Glossary of Human Resources Management and Employee Benefit Terms
Employee retention refers to an organization's ability to prevent employee turnover. It includes policies, best practices, and critical strategies designed to prevent top talents from quitting their jobs voluntarily or involuntarily. In fact, it is one of the key focus areas of the HR department.
Every organization wants to retain its top employees for the business to thrive, and that's the main objective behind designing any employee retention strategies. They help mitigate the risks of employee turnover, keeping critical talent for longer.
Employee retention is one of the key focus areas of the HR department, and it's this team that comes up with innovative strategies, practices, and policies to scale down the number of people quitting an organization by improving the overall conditions and critical processes.
Employee retention is important because it helps:
As a thumb rule, an employee retention rate of 90% or higher is considered good, meaning a company should aim to maintain its average employee turnover rate at least 10% or even lower.
Retention (number of employees who stay) and turnover (number of employees who leave) are two sides of the same coin, which are crucial HR KPIs.
A 100% retention rate may not be achievable because some employees who quit might be poor performers too, which only paves the way for high-performing talents to spend less time on training and be more engaged.
According to BLS, the average retention rate in 2021 was around 47.2%, but the individual rate differs by industry and sector. Food services, high-tech, and retail businesses typically have higher turnover rates than other industries.
An organization's ideal turnover rate and retention rate depend on various factors. These include your:
Unless you don't take the time to factor in these metrics, you won't have an accurate picture of how your business handles its retention and turnover.
An employee retention strategy is an organization's plan to reduce turnover rates, increase retention, prevent attrition, and foster engagement.
Although turnover at any company is inevitable, creating a retention strategy helps prevent voluntary turnover as much as possible. It also saves an organization on time and cost. After all, it is easier and less expensive to develop your current employees than to hire new people.
Here are some key factors that affect employee retention:
You can't tie employees down. So, how to fix your turnover numbers? If that's what you're struggling with, then try focusing on these key drivers:
Retain your top talent by creating the Best Place to Work. Listen to your employees, resolve their concerns, and engage them with Empuls so they are happy, motivated, and stay longer.
Employee retention is generally expressed as a statistic where the percentage signifies the number of employees who prefer to stay in an organization for a fixed duration (example: a quarter/half year/yearly).
Here’s the formula to measure employee retention:
Employee retention rate = (Total no. of employees – Total no. of employees who quit ÷ Total no. of employees) X 100
Example: Assuming that you have 350 employees in your organization with 40 employees quitting every year on average, then your employee rate will be the below:
Employee retention % = (350 - 40 / 350) x 100
Employee retention % = (0.88) x 100
Employee retention % = 88.57
Employee retention rate= 88.57%
These are short surveys that can be sent frequently to check what your employees think about an issue quickly. The survey comprises fewer questions (not more than 10) to get the information quickly. These can be administered at regular intervals (monthly/weekly/quarterly).
Having periodic, hour-long meetings for an informal chat with every team member is an excellent way to get a true sense of what’s happening with them. Since it is a safe and private conversation, it helps you get better details about an issue.
eNPS (employee Net Promoter score) is one of the simplest yet effective ways to assess your employee's opinion of your company. It includes one intriguing question that gauges loyalty. An example of eNPS questions include: How likely are you to recommend our company to others? Employees respond to the eNPS survey on a scale of 1-10, where 10 denotes they are ‘highly likely’ to recommend the company and 1 signifies they are ‘highly unlikely’ to recommend it.
Improving employee retention is all about reducing turnover and continuing to meet business goals. It usually starts with hiring the right employees with a few additional strategies that include: