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Your Guide to Employee Retention: Strategies & Tips for Improving Engagement


Is employee retention a major area of focus for your organization? Because it definitely should be. 44% of leaders cited retention as a challenge over the last year! To survive — and ideally, thrive — in today’s world of work, your company needs to have strategies in place to engage and retain its people. Without a plan to encourage employees to remain on your team, you risk wasting precious time and resources on recruiting and hiring efforts. Whether your company has 50 employees or 50,000, understanding how to keep your employees engaged will play a major role in your competitive advantage in the marketplace. Keep reading to better understand the role of employee retention in your organization and 18 strategies and tips to retain top talent.

Table of Contents

What is Employee Retention?

How to Calculate Employee Retention

Why Does Employee Retention Matter?

How to Improve Employee Retention Rates?

Best Employee Engagement and Retention Strategies

What is Employee Retention?

Employee retention includes the strategies, tactics, compensation, perks, benefits, efforts, and more that an organization uses to keep employees engaged and prevent turnover. In short, employee retention is the percentage of employees that stay with your company in a given time frame. (Conversely, employee turnover is the percentage of employees that leave for any reason.)

Some level of employee churn is expected, even healthy and normal, as it creates space for fresh talent. But low employee retention or high turnover rates, however, can spell danger for an organization.


How to Calculate Employee Retention

To calculate your retention rate in a given time period, you can use this formula:

(Remaining headcount / Starting headcount) x 100

For example, to assess last quarter’s retention rate, take the number of employees at the end of the quarter (let’s say 1,500) and divide that by the number of employees you started the quarter with (let’s say 1,557), then multiply by 100. In this example, your retention rate for the last quarter would be (1500/1557) x 100 or 96.3%, so only 3.7% of your employees left for any reason.

Before you panic when evaluating your company’s employee retention rates, keep in mind that not all industries are made equal. For example, the hospitality industry – food and drink services, travel, tourism, etc. – has some of the poorest employee retention rates, with hotels and motels often turning over 73.8% of employees per year! You can compare that with the 10-15% turnover rate that is considered healthy by most HR specialists.

Why Does Employee Retention Matter?

Employee retention reflects the health and stability of your organization. When employees constantly leave, your organization suffers across the board — it hurts company pockets, productivity, and people.  

Saves Money

High turnover rates can cost your company thousands, and even millions, of dollars per year. It’s no secret that replacing employees is more expensive than retaining employees. Gallup reports a conservative guess that replacing talent can cost anywhere from one-half to two times the employee’s annual salary. For example, replacing a single employee making $50,000 a year can cost anywhere from $25,000 to $100,000.

And that’s just if we’re measuring cost in dollars. Hunting and hiring are incredibly time-consuming as well.

Affects Morale

When your company is a revolving door of people, morale takes a hit. As recruiting and hiring efforts are underway, other team members often need to cover extra work until a new team member is not only hired but trained as well.

Furthermore, part of a happy, healthy work environment is the connection between team members. As employees come and go, there are less meaningful working relationships.

Impacts Business Operations

With their departure, employees take crucial historical knowledge about your company, ways of working, effective strategies, client relationships, and more. It can be difficult (and even impossible) to replace folks who hold business-critical knowledge about life, work, and productivity at your organization.


How to Improve Employee Retention Rates?

Improving employee retention rates starts with a data-driven strategy. After all, you can only improve a problem that you fully understand. Gather data about your employee retention through tools like stay interviews, exit interviews, or even exit surveys. Assess your retention data not only by time frames, but by salary bands, roles, and functions. Use data to uncover any trends:

  • Which roles are the hardest to keep filled?
  • What time of year is turnover highest?
  • Is employee retention lower in a particular department?
  • Is employee retention lower under a particular leader?
  • What are the retention rates by location?
  • How does my retention rate compare to industry average?

By asking insightful questions, you’ll diagnose the real problem and uncover actionable next steps and learn how to keep people in your organization. For example, you might uncover an alarming drop in retention one year, but upon closer examination, several teams had people retire. This is much different than learning that people are leaving because of a poor employee experience.  

When analyzing the state of retention at your company, you can also try assessing through the lens of the employee lifecycle: Recruiting, Hiring, Onboarding, Development, Retention, and Offboarding.

  • What experiences are your people having during each of these key moments of the lifecycle?
  • Do most employees quit before year one?
  • How soon after hiring are people quitting?
  • What is the average tenure for an employee at your company?

Even if you have a stellar company, it’s hard to get past a terrible first impression during onboarding. Measure and survey your people about their experiences during each key moment to better understand the opportunities for improvement. The bottom line? To retain your people, make each moment count.

18 Best Employee Engagement and Retention Strategies

No single factor will keep every employee at your company. Engaging and retaining your employees requires continuous effort and a multiplicity of strategies working in tandem. Increasing salaries across the board won’t keep a burned-out employee. And all the best company perks and benefits won’t keep an employee who feels disrespected and unhappy.

While no one tactic holds the key, each of the strategies and tips below are proven ways to increase the retention rate at organizations — and every little bit counts.

