Employee Retention Strategy Guide: 25 Ways to Keep Top Talent
Amber Biela-Weyenberg | Content Strategist | May 20, 2024
Globally, 93% of organizations worry about employee retention, according to a 2023 LinkedIn survey of more than 2,200 HR and learning development professionals and employees who use learning services. Organizations regularly struggle to find and hold on to talent with the skills, expertise, and knowledge vital to business success. Recognizing the significant impact of employee turnover on the business, more HR leaders are examining employee retention strategies to give employees more compelling reasons to stay with their companies.
What Is Employee Retention?
Employee retention is an organization’s ability to keep workers at the company and reduce undesired turnover. Often there’s an emphasis on retaining top talent, meaning individuals considered knowledgeable, skilled, and highly productive. Retention also focuses on keeping people in the roles that are essential to delivering a product or service, such as production line workers in a factory, certified nursing assistants at a long-term care center, or servers and chefs at a restaurant. Employee retention has long been an area of focus for human resources teams, but it’s increasingly important as it becomes more challenging to fill positions.
A 2023 ManpowerGroup survey of more than 40,000 employers globally found that 75% struggle to find people who have the skills the company needs. Sometimes this is because only a small segment of the talent pool has those skills, which is a common challenge when hiring for roles that work with emerging technologies. Sometimes, it’s because the skill takes time and training to learn and is in consistently high demand—think nurses, welders, truck drivers, and accountants. And sometimes it’s because an organization is essentially seeking a needle in a haystack—a person with a unique combination of skills and experience.
Additionally, in a challenging hiring market, finding suitable candidates is only half the battle—they also have to accept the job offer. If a company doesn’t provide competitive incentives and an appealing work environment and culture, not only will it have trouble retaining employees, but it will also have difficulty hiring them in the first place. And ultimately, the more time a company spends dealing with employee turnover—including finding and onboarding people, then getting them acclimated and productive in their roles—the less time its workforce has to spend on more innovative and strategic endeavors.
Key Takeaways
- Employee retention is a company’s ability to keep workers, often with a particular focus on retaining high performers and employees in critical, hard-to-fill roles.
- Employee retention impacts the business in many ways, including affecting output, morale, productivity, customer sentiment, and the bottom line, because replacing workers is expensive.
- Effective employee retention strategies include offering career development programs, improving the culture, training managers to retain staff, investing in diversity programs, and offering fair compensation and benefits.
Employee Retention Strategies Explained
Employee retention strategies are exactly what they sound like: ways your organization can entice employees to stay with the company. Employee retention is influenced by everything a person could like or dislike about a job, such as pay, benefits, company culture, managers, time off policies, remote work opportunities, and much more. Companies must craft policies around these areas with an eye toward how they’ll hurt or help employee retention.
One popular way to think about retention is in terms of Herzberg’s Two-Factor Theory, originally published in 1959. Herzberg, a psychologist, conducted workforce research with his colleagues, and they proposed that job satisfaction and dissatisfaction are affected by two sets of factors: hygiene factors and motivation factors. Hygiene, or external, factors include working conditions, salary, and company policies. Motivation factors include growth potential, meaningful work, recognition, and other aspects related to the work itself. Ideally, employees have positive experiences with both sets of factors, creating an engaged, productive workforce. However, sometimes workers have mixed feelings. An employee who’s happy with their working conditions (a hygiene factor) but who doesn’t feel appreciated (a motivation factor), may be less likely to do more than the bare minimum. The theory also suggests that even if someone loves their job, they’re more likely to leave an organization if they’re unhappy with their salary or company policies. The research concludes, logically, that workforces that have poor experiences with both sets of factors likely suffer from high turnover.
While there’s been criticism of Herzberg’s Two-Factor Theory—for example, some people say it assumes everyone values the same things—it’s still a helpful framework for HR leaders to consider as they approach employee retention. By identifying factors that detract from the employee experience, they can help their organizations find solutions or, at least, ways to make those aspects less dissatisfying. Further, HR leaders can help amplify meaningful job aspects to increase employee satisfaction and retention.
Why Are Employees Leaving?
Employees leave their organizations for many reasons, which is why most HR professionals conduct exit interviews when someone resigns. They want to understand if the company should address a chronic problem that’s hurting retention. Some common motives are well understood, starting with compensation. 82% of the 4,000 US and UK employees surveyed by Korn Ferry in 2023 said they would leave their current job for a higher salary or better benefits.
