Factors Affecting Employee Retention


The term “employee retention” describes the management strategies used to encourage employees to stick around the company for a longer period of time. The ability of a business to reduce employee turnover, or the amount of employees who quit their jobs either freely or involuntarily, is known as employee retention. For an organization to succeed, its top personnel must be retained. Retention of employees aims to achieve this. Employee retention refers to the plans a business makes to reduce the likelihood of employee turnover and the procedures it implements to keep its most valuable employees. 

Employee retention techniques play a significant role in inspiring workers to stay with the company for as long as possible and make valuable contributions. Creating a nice work environment to encourage engagement, expressing gratitude to employees, offering competitive compensation and benefits, and promoting a healthy work-life balance, organizations may keep talented and productive staff while lowering turnover. 

In times of low unemployment and increased competition for talent, employers are especially interested in keeping workers on board. Organizations use human resources technology for recruiting, onboarding, engaging, and rewarding employees. They also give employees more work flexibility and provide them with cutting-edge benefits like financial and physical well-being to retain them for a longer period of time.

Employment Figures

⅓ of new recruits quit their job after 6 months.
Replacing talent can cost up to 2X the employee’s annual salary.
It can take 1-2 years for the productivity of a new employee to reach that of an existing staff member.
Engaged employees are 59% less likely to look for a new job.
75% of millennials leave the company to change roles instead of waiting for a promotion.
Remote workers are 50% less likely to quit.
35% of employees will look for a new job if they don’t receive a raise within 12 months.
54% of people who are unhappy at work plan to leave in the next 12 months. While just 23% of those who are happy at their current jobs plan to leave.

Importance of Employee Retention 

The significance of employee retention involves more than just reducing loss to the company when they depart. It also provides chances to raise a number of important indicators’ performance for the organization. The following are the importance of employee retention:

Cost Reduction

Advertising, interviewing, and screening are all costs. Training and managerial oversight are additional onboarding costs. Other concerns that increase the cost of turnover include reduced productivity, poorer engagement, poor customer service, and effects on the company culture. If the company is able to retain its employees for a longer period of time, then the company can significantly reduce its cost related to human resource management and improve the performance of business. Therefore, employee retention is important to reduce the cost of business. 

Employees with experience

The loss of institutional knowledge, skills, and relationships that go when an employee leaves the company and interacts with clients and partners is one debilitating consequence of excessive turnover. The opportunity cost, commonly referred to as the potential value the employee may have provided, is also lost by the organization. Senior staff leaving their positions might have an impact on succession planning. Companies which are able to retain experienced and senior employees can experience significant growth and returns because such employees can solve the complex business issues on their own and add value to the organization.

Increased Productivity

Effective employee retention can prevent productivity losses for a company. Workplaces with high retention rates typically have more engaged employees who produce more work. Customer relationships are more likely to be improved by engaged personnel, and teams that have had time to gel also typically provide better results. Therefore, employee retention results in increased productivity because the employees are engaged in an organization for longer-term and they are experts in their particular field.

More Positive Corporate Culture

A company’s corporate culture is created by the attitudes, tastes, and actions of its employees, and it unquestionably aids in attracting and keeping the best candidates. Others frequently wonder why an employee leaves and may begin to doubt their own commitment to the company when this happens. A company’s ethos and atmosphere are strengthened when engaged individuals who are in line with its culture remain on staff. 

Higher Revenue

Gains in revenue come from a variety of factors, including improved customer service, more productivity, and lower staffing costs. Tracking revenue growth as a result of retention policies can be a crucial human resource indicator to show the return on investment of those activities. Retaining best and experienced employees help to generate higher revenue by decreasing the cost and improving the customer service and management works.

Higher morale among workers

When employees feel like they belong in the company, they are more likely to have higher morale, take pride in their work, and so perform better. The opposite outcome may result from high turnover rates. The companies with effective employee retention programs can increase the employee engagement, connect everyone and create a positive ambience in the workplace.