1. Pay At or Above Market Value

Research shows that compensation is still a driving force for employee retention. In today’s job market, remote positions are now available to almost anyone around the world. That means companies no longer benefit from jobseekers being limited by the location they live in. At least every two years, conduct an industry salary assessment to determine if your pay for each role is at or above market value and adjust accordingly.

Remember, smart job seekers understand that compensation goes beyond just the salary on paper. Take a look at your total rewards package. What kind of health benefits do you offer? Employees are interested in companies that can offer tuition reimbursement, cellphone stipends, gym memberships, free counseling or legal advice, education stipends, and more! Always make the best offer your company can reasonably afford.

If your organization offers benefits and additional perks, consider creating a one-pager that summarizes the total rewards and compensation included with the role! This is something you can share with an interviewee during the hiring process.

Reminder: While salary and compensation are important, they’re not everything! After employees believe they are compensated fairly, other factors like feeling valued and recognized heavily impact whether they will stay at an organization or try their best.


2. Clearly Explain Job Roles and Responsibilities

Incompatibility is often a major driver of high employee turnover and can usually be remedied by taking a closer look at the hiring process. No one likes finding out that new job expectations don’t match reality. To avoid this, be sure to clearly explain the role during the interview process. If possible, have a current employee who works in a similar role describe the day-to-day responsibilities and expectations. If folks need to be tech-savvy and comfortable using several different programs and tools, let them know. You’ll save everyone some time and effort by hiring people who want the job you’re actually offering.

3. Be Honest About Your Company Culture

Often a company will describe the culture it aspires to have, rather than acknowledge where it is today. Clarity about your company culture is equally as important as clarity about the role you’re offering. If your culture celebrates lone-wolf top performers, don’t talk about how you value teamwork. Or, if your culture is fast-paced, be upfront about that. The description of your company culture needs to focus on the reality of life as an employee at your organization. Employees want to know exactly what they’re signing up for, so tell them!

4. Hire for Culture Add, Not Culture Fit

When hiring, be on the lookout for candidates that add to rather than fit into your existing company culture. This means you don’t want to hire people that think and work exactly like you and your current teams. Over time, hiring exclusively for culture fit leads to stagnant teams that exist within echo chambers, ultimately stifling innovation. Does your team have a lot of “big picture” thinkers? Pay special attention to candidates that can think through the details.

In the long run, the health of your organization will benefit, increasing the likelihood that people will stay. Moreover, the nuanced dynamic of your team will keep things interesting as you collaborate to deliver business results.

5. Host Team Building Activities

Have some fun with your teams! This key part of a strong company culture is often overlooked. Team building activities should be intentional because it’s essential and beneficial. Beyond just having a good time, team building encourages open communication, honesty, productivity, boosts morale, and so much more! Whether you’re in person or virtual, there are plenty of great options.

Get creative with your team building and try these ideas:

If you’re looking for additional team building ideas, try these quick team building activities for virtual teams.

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6. Invest in Employee Wellbeing

Happy and rested employees perform better than burnt employees. Studies show that Gen-Z and Millennials now make up 46% (and growing) of the full-time workforce. Above all, they want employers who truly care about their wellbeing. So, find and implement some creative ways to support employee wellbeing! You can offer:

  • Subscriptions to meditation apps like Calm or Headspace
  • A stipend for a counseling app like BetterHelp
  • Gym memberships
  • Virtual yoga or Zumba classes
  • Mental health days off

These are great options! But take time to build employee wellbeing within the context of the work environment too. Try these ideas:

  • No-Meeting Mondays
  • Early dismissal on Fridays (try a rotating schedule if you need at least a few folks on the clock)
  • Encourage employees not to respond to emails after hours
  • Suggest that employees block time for breaks between meetings or calls 

7. Encourage Employees to Take Time Off

Far from counterintuitive, encouraging employees to take time off is a great retention strategy. Here’s why: in a post-pandemic world, 65% of employees have shifted away from centering their lives around work – and they’re likely willing to quit if the job demands that. Encouraging a healthy work/life balance is key to communicating to employees that you see them as people, not just factors in the company’s bottom line.

8. Provide a Flexible Work Environment

Only hire people you trust. That way, you’re empowered to encourage a flexible work schedule and environment, knowing everything will get done. Where possible, allow flexibility with work hours and scheduling. And if people can work remotely, let them.

Forbes outlines some statistics every employer needs to know about remote work. Spoiler alert: People love it. Here’s what the research suggests:

  • 74% of professionals expect remote work to become standard
  • 97% of employees don’t want to return to the office
  • 61% of employees prefer being fully remote

Given the above, you’ll all but guarantee lower employee retention rates by not allowing remote work if it’s possible. 

It’s important to note that a fully remote environment isn’t always possible for every company or industry, for example, manufacturing, healthcare, or retail. Instead, build flexibility into these environments in different ways! Try giving employees more say in scheduling, allowing them to swap shifts with peers, or the ability to leave for just a portion of the day.


9. Never Micromanage

Micromanaging kills motivation. And motivation is tied directly to employee engagement which is a key factor in employee retention. Micromanaging is when managers or leaders closely observe and control an employee’s work.