Of course, money isn’t everything. When Boston Consulting Group asked more than 11,000 employees what they wanted in a job, they did list better pay and benefits. However, emotional factors were the most important when they reframed the question to ask: What attributes make you want to stay with an employer? Being treated fairly and being respected, doing enjoyable work, having job security, feeling valued and appreciated, and feeling supported all ranked higher than compensation. The same survey found that more than a quarter of employees see themselves leaving their employer within a year.
Other factors influencing employee attrition include bad managers, burnout, a lack of professional development opportunities, low autonomy, and boredom. But negative experiences aren’t the only reasons employees leave. Sometimes an incredible opportunity comes along that a worker can’t pass up. As odd as it sounds, that’s the best-case scenario regarding attrition—the employee was happy and wasn’t looking. However, an organization can still consider whether they can do more to create similar opportunities and whether they need to look at new opportunities and advancement more actively for high-performing employees in the future.
Why Employee Retention Matters
Today it’s common for employees to switch employers, with the median tenure being 4.1 years, according to research released by the US Department of Labor in September 2022. The stigma attached to job hopping is mostly gone, putting more pressure on HR professionals to effectively manage the workforce by analyzing and addressing causes of attrition to strengthen retention. This process is vital because employee attrition negatively impacts the business in several ways.
- Recruiting and hiring is expensive. There’s much debate and research on how much it costs to backfill a position, but there’s no denying HR spends lots of their own time and budget on third-party recruiters and services to fill open roles. Edie Goldberg, founder of talent management firm E.L. Goldberg & Associates, puts the cash and noncash costs at three to four times a position’s salary. The Society for Human Resource Management puts the average cost per hire at nearly US$4,700. While the specific cost may be up for debate, the bottom line is that recruiting takes up money, time, and expertise that could be spent more strategically if employee retention rates were higher.
- Retention affects morale. Poor retention rates cause a sense of instability in the workforce, leading other employees to question if they should be looking for a new job. If one person leaves a team, it’s more likely another will, damaging morale. Likewise, strong retention suggests people consider the company a place to stay and build a career
- Productivity suffers. As employees temporarily take on more to pick up the slack and resources are diverted from projects to focus on backfilling a position, productivity suffers, especially when a high performer leaves
- Output wanes. Poor retention can threaten a company’s core ability to deliver its products and services. There’s a reason US trucking companies emblazon their vehicles with pitches to come drive for them amid a national shortage of commercial truck drivers. And if you’re suffering declining morale and productivity due to poor retention, output will inevitably suffer even more. Additionally, when the organization loses an employee with extensive industry knowledge, it loses invaluable insights, so teams may not have access to relevant knowledge, resulting in subpar decisions.
- The customer experience suffers. Unsurprisingly, the factors listed above negatively affect the customer experience. Unhappy workers, or people distracted by changes in the department or additional work they’ve taken on, aren’t as motivated to help others. Employee retention correlates with customer service satisfaction scores.
25 Employee Retention Strategies
HR teams can use many different employee retention strategies that touch different areas of human capital management to boost the employee experience and business value. Here are 25 of the most effective.
1. Offer fair pay
Workers who believe they’re underpaid are more likely to look for another job, so employee retention starts with paying competitive rates. Companies should regularly review salaries from a market analysis and a diversity, equity, and inclusion (DE&I) perspective to ensure people are paid fairly. Inflation has added to the challenge. Workers who don’t receive cost-of-living increases feel like they’re getting a pay cut and are more likely to be dissatisfied with their employer.
2. Recruit competitively
Finding the right people to fill open roles is critical to employee retention, since those people are more likely to be happy, productive, and successful. But skills gaps have left more companies competing to find the right candidates in a smaller talent pool. On average, 75% of employers have trouble filling open roles, according to a 2023 ManpowerGroup survey of more than 40,000 employers across 41 countries. Companies should assess the marketplace and review their pay, benefits, and other offerings to ensure competitiveness and increase the likelihood of attracting and hiring the best candidates. They also need to be aware of their reputation as an employer and take action to ensure skilled candidates are aware of both the brand and specific job openings.