Enhanced client experiences

Customers frequently appreciate businesses where they regularly interact with known, welcoming faces and form bonds with one or more employees. Positive customer perceptions can be increased through low turnover rates. As a result, the company with low turnover rates tends to provide excellent customer experience because the retained employees are experienced and better in their work and provide better service to the customers and delight them.

Greater Engagement of Employees

Just as it takes time for new hires to become familiar with the details of their jobs, developing a sense of commitment to a company’s work and vision also takes time. Employees who believe in the future of their organization and intend to stay are more likely to give their best in every work. Similarly, the employees who are more engaged in work have positive feelings and connection with the company and they also act as a brand ambassador of the company and promote the company among their connections.

Employee Retention and Hierarchy of Needs

Self ActualizationAchieving Full Potential, Including Creative Activities
Feedback, Increment and Promotions
Esteem NeedsPrestige and Feeling of Accomplishment
Recognition, Rewards, Value and Feedback
Belonging and Love NeedIntimate Relationships, Friendships
Teamwork, Collaboration, Inclusion
Safety NeedsSecurity and Safety
Job Security and Safety
Physiological NeedsFood, water, warmth and rest
Work Conditions

Factors affecting Employee Retention 

Employee retention involves three major participants; employee, employer and the working environment. There are various factors which affect employee retention. Some of them are given below:

People and Culture

Given that humans are social beings, it seems to reason that workers would prefer to work in environments where they feel like they belong and can be authentically themselves. Although it may seem counterintuitive, spending time creating a healthy workplace culture at your business will free up your time so that you can focus on other things like productivity, engagement, motivation, and retention. 

Employees are more likely to stay in a particular company if they value and respect the people and culture of that organization. They will not prefer to work in a company where there is bad workplace culture and people are not cooperative. Therefore, people and culture are one of the important factors that affect employee retention in an organization.

Meaningful Advantages

When a company offers competitive benefits, offers possibilities for growth, makes its employees feel appreciated and valued, and supports its culture and mission, employees are more likely to stick around. To keep staff motivated, the company needs to provide them concrete examples of the company’s ideals. It’s likely that employees’ hiring decisions were heavily influenced by the company’s principles. Most of the employees care about strong workplace benefits such as incentives, bonuses, force leave, health care benefits, parental leave and many more. Therefore, they are likely to stay in a company where they can get meaningful advantages.

 Training and Onboarding

Strategies for employee retention are crucial. The sooner it arrives, the better. When their expectations are not realized, new employees frequently depart an organization. Practices for onboarding and educating new employees are essential to ensuring their comfort and a smooth transition. Offering employees with social support, organized and unorganized activities, instruction, and the chance to share their learning experiences can be the first step in doing this. By investing in employees, the company can show them the care and possibility of further growth in a company. As such, the employees are more likely to remain in that organization for a longer period of time.

Manager-Employee Relationship

The manager-employee relationship is very important. Good relationships at work are what employees long for. Managers must establish a personal rapport with their staff. If they can’t stand their supervisors, most employees may not be kept interested and content even with a fantastic wage and benefits. Managers who lack effective management abilities struggle to build strong working relationships with staff members. In the end, this affects both the financial situation and excessive personnel turnover. Therefore, a good and transparent relationship between employees and managers is crucial for low employee turnover. 


For the effort employees put into their work, they look for praise and acknowledgment. Rewards, both monetary and non-monetary, are effective in this regard. Long-term failure occurs in organizations that lack the ability to recognize their people. Therefore, praising and acknowledging the employees for their efforts or showing them public gratitude will inspire them and encourage them to work for the company consistently.

Work-Life Harmony

Work-life balance is rapidly becoming more significant to employees. Employee retention decisions are frequently impacted by it. Employees today yearn for flexible work arrangements that let them balance their home and professional life. They must strike a balance between their personal and professional lives. If the company constantly puts the employees to work and doesn’t give them enough time for their personal life, then the employees are more likely to leave that organization. Therefore, the company should provide enough time for the employee’s personal life as well so that they can work better and remain in the organization for a longer period of time. 


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