If you need to see everything before it goes out or spend time outlining in detail exactly how a task needs to be done, you might be a micromanager. Medium outlines some other tell-tale signs of a micromanager.

Instead of watching your employees’ every move, focus on empowering them to make good decisions because you trust them.

10.  Assess Your Company Values

Your company values matter, and it might be time to reassess them. In fact, Gartner suggests that we “forget the Great Resignation; think Great Reflection.” Post global pandemic, employees have shifted their priorities and reevaluated the role of work in their lives. Today’s employees (and consumers) want to work for and support companies whose values are aligned with their own. Employees are looking for a less transactional and more relational, people-centric work environment.

That said, today’s job seekers have questions:

  • Do your company values make it clear that it puts people first?
  • What commitments to diversity, equity, and inclusion does your organization have?
  • What efforts are you making towards a more sustainable carbon footprint?

Employee retention is increasingly tied to the shared ethics between employee and employer.

11.  Communicate the Company’s Vision

Your company vision communicates where you’re heading. It captures the inherent possibilities and potential associated with staying on board for the future with your company. Is your vision inspiring? Does your vision clearly communicate what direction your organization is heading in? Employees want the answers to these questions.

Your employees need to know they are associated with a future-minded organization that understands where it’s going, how it can get there, and what role employees play. Importantly – your people want that future vision to align with their personal values and ethics. With 52% of employees questioning the purpose of their day-to-day job, you’ll retain more talent when you have an answer prepared.

12.  Clarify Career Paths

A career path is the series of roles your employee aims to hold throughout their time at your company. A clear path forward is key to retaining top talent, especially for younger generations of employees. Not all paths need to lead to the C-Suite though. Having options for lateral or cross-functional moves is valuable too.

Clarifying your career paths means clearly defining the core competencies required for each role. This lets employees know exactly what they need to do or learn to get promoted. Once you’ve defined the paths, circulate and communicate that information with employees, ensuring it is stored somewhere easily accessible.

Tip: Share your career paths during recruiting and hiring! You’ll differentiate your company and demonstrate your commitment to the career development of your people.

13.  Invest in Employee Learning and Development

To complement a clear and robust career pathing plan, you’ll need to continuously invest in employee learning and development (L&D). The Association for Talent Development defines L&D as, “a function within an organization that is responsible for empowering employees’ growth and developing their knowledge, skills, and capabilities to drive better business performance.”

And research has shown a clear return on investment and better business performance for the companies that invest in employee learning. In one study, firms that spent an average of $1,595 per employee in training experienced 24% higher gross profit margins. That’s quite the return!


14.  Ramp Up the Recognition

Recognition is an easy way to build employee engagement levels and increase employee retention rates. Saying “thank you” and letting employees know how much and why their work matters can make a big difference. Furthermore, the risk of not valuing your employees in the wake of the Great Resignation is clear: 54% of employees who quit didn’t feel valued by their organizations and 52% didn’t feel valued by their managers.

Recognition is a proven way to boost morale, lower turnover, and improve job performance — with four in five employees citing increased motivation when managers and leaders show appreciation.

15.  Find Opportunities for Feedback

Feedback is crucial for promoting employee development and progress. On a regular basis, encourage managers to provide feedback to their teams. This should be both positive and constructive. Most companies have moved away from the yearly performance review in favor of more regular touchpoints with employees. Remove the mystery and provide clarity around how employees are performing. You’ll encourage them to stay engaged and stay with your company.

16.  Offer a Mentorship or Buddy Program

Joining a new team or organization can be daunting – even for the most skilled workers. Create a mentorship or buddy program to provide support during those first few months on the job. Robust onboarding plans that help employees become embedded in the organization through forming connections can help lower your retention rates.

17.  Tap Into the Power of Great Managers

“More than half of exiting employees say that their manager or organization could have done something to prevent them from leaving their job” (Gallup). Managers are your organization’s frontline in the effort to keep employees happy, engaged, and motivated. Managers who regularly connect with employees can often catch the signs of a disengaged employee as they begin to develop and emerge.

18.  Incorporate Stay Interviews

According to SHRM, a stay interview is, “a structured discussion a leader conducts with each individual employee to learn the specific actions she must take to strengthen that employee’s engagement and retention with the organization.”

Stay interviews are different from exit interviews, which aim to uncover what prompted the departure. Instead, stay interviews are proactive listening sessions where leaders or managers understand what is keeping a current employee and what might cause them to leave. Stay interviews can even occur as early as 90 days into an employee’s journey with your company.

This is a powerful tool for uncovering what keeps folks at your organization and what might cause them to leave. While the act of just listening to employees and caring enough to ask will make a difference, be sure to catalog the leanings and take steps to rectify any issues raised.

Remember: Your Employees Are Your First Customers

Take care of your people, and they’ll take care of your customers and business. Market trends suggest that the future belongs to companies who understand the importance of adopting a people-first approach to the employer-employee relationship. The tips above are designed to move the needle on your retention rates by keeping the wellbeing, health, and preferences of your people top of mind.

As you strategize, remember that every bit counts, and employees will appreciate it. Take time to communicate your retention efforts to employees as well. Let them know that designing meaningful experiences matters to your organization!