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Best practices for employee retention

The most obvious way to employee retention is employee satisfaction. But what drives satisfaction in the workplace differs greatly across individuals and contexts.

What is employee Retention?

Employee retention refers to the phenomenon where current employees choose to continue to work for their current company and do not actively search for other job opportunities. Employee turnover, being the opposite of retention, is the percentage of employees that leave your company in a given period. Retention is, therefore, heavily reliant on the strategies and processes that a company puts in place to ensure turnover risks are mitigated.

Creating an environment that encourages employee retention is a leading challenge for HR professionals and management teams. High employee turnover rates not only stunt the company’s growth but can also accumulate substantial operational costs as you need to replace resources time and time again.

Why does employee retention matter?

To break it down to its most simple reasoning, prioritizing employee retention just makes sound business sense. Companies that address the reasons for turnover and then actively take steps to improve retention reap significant benefits, including reduced costs. The most conservative estimate indicates that replacing just one employee equates to an estimate of one and a half to two times that employee’s annual salary. The magnitude of financial costs coupled with the “soft costs” (i.e., lower morale, toxic culture, incomplete projects, etc.) that high turnover can have in an organization is enough to make any HR focus on employee retention. Additionally, turnover and retention need to be taken into consideration when devising hiring road maps.

If you want to look at reasons to invest in employee retention beyond financial responsibility, look no further than the competitiveness of the job market. Ask your recruiters how many times they have reached out to a candidate and gotten the response, “Thank you for your interest, but I am happy where I am”. they probably have some sort of indication as to how often they hear that, but it’s even better if they track reasons for rejection throughout the recruitment process! This data helps shed light on the fact that more and more employers are offering employees desirable compensation packages and work environments, making it harder to persuade top talents to join your company. The moral of the story is that when unemployment is low and competition for talent is high, it is important to ensure that your company does what it can to retain productive and talented employees because not only will it be expensive to replace them, it might be extremely difficult as well.

Why are employees leaving?

There are many reasons why employees are leaving their jobs, from feeling undervalued and unappreciated to a lack of career progression opportunities. It is important to understand why employees are leaving to make changes and improve retention. At the beginning of 2022, Flexjobs conducted a study that concluded that 30% of employees are stuck in a job they want to quit while 25% had quit their jobs within the last six months. Of those who did quit, 68% of them did so without another job lined up. So let's take a look at the top 5 reasons that make employees want to kick their current employers to the curb:

  1. Toxic company culture (62%)
  2. Inadequate salary (59%)
  3. Poor management or leadership (56%)
  4. Lack of healthy work-life balance boundaries (49%)
  5. Lack of remote work opportunities (43%)

However, this is not a one size fits all kind of scenario. Although we do believe that these are critical potential turnover risks that employers need to mitigate, that does not mean that these are the only factors that contribute to a disengaged employee’s decision to leave a company.

Another study conducted around the same time by the Pew Research Centre found that although low pay was once again a major contributing factor, the following three reasons were:

  • Lack of career progression opportunities
  • Feelings of disrespect at work
  • A lack of employer concern for childcare requirements

There are probably a hundred other studies that we could present to you that will contain an entirely new set of reasons why employees want to quit their jobs. But what’s important is finding out the specific reasons employees leave your company. The best way to do this is to encourage your exiting employees to complete an employee engagement survey and/or participate in an exit interview, to get an understanding of their employee experience. Allow them to provide employee feedback and voice their reasons for leaving.

How do you improve employee retention?

Now that we have a better understanding of why employees leave their jobs, let’s dig into prevention. Ultimately, improving employee retention requires a comprehensive approach that addresses the underlying issues and provides employees with the resources and support they need. Again, you need to devise tailor-made, effective employee retention strategies that combat the turnover risks that are specific to your company, but here are some common strategies that you can use as a starting point:

  1. A top-notch recruitment and onboarding process

    Implementing a comprehensive hiring and onboarding process provides new employees with the tools and resources they need to succeed, which is a vital contributor to their retention. Employees who have been given all the information and tools they need to fully understand what they need to do and how they should do it are more likely to feel empowered in their position. Empowered employees will feel like they’re able to add genuine value, and will likely be more inclined to stay.

  2. Regular performance reviews

    Provide regular performance reviews with feedback to ensure employees understand their roles and responsibilities and how their performance is being evaluated. Giving your employees a clear picture of how they’re performing and how they can improve provides a sense of safety and understanding that is necessary for employee recognition, satisfaction, and retention.

  3. Clear personal and professional development opportunities

    It goes without saying that the majority of people in today's workforce are looking to advance in their careers. Making sure these advancement opportunities are communicated regularly so people know what they are progressing towards and what their career path can look like helps keep employees motivated and satisfied in your workplace. Allowing for ongoing education opportunities for your employees also gives them the option to further their personal development.

  4. Curating a positive working environment

    A company’s working environment encompasses a range of things; the general office atmosphere, the communication style among employees, the company culture, and the level of focus on curating a healthy work-life balance, to name a few. At Amby, we have found that a people-centric approach to the working environment is a great way to foster a positive workplace that keeps employee morale high.