3. Hire smarter
Candidates who have a positive experience during the talent acquisition stage are more likely to accept a job offer and have a good impression of the company, making it more likely they’ll stay longer. HR can improve this stage by eliminating the hassle of creating profiles, making sure applications are easy to fill out, actively communicating relevant information at each step, and speeding up the hiring process. Additionally, HR can use automation to send candidates personalized emails and texts at various stages and automate workflows, such as offer approvals, to improve the recruiting experience. Hiring managers can make sure applicants understand the role, the people they’ll work with, and the company culture they’re joining.
4. Improve onboarding
Onboarding is vital to a new employee’s success. Organizations can increase their retention rates by helping each new worker make essential connections with stakeholders, answering their questions, helping them understand the company culture, and giving them the tools they need to thrive and quickly be effective in their role. Some HR software guides employees through the onboarding process, continually giving them relevant information over the initial months to help them acclimate. In addition, some companies have an extended onboarding period that begins with preboarding, helping new hires become familiar with the workplace culture before their first day.
5. Provide benefits people want
Companies regularly provide their workforce with health, dental, and vision insurance, but most employees want and expect more. Some organizations offer expanded benefits such as fertility support, elder care, tuition reimbursement, and mental health support. Consider surveying your workforce to find out what type of support matters most. A Gallup poll found that pay/benefits was the most common reason employees quit in 2023.
6. Invest in professional development
Employee and employer needs align when it comes to career development. Most people want and expect their organization to help them learn new skills to stay relevant in their roles and potentially move into new ones. Tailoring learning opportunities to employees is a great incentive for them to stay with an organization, and it helps companies prepare for the future. Six in ten workers will require training before 2027 due to growing skills gaps, reports the World Economic Forum after surveying 803 organizations (collectively employing more than 11.3 million workers) in 2022 and 2023. Providing relevant training requires business leaders and HR teams to work together to make sure the company offers the right training content and does so in the most effective way. To do this, they need to understand their employees’ skills and career aspirations. Companies that don’t help employees adapt risk having an underskilled workforce and losing some of their most motivated employees—the ones who are eager to learn.
7. Create pathways for growth
Many employees want to upskill to remain employable in the long term, and some want to move up the career ladder, requiring them to learn new skills. Organizations can give workers access to learning development programs that are tailored to their unique needs. Internal mobility is also vital. A 2023 Pew Research Center study of 5,188 US adults found that only 33% are extremely or very satisfied with their opportunities for promotion at work. If an organization doesn’t promote from within, it’s more likely to lose employees who believe they must leave to move to a higher level.
8. Offer mentorship programs
Mentorship programs are one way to help eager employees learn new skills, navigate their career paths, and strengthen their bonds with the organization. The company benefits when more seasoned employees mentor others and pass on their institutional and industry knowledge. Otherwise, these valuable insights may be lost when workers retire. Many mentors get satisfaction from teaching emerging leaders as well, giving them added motivation to stay on the job.
9. Train managers to retain
Great managers are linked with a 72% reduction in attrition risk and a 3.2X increase in employee retention, according to a Boston Consulting Group survey. The key is for managers to have the training, tools, insights, and incentives to support their teams. In terms of training, managers may benefit from improving their communication, listening, empathy, conflict resolution, and leadership skills. Organizations can also encourage managers to look internally first when filling open roles. It’s also beneficial to give them tools and insights, such as learning materials they can share and data that shows employee sentiment over time, to help them guide their teams more effectively and build stronger relationships.
10. Build employee engagement
It’s well known that engaged employees have higher retention rates and increased productivity due to reduced absenteeism, better overall well-being, and a sense of psychological safety that lets them freely share their ideas. Creating an environment where workers feel respected and have a sense of belonging is critical to engagement and therefore retention. Strong employee engagement can also offer companies a competitive edge. In 2023, on average, 23% of employees were engaged globally, according to a Gallup survey of more than 120,000 employees. But at companies that follow HR best practices, 72% of employees were engaged.
11. Communicate transparently
Clear and honest communication is a key factor in building trust with your workforce. When employees don’t understand why the business makes certain decisions, it makes them uneasy. It also increases the likelihood that they won’t see how their contributions help the organization, which is problematic because, without that knowledge, they can’t find meaning in their work. Companies can keep employees and managers on the same page and help the workforce feel valued and respected by communicating openly and often about company strategy, culture, and policies. It’s also vital to ensure communications are relevant and meaningful or else they become background noise that employees start to ignore.
12. Offer incentives
Incentives encourage employees to perform at the highest level and stay with an organization. They may include a formal employee recognition program with small gifts, bonuses for workers who meet certain quotas or thresholds, or extra paid time off awarded for a job well done. Workers who feel recognized and appreciated are more likely to stay with their employer. Incentives can also be perks the company offers all employees, such as tuition reimbursement, profit sharing, or discount programs.
13. Value DE&I
Feeling accepted for who you are, being treated fairly, and having the same opportunities as everyone else are vital to employee retention, highlighting the importance of diversity, equity, and inclusion (DE&I) initiatives. As part of their DE&I efforts, many companies track metrics such as salaries, promotions, and attrition across the workforce to identify bias and correct disparities. Companies can also take steps to build a diverse workforce during the hiring process by posting jobs in a wide variety of places to reach people of different backgrounds and tracking the results.
14. Provide continuous feedback
Too often employees aren’t sure how they’re performing. 51% of the more than 5,100 US workers included in a 2023 Pew Research Center study said they aren’t satisfied with the amount of feedback from their supervisor. Workers want guidance to help them improve and encouragement and recognition when they’re doing well. Some companies recognize that peers can provide helpful feedback too, especially when it comes to acknowledging great performance, and encourage employees to submit feedback for colleagues during annual reviews. Without feedback, employees may feel their contributions don’t matter or the company doesn’t care, making them more likely to leave.
15. Work on culture continuously
Workplace culture comprises the shared beliefs, acceptable behaviors, and general attitude of the workforce. Cultures vary by company, and there’s no one “right” kind of culture. When it comes to retention, leaders must be consistent about the culture they nurture and the actions they take and reward. And they need to listen and watch to see whether employees buy into that culture. Organizations that build a sense of community among the workforce enhance the employee experience and retention.
16. Engaging in CSR programs
65% of millennials told Korn Ferry they’d feel more inspired at a company with a good environmental, social, and governance (ESG) policy—and that they’d be more loyal. That’s according to a 2023 survey of 4,000 professionals in the US and UK. Employees generally expect their organizations to have corporate social responsibility (CSR) programs and take ESG seriously.
17. Provide autonomy and choice
No one likes being micromanaged. 73% of workers say it’s the #1 sign of a toxic workplace, according to a 2023 Monster poll of more than 6,000 employees. Empowering your workforce to make decisions and giving them the freedom to complete tasks in a way that makes sense to them are practices likely to boost employee retention. It’s also essential to ensure the workforce can get the help they need when they need it. Many companies use chatbots and knowledgebase articles to help employees quickly find answers to questions, eliminating frustrating roadblocks.
18. Consider work-life balance
Long hours spent in the office or online answering emails late into the night negatively affect the employee experience, especially when this behavior is habitual. It’ll likely lead to burnout and higher attrition rates. Organizations can take steps to ensure their culture doesn’t promote this lifestyle by encouraging workers to have a healthy work-life balance, offering flexibility, and respecting employees who take care of themselves. Leaders shouldn’t only praise employees who “go the extra mile.” If leaders normalize taking paid time off, employees will be encouraged to recharge and less likely to burn out.
19. Emphasize teamwork
Teamwork is a great way to foster a sense of community and solve problems better. It can also improve productivity and tap into people’s unique perspectives, helping them feel valued. People who like their teams are more motivated to stay with a company. Coworkers may be scattered across the globe or operating in a hybrid workplace, so giving your workforce collaborative communication tools is vital to effective teamwork. Companies can also encourage teamwork by acknowledging its importance in company communications, highlighting team successes, and helping managers build collaborative teams.
20. Create employee stock ownership plans
Employee stock ownership plans help workers feel more connected to the business’s success. Employee ownership can be achieved by making stock grants and options part of the compensation package, with vesting periods that provide an incentive to stay with the company, or by offering discounts for employees to purchase stock. Employee ownership strengthens the employee-employer connection by making the workforce feel like they’re part of something bigger, and they benefit financially if the company’s stock rises. Companies can also set up a more formal employee stock ownership program, or ESOP, where employees own all or part of the company. Since employees must sell their share of an ESOP if they leave, they’re less likely to do so if the company performs well.
21. Invest in change management
Change is constant and can grind on employees, leading to change fatigue, burnout, and higher attrition rates. Companies can invest in change management programs to ease the impact on employees. They can also consider using technology embedded with AI that can help support communication efforts, increase productivity, and uncover insights to help their workforce navigate the transition more successfully. In addition, companies should equip their managers to deal with change, explain why it’s happening, and inspire their teams. Helping employees navigate these changes well can improve retention.
