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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. 

Listen, recognize, award, and retain your employees with our Employee engagement software  

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 are the best practices for improving employee relations?

When employees feel valued, respected, and supported, they are more likely to be engaged, productive, and committed to the company's success. Here are some key employee relations strategies to cultivate a positive work environment:

  • Create an environment of trust and respect: Foster an atmosphere where employees feel comfortable expressing themselves, voicing concerns, and offering ideas. This builds trust and fosters a sense of psychological safety, which is crucial for open communication and collaboration.
  • Encourage open communication: Maintain clear and consistent communication channels that flow both upwards and downwards.  Encourage employee feedback through surveys, focus groups, or one-on-one meetings. Regularly share company news, updates, and goals to keep employees informed and engaged.
  • Invest in employee development: Provide opportunities for career development through training programs, mentorship initiatives, and tuition reimbursement. By helping employees develop their skills and knowledge, you demonstrate a commitment to their growth and future within the company.
  • Recognize and reward achievements: Publicly acknowledge and appreciate employee contributions, big and small.  Employee recognition programs can boost morale and motivate employees to continue exceeding expectations.
  • Promote work-life balance: Offer flexible working arrangements, such as remote work options, flexible hours, or compressed workweeks, to help employees manage their personal and professional responsibilities. This demonstrates a commitment to employee well-being and helps reduce stress.
  • Empower employees: Give employees ownership over their work and decision-making processes. This fosters a sense of autonomy and accountability, leading to increased engagement and job satisfaction.
  • Foster a culture of collaboration: Create opportunities for teamwork and collaboration across departments. This not only improves communication and problem-solving but also builds stronger relationships among team members.
  • Promote diversity and inclusion: Cultivate a workplace that values and embraces diversity in all its forms. This fosters a sense of belonging and ensures everyone feels respected and valued for their unique contributions.

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%

What are the best practices for improving employee retention?

The best practices for improving employee retention are

Improving employee retention is crucial for maintaining organizational stability and productivity. Here are some best practices for enhancing employee retention:

1. Competitive compensation and benefits

  • Salary and bonuses: Ensure that your compensation packages are competitive within your industry and region. Consider regular salary reviews and performance-based bonuses.
  • Benefits: Offer comprehensive benefits packages that include health insurance, retirement plans, paid time off, and other perks like gym memberships or childcare support.

2. Career development opportunities

  • Training and education: Provide ongoing training and professional development opportunities. This can include workshops, online courses, and tuition reimbursement programs.
  • Career pathing: Create clear career paths and progression opportunities within the organization. Help employees understand how they can advance their careers.

3. Work-life balance

  • Flexible work arrangements: Offer flexible working hours, remote work options, and compressed work weeks. This helps employees manage their personal and professional lives better.
  • Encourage time Off: Promote the importance of taking vacations and breaks to prevent burnout.

4. Positive workplace culture

  • Inclusivity and diversity: Foster an inclusive environment where diversity is celebrated. Ensure that all employees feel valued and respected.
  • Employee recognition: Implement programs to recognize and reward employees’ hard work and achievements. This can include formal awards, shout-outs in meetings, or appreciation events.

5. Effective leadership and management

  • Training for managers: Ensure managers are well-trained in leadership skills, including communication, conflict resolution, and team building.
  • Regular feedback: Encourage managers to provide regular, constructive feedback and to hold one-on-one meetings with team members to discuss their progress and any concerns.

6. Employee engagement

  • Involvement in decision-making: Involve employees in decision-making processes, especially those that affect their work. This can increase their sense of ownership and commitment.
  • Team building activities: Organize regular team-building activities to strengthen relationships and improve collaboration.

7. Healthy work environment

  • Physical workspace: Create a comfortable and safe physical workspace. This includes ergonomic furniture, sufficient lighting, and a clean environment.
  • Mental health support: Provide resources and support for mental health, such as counseling services, mental health days, and stress management programs.

8. Clear communication

  • Transparency: Maintain open lines of communication between management and staff. Share company news, changes, and updates regularly.
  • Feedback mechanisms: Establish channels for employees to provide feedback anonymously if needed. This can help identify issues before they lead to turnover.

9. Onboarding and integration

  • Comprehensive onboarding: Develop a thorough onboarding process to help new hires integrate into the company culture and understand their roles.
  • Mentorship programs: Pair new employees with mentors to guide them through their initial period at the company.

10. Regular assessment and adaptation

  • Employee surveys: Conduct regular employee satisfaction and engagement surveys to gauge how employees feel about their work and the company.
  • Data-driven decisions: Use the data collected from surveys and other feedback mechanisms to make informed decisions about changes and improvements.

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.

What are the best practices employee retention strategies?

In today's competitive job market, retaining your best employees is crucial for organizational success. Here are some of the most effective employee retention strategies to keep your top talent engaged and satisfied:

  • Competitive compensation and benefits: Offer a compensation package that is competitive with the market rate for similar positions in your industry and location. This includes a fair base salary, comprehensive benefits package (health insurance, paid time off, retirement plans), and potential for bonuses or profit sharing. Competitive compensation demonstrates your value for your employees and helps attract and retain top talent.
  • Invest in employee well-being: Prioritize employee well-being by offering programs and initiatives that support their physical and mental health. This could include health and wellness programs, on-site fitness facilities, employee assistance programs (EAPs), and flexible work arrangements to promote work-life balance. By investing in employee well-being, you create a healthier and happier workforce, reducing burnout and absenteeism.
  • Foster a culture of recognition and appreciation: Publicly acknowledge and appreciate employee contributions. Implement employee recognition programs that celebrate achievements, both big and small. This can take the form of verbal praise, peer-to-peer recognition awards, or bonus structures tied to performance. Recognition motivates employees, reinforces positive behaviors, and demonstrates that their hard work is valued.
  • Provide opportunities for growth and development: Invest in employee development by offering opportunities for learning and skill-building. This could include training programs, mentorship initiatives, tuition reimbursement programs, or participation in conferences and workshops. By helping employees develop their skills and knowledge, you not only improve their performance but also keep them engaged and interested in staying with the company.
  • Create a positive and supportive work environment: Cultivate a work environment that is positive, supportive, and respectful. This includes promoting open communication, encouraging teamwork and collaboration, and fostering a sense of belonging. Employees who feel valued, respected, and supported by their colleagues and managers are more likely to be engaged and satisfied in their roles.

What are the 4 pillars of employee retention?

By focusing on these four crucial pillars, you can create a work environment that fosters positive employee relationships and helps retain top talent:

  • Employee engagement: When employees are engaged, they are invested in their work and the company's success. This translates to higher productivity, innovation, and customer satisfaction.
  • Employee experience: The entire employee journey, from onboarding to exit, should be positive and enriching. This includes providing clear communication, growth opportunities, and a supportive work environment.
  • Employee well-being: Organizations that prioritize employee well-being see a significant return on investment. This includes offering competitive benefits packages, promoting work-life balance, and fostering a healthy work environment.
  • Employee development: Investing in employee development shows a commitment to their future within the company. Providing opportunities for learning and growth keeps employees motivated and engaged.

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