    There are a few people-centric initiatives that can be helpful when trying to foster a positive working environment. Allowing for flexible work options will empower your employees to get their work done in a way that suits them, which is great for their work-life balance and mental health. Additionally, prioritizing social and team-building activities throughout the year will allow for greater collaboration between employees, which will foster better communication, a feeling of safety, and better employee engagement. Lastly, it is helpful to encourage two-way communication with management and employees to ensure everyone feels like their voice is being heard.

  5. Competitive salaries and benefits

    It’s no secret that money talks, so offering competitive compensation and benefits is a surefire way to show employees they are valued. Make sure that you are keeping up with inflation and doing continuous salary research to make sure you are in line with market expectations. We recommend having annual or semi-annual salary reviews so employees know when that discussion is coming, and so that your finance team can plan accordingly. Including benefits like flexible work arrangements, health insurance, and comprehensive annual and parental leave is also a great way to prevent employee departures.

  6. Allow for employee ownership

    People thrive when they feel like their daily contributions in the workplace are making a positive difference, so allowing employees to take full ownership of their work is a great way to improve job satisfaction and foster a sense of pride and responsibility in each employee.

  7. Meaningful recognition

    Piggy-backing off the previous point, making a point to give meaningful, social recognition for excellent performance is important. By regularly giving praise for a job well done you can continuously motivate employees and reward their hard work. Try creating a forum (i.e., a slack channel) where employees can share praise openly, regularly, and authentically.

Something important we’d like to mention here is that increasing employee retention for remote employees might be something you need to go the extra mile for. If you have decided to go with the hybrid option in your workplace, you should be mindful of the need to tailor these innovative employee retention strategies to be effective for both in-office and remote employees.

Implementing and measuring your retention efforts

Once you’ve decided which programs and tactics you need to improve employee retention, it is important to have specific metrics in place to measure the success of these processes. Just be sure to measure retention before and after you make the change. This will help ensure that you capture the cause and effect of your answers. In other words, it will sanity check that you are investing your time, money, and resources into the right areas and that you are fixing the problems that are causing your employees to leave.

Now let's deep dive into the metrics that you can use to measure different aspects of employee retention.

Calculating employee retention rate

It is no real surprise that the first metric we’re going to discuss to measure employee retention is also the most commonly used one. This rudimentary metric provides you with an overview of your company’s ability to retain employees over a set period of time. Generally, companies with a good employee retention rate score 90% or above when utilizing this metric. You must try to strike a balance between keeping your existing employees while ensuring there is an opportunity for new employees who offer a diverse set of skills and ideas can join the company.

Now, let’s get calculating:

Employee retention rate = ((Total number of employees - total number of employees left) / total number of employee left)) x 100


Calculating retention rate by categories

Employee retention rate is great when looking at the big picture but sometimes when trying to make improvements it is best to get a more in-depth look at the retention rates across different categories.

Retention rate per department

If a particular department is experiencing a high turnover rate then that needs to be thoroughly looked into. By talking to employees within that department or those exiting the company who worked in that department you can begin to identify areas that need improving. If you measure the retention rate from each department you might also be able to learn from certain departments with a higher retention rate.

Retention rate per department = ((Total number of employees in that department – number of employees who have left that department) / total number of employees in that department) x 100


Retention rate per manager

Looking at individual managers’ ability to retain employees can give some insight into their leadership skills. A manager who has a high turnover rate may need to assess their management style and adjust it in a way that is mutually beneficial and helps the team work towards the company goals without too much change of personnel.

Retention rate per manager = ((Total number of employees per manager – number of employees who have left per manager) / total number of employees per manager) x 100


Retention rate of managers

Retaining engaged employees at a managerial level is particularly important since a low retention rate among managers could be an indicator that they are not being challenged enough to feel fulfilled in their roles. Or maybe it’s an indication that they do not have the correct tools to complete their managerial responsibilities effectively leaving them feeling overwhelmed - all of which can significantly impact retention within their team.

Retention rate of managers = ((Total number of managers – number of managers who have left) / total number of managers) x 100


Calculating average employee tenure

An effective way to gauge employee job satisfaction is to understand how long employees typically stay with a company. Averaging out the total tenure of all employees throughout the entire workforce yields the average employee tenure. A higher average length of employee tenure indicates higher levels of employee satisfaction and thus higher retention rates.

Average employee tenure = Total employment time for all employees / Total number of employees


Again, Human Resources professionals can use this metric across various departments or groups to see where there are areas of concern.

Investing in employee retention is key for any business looking to succeed. It leads to improved employee well-being and engagement, increased productivity, and better company morale. Remember to clearly identify your company’s potential turnover risks and implement strategies that will best alleviate said risks. Once you’ve implemented your processes to improve your retention rates, do not forget to measure, measure, measure! By investing in your employees, you are investing in the future of your business.

Author profile Shannon Hill

Studies BA Law, Psychology, and Philosophy. Talent Acquisition Consultant at Amby. Passionate about recruitment, diversity, equality, and inclusion.