22. Support employee well-being
Boston Consulting Group surveyed 11,000 workers globally in 2023 and found the biggest employee retention factors weren’t pay and benefits. Emotional needs that affect a worker’s overall well-being topped the list. People are more likely to stay with their employer if they feel valued, appreciated, supported, and respected. They also want to be treated fairly, have a sense of job security, and enjoy their work. Organizations should think about well-being holistically. Wellness programs and mental health support are essential, but other workplace factors affect employee welfare.
23. Acknowledge hard work and milestones
Employees want to be seen and recognized for their contributions to the organization. While HR often leads formal recognition programs and handles employee milestone anniversaries, companies can help managers with workforce appreciation. Some HR platforms have tools for managers to help them build better relationships with their direct reports through recognition. Notifications can be automatically sent to remind them to thank an employee for their years of service and to check in with their direct reports if it’s been a while. If managers don’t regularly talk to each direct report, well-deserved thanks will go unexpressed. Additionally, organizations can share significant individual and team accomplishments companywide, fostering a culture of appreciation and recognition.
24. Be aware of burnout
Stress is common at work. Low stress levels can motivate employees, but the World Health Organization says chronic workplace stress that’s not successfully managed leads to burnout. Burned-out employees are exhausted, have negative feelings toward their job, and often leave. Organizations should train leaders at all levels to spot early signs of burnout and step in to help employees before it’s too late. It’s vital to create a company culture where self-care is promoted and workers are encouraged to take vacations and days off before their energy is depleted.
25. Know when to let employees go
If a company tolerates poor performance or violations of the company culture, its best employees are more likely to leave in frustration. It’s important for organizations to support employees, have plans in place to help them improve when they’re not meeting expectations, and give managers tools to help them progress. Sometimes the extra attention and support pay off, putting the employee on a better path; sometimes they don’t. Organizations should carefully consider when it’s time to let an employee go.
How to Calculate Employee Retention Rate
Calculating your employee retention rate is a straightforward process. First, decide what time period you want to assess. Divide the number of employees the organization had on the last day of that period, minus any new hires, by the number it had on the first day. Next, multiply that number by 100. That’s your employee retention rate.
Employee retention = (number of employees who stayed during the time period / number of employees at the start of the time period) x 100
For example, if you’re measuring retention year to date, take the number of employees today, subtract the number of new hires made this year, and divide the result by the number of employees the organization had on January 1. Multiply the result by 100 to find your employee retention rate.
Personalize Employee Experiences with Oracle ME
Oracle ME, part of Oracle Fusion Cloud Human Capital Management (HCM), is a complete employee experience platform that helps organizations deliver an exceptional workforce experience so employees can grow and thrive. The embedded features and tools in Oracle ME enhance different aspects of work. For example, Oracle HR Help Desk, a self-service knowledgebase, and Oracle Digital Assistant, a conversational AI chatbot, let workers find answers quickly and get support when they need it. Additional assistance comes from Oracle Journeys, which provides contextual guidance to help employees compete HR-related tasks, and Oracle Grow, which offers a personalized learning experience that unifies learning, skills development, and talent mobility opportunities. Managers receive support, too, with Oracle Touchpoints. It lets them track employee sentiment with personalized team insights and encourages continuous engagement with direct reports. Oracle ME further fosters a sense of belonging and community with Oracle Connections, an interactive workforce directory, and Oracle Celebrate, which lets peers recognize each other’s efforts. HR benefits from the ability to communicate directly with the workforce and measure the impact of communications with Oracle HCM Communicate.
Employee Retention Strategies FAQs
What’s the difference between employee retention and employee turnover?
Employee retention is when an organization keeps workers in the company, and employee turnover is when they leave voluntarily.
What is a KPI for employee retention?
The most common employee retention KPI is the employee retention rate. To calculate it, take the number of employees your company has at the end of a given time period, subtract the number of new hires made during that time period, divide the result by the number of employees at the start of the time period, and then multiply by 100. A company may also consider other metrics, such as involuntary turnover rate and employee satisfaction scores.
Why are workers leaving?
Employees quit for many reasons, including low pay, burnout, bad managers, lack of career development opportunities, and feeling disrespected or undervalued. HR should conduct exit interviews and track why workers leave to see if a widespread problem should be addressed.