recognition programs had 31% lower voluntary turnover and 28.6% lower frustration levels
  • A whole 52.5% of employees want more recognition from their manager
    Organizations with recognition programs are 12 times more likely to have strong business outcomes.
  • Recognition is one of the top drivers of candidate attraction

As part of your employee retention strategies, you can implement employee recognition programs to acknowledge and reward outstanding performance and contributions. Recognizing employees' efforts and providing incentives can boost morale, job satisfaction, and loyalty.