Definition

employee retention

Contributor(s): Shaun Sutner

Employee retention is the organizational goal of keeping talented employees and reducing turnover by fostering a positive work atmosphere to promote engagement, showing appreciation to employees, and providing competitive pay and benefits and healthy work-life balance. Employers are particularly interested in retaining employees during periods of low unemployment and heightened competition for talent. To retain employees, organizations use human resources technology for recruiting, onboarding, engaging and recognizing workers and offer more work flexibility and modern benefits like physical and financial wellness programs.

Employee retention strategies

Organizations that are focused on retaining employees usually start with the employee hiring and onboarding process by giving new workers adequate training and orientation in the culture of the organization. They also give new employees an opportunity to ask questions and engage in dialogue with supervisors about their work.

Some organizations use systematic recognition and rewards strategies to show they value employees. Some employers rely on employee engagement software that uses gamification and other techniques to recognize workers and provide rewards and perks such as retail discounts. Employers also focus on competitive pay using employee compensation management software that compares pay rates against benchmarks for given regions, job titles and performance ratings.

Employers seek to distinguish themselves in the hiring arena by offering slates of varied benefits offerings, both voluntary benefits, or employee-paid, and those paid for or subsidized by the organization. Newer types of benefits include lower premium high-deductible health insurance plans, pet insurance, education debt repayment programs and legal counseling.

To foster work-life balance, organizations offer flexible work schedules, time off and telecommuting, and they train managers to encourage employees to take vacations.

Employers increasingly provide office amenities such as ergonomic and standing desks, subsidized meals, free refreshments and relaxation hubs offering games such as ping-pong and pool.

Why employee retention is important

High rates of employee turnover can harm organizations' ability to carry out their mission because of impairments to continuity, loss of institutional knowledge, and high costs of replacing departing workers. Diminished productivity and  competitive advantage are among the biggest losses caused by employees leaving an organization.

Employee departures can also lower morale and spur more employees to leave the organization. Employee retention is also important to team building and cohesion in the workplace, so workers can come to trust and depend on each other.

Another negative effect of turnover is the impact on customers, who can notice that they are dealing with a continual flow of different people. 

Aspects of employee retention

Employee engagement and employee experience are seen as among the most important strategies in retaining valued employees and maintaining a positive employer-employee relationship.

Organizations' HR departments can deploy employee engagement software to do pulse, or instant, surveys about employees' feelings toward the organization and take action to remedy areas in which employees have low job satisfaction. Such surveys are usually anonymous and brief to make employees more likely to participate.

Employees' feelings about belonging to and having their voices heard in the organization are considered a key aspect of employee retention. Employees often cite the importance of  having managers who support them, and frequent surveys are a way to gauge their feelings about their supervisors.

Employers also use corporate wellness technology that promotes organization-wide cohesion using a variety of techniques including fun competitions and group volunteer projects. Promoting physical and psychological well-being is sometimes a key aspect of corporate wellness. Organizations can provide incentives or discounts on health insurance for employees who use wearable and mobile devices to track their physical activity or other metrics, including those related to chronic health conditions.

This was last updated in May 2018

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