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The Empuls Glossary

Glossary of Human Resources Management and Employee Benefit Terms

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Employee Retention 

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.

What is employee retention in HR?

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. 

Take employee recognition to next level and experience a 90% surge in Employee Engagement

Why is employee retention important?

Employee retention is important because it helps:

  • Ensure productivity flow
  • Lower turnover rates
  • Save on hiring costs
  • Reduce training time
  • Improve morale and engagement
  • Build a positive company culture
  • Increase business revenue 

What is a good employee retention rate?

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:

  • Historical turnover rate
  • Internal promotion rate
  • The industry you are in

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.

What is an employee retention strategy?

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.

What factors affect employee retention?

Here are some key factors that affect employee retention:

  • Low employee morale: Lack of employee morale is highly contagious. It rapidly spreads to others and brings down their productivity levels too. 
  • No career growth: No employee enjoys doing the same old tasks every day, especially when there's no scope for growth or progress. Eventually, it creates career insecurities, triggering them to hunt for other better opportunities. 
  • Lack of timely recognition: Organizations that don't recognize employees' efforts must be prepared to see their top performers walk out for other opportunities. 
  • Poor relationships with managers and peers: A good paycheck and a few perks won't cut it. Employees spend most of their time at work, and a healthy business relationship is crucial to thriving in a workplace. 
  • Ignoring employee wellness: If an organization fails to offer proper well-being, they won't hesitate to look elsewhere.

What are the main drivers for 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: 

  • Individual and organizational alignment: Employees should understand a company's goals and their role in accomplishing them. To work in tandem, a company must have a positive culture and effective communication that outlines every employee's roles and goals. When objectives are lined up, engagement soars. Employees who embrace the core values see a more significant purpose at work and stay longer.
  • Rewards and recognition: Honest recognition and rewards are the core pillars of a dynamic, healthy talent retention strategy. Awarding top performers makes them feel valued and builds loyalty toward the organization. 
  • Timely appreciation: Appreciate employees in front of everyone and on time reinforces positive behaviors. Even simple gestures like 'thank you,' 'you've done a great job,' or 'congratulations' can boost their morale.
  • Periodic surveys: Many employees report a significant disconnect between themselves and their superiors. This disconnect is apparent in organizations where HRs and managers fail to know their pulse or ask for feedback. To understand what employees want, just ask. Take periodic surveys encompassing everything—from work environment to goal setting and management styles.

Pro Tip:

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.

Talk to our engagement expert today!

How to measure employee retention? 

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%

Employee pulse surveys:

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).

One-on-one meetings:

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.

Based on the responses, employees can be placed in three different categories:

  • Promoters
    Employees who have responded positively or agreed.
  • Detractors
    Employees who have reacted negatively or disagreed.
  • Passives
    Employees who have stayed neutral with their responses.

How to improve employee retention?

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:

  • Build a positive workplace culture: Have a healthy company culture that improves teamwork, boosts morale, and increases productivity. When job satisfaction, work performance, and collaboration are enhanced, it helps reduce stress and makes employees stay longer.
  • Ensure proper communication: Effective communication is one of the pillars of employee retention. When people comprehend what’s expected from them and when there are open channels of communication, they feel free to ask questions whenever they are confused. 
  • Offer perks and benefits: These are not only a vital part of employee retention but also show employees that an organization genuinely cares about their overall well-being.
  • Give timely rewards and recognition: One of the best ways for employees to feel appreciated and seen at the workplace is to have R&R programs. While the idea is to reward hard work, it also lets other coworkers be aware of the positive impact.

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