Employee retention is a company’s ability to keep its employees over time. Although there will always be some level of turnover in business, the more employees stay on for the long haul, the better it usually is for an organization’s bottom line.
As it turns out, replacing employees is expensive. A poll by Express Employment Professionals estimates that the average cost of turnover is $45,236 per employee in 2026. That number is even higher for specialized roles when you account for potential separation packages, recruitment, and lost productivity while the position is vacant.
Thanks to social media and improved online search, employees now have more information at their fingertips than ever regarding what competitors are offering, what salary to expect for their skill level, what benefits are on the market, and what other workplaces look like day to day.
Employers are also facing new challenges in retaining millennials and Generation Z college graduates in the workplace. Millennial and Gen Z workers are often written off as lazy, but the truth is that they are simply not motivated by the same things that worked for previous generations.
Forbes states that millennials value a strong company culture and need more encouragement and constructive feedback to feel integral to the workplace.
These employees also tend to be more creative and skilled with technology. While older generations tend to write this off as “tech-absorbed,” harnessing this passion and natural talent can be an incredible asset to your company.
Also, millennial workers want to feel like they’re doing important work. According to Forbes, 84% of millennial workers prioritize making a positive impact on the world over professional recognition. They need to feel engaged in their career to want to stay with the company.
Understanding these challenges is the first step towards addressing them. The most effective employee retention strategies today are proactive, creative, and built on trust between employer and employee.
(Employees at end of period − New hires during period / Employees at start of period) × 100
You usually want to aim for a rate of 90% or higher, though this may vary by industry. Some fields are naturally more prone to turnover than others.
Anything over 20% is usually considered high employee turnover, but it’s important to look at overall patterns, not just the employee turnover rate.
For example, if most of your turnover occurs in the first few months of employment, it’s worth looking into whether you have a problem with your job descriptions, interview procedures, or onboarding process.
There are a few basics to cover when it comes to employee retention. These are the usual suspects when it comes to things that make or break someone’s long-term prospects at a company.
Although there is a correlation between compensation and employee retention, a business owner can’t afford to keep raising wages indefinitely, especially as employees hit the top of the pay range for their position. I once believed that if you treated your people well and paid them fairly, they would stay. What I have learned from five decades of managing people, we must also find a way to passionately engage their hearts. A strong culture, with a shared understanding and belief in the mission, significantly improves retention.
Fortunately, you have plenty of options for employee retention that don’t involve simply raising salaries. Here are some strategies for employee retention that go beyond salary alone.
Provide consistent, thoughtful, intentional feedback, both positive and constructive. This gives your associates a sense that they’re doing good work and allows them to make steady progress.
Give your employees varied duties. They expect to learn new skills and have different experiences that will grow their portfolio. They will usually accept and excel in lateral positions if the work is meaningful.
Provide opportunities for professional development. Plan and budget for outside seminars and workshops. Development is an effective employee retention strategy.
Show your employees how their work matters. Many of our teammates never realize how their work contributes to the company’s success. Include them in decision-making sessions so they know their input is valued and appreciated.
Create realistic and understandable goals. Most employees prefer clear objectives to avoid misunderstandings about what to expect.
Always hire and pay for potential, not the high-priced, more experienced gunslinger. Then, you will have more room to mold a newer employee while saving on their salary.
Always be careful to maintain parity between your current employees’ and new-hire rates. If someone with you for five years finds out they’re making the same amount as the new guy, they’ll feel devalued.
Management is crucial to employee retention. A good manager is worth their weight in gold. Invest in regular leadership evaluations and training to ensure your team uses its power responsibly.
Consistently reinforce to your team the monetary value of benefits. For example, healthcare, vacation, and PTO are all part of an employee’s total compensation package. Unfortunately, many employees don’t realize the actual value of these benefits until they find a new job.
Emphasize that positive performance evaluations lead to better compensation growth. Don’t get in the habit of handing out yearly raises regardless of performance. Encourage your employees to go above and beyond. In other words, pay for goal completions.
Constantly audit your competitors’ compensation. Don’t get surprised when your top talent leaves for a higher-paying gig down the street. Instead, you should know how much your competitors are paying so you can attract employees who can outperform theirs.
A structured 30-, 60-, or 90-day onboarding process can help retain new hires and set their expectations at the start of their employment.
There are more creative benefits options today than ever before. Things like childcare subsidies, flexible hours, wellness stipends, mental health support, and other out-of-the-box perks can help you stand out from the competition.
One of the quintessential books about talent retention is Love ’Em or Lose ‘Em by Beverly Kaye and Sharon Jordan-Evans. Although the book dates back to 1999, the ideas inside are still rock-solid. One of the best is in the very first chapter. The idea is this: How do you improve employee retention? When in doubt, try asking.
Kaye and Jordan-Evans present a common phenomenon: businesses spend time, money, and energy developing employee retention strategies to keep their best talent, only to lose them in the end. Why? Although they have given the problem a lot of thought, they have yet to ask their employees what it would take to keep them on.
Different people have different wants and needs, and you can’t read their minds. It’s worth asking, maybe at an annual review, what it would take for your employees to stay for the long haul. If that feels too direct, an anonymous survey might take some of the pressure off.
Please don’t wait until your top performers accept another offer to figure out how to keep them. Employee retention strategies should be a significant concern long before your associates start thinking about jumping ship. Turnover is inevitable, but you want your people to stay as long as possible and part on good terms when they leave.
Employee retention is a business’s ability to reduce turnover and keep employees over the long term.
A few key drivers include compensation and salary, career growth options, cultural fit, management, and benefits.
Some worker retention strategies include offering better work-life balance, creative benefits, investing in opportunities for continuing education and career growth, and asking employees what it would take to keep them long-term.
Are you looking to improve talent retention at your organization? Keeping your talent doesn’t have to break your company’s budget. Fill out my “get started” form for a complimentary video call with a professional coach to discuss employee retention strategies for your business. You can also sign up for my email list for more great articles on leadership, business growth, and more.
Coach Dave
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