Guide: What is Employee Retention?

No matter the industry, some employees end up leaving when they find a better job. It’s not always for the same reasons. Better working conditions and monetary benefits always come to mind, but others might just want to pursue a different career.

We can’t always prevent employee turnover, but it becomes a problem when we have high turnover rates yearly. Retaining the best employees is also important in maintaining the productivity of the business.

Employee retention sounds simple, but why can’t all businesses solve the problem of preventing high turnover rates? Why do employees leave in the first place?

In this guide, we’ll define what employee retention is, understand its importance to organizations, and learn how it can be effectively done in a modern workplace. We’ll also know more about fulfilling the needs of employees and why this is important in reducing turnover rates.

Defining Employee Retention

We commonly define employee retention as the capacity of the organization to retain its employees and avoid high turnover rates. While this definition is correct, it forgets the most important element — the employee’s satisfaction. 

Simon Sinek, author of Start with Why and Leaders Eat Last, puts into perspective how we should look at the relationship between employee turnovers and their level of job satisfaction. 

According to Sinek, financially invested employees only want to get paid in return, while emotionally invested employees want to be able to contribute to the organization.

Put simply, employee retention is about keeping employees engaged and providing not only their financial needs but also their emotional needs in order to retain their willingness to contribute to the organization. 

Employee engagement goes hand in hand with employee satisfaction and employee retention. The small but well-appreciated investments made by companies to their employees are the keys to having better employee engagement and retention.

There is a human aspect that we need to look into when we want to reduce exit interviews and employee turnovers. 

Employee Retention is Not

Traditionally, we have viewed employee retention to be a checklist of requirements that need to be met in order to retain employees. In the modern workplace, employee satisfaction is no longer limited to the following:

Monetary benefits

The pay that employees receive isn’t a sufficient basis for ensuring that they’re satisfied with their job. Employees don’t always leave because of higher compensation. 

Salaries only form part of the basic necessities that employees need in order to stay. Some might choose to give up a high-paying job for better working conditions.


A higher company position isn’t always enough to keep even the best employees. Promotion isn’t a guarantee that they’ll stay longer with the organization.

The motivation of employees and managers to continue working with a company is more important than any level of authority granted to them. Even the best employees resign when they can’t find a good reason to stay.

The Impact of Employee Retention

When employees resign, we don’t just lose irreplaceable talents. We lose valuable team members who are part of our overall work dynamics. 

As a result, we have to shoulder the costs of those losses. This might involve raising low employee morale and changing work dynamics to temporarily fill in the roles performed by a resigned employee. 

Training Costs

It’s costlier to hire someone new than to create effective employee retention programs. In fact, there are several costs incurred during hiring operations. It takes a minimum of $4,000 just to hire a new employee.

In addition, there are also training costs for orienting new employees on how to perform the job. It may take some time before the new hires become productive.

Resources that could have been invested in new projects end up being spent on training whenever an employee resigns. Even if the new employee is talented, we still need to dedicate time to align them with the dynamics of the workplace. 


Retaining the most productive employees is the ideal situation for any company. Losing them might require hiring more people just to meet their level of productivity. 

Aside from the costs, there are times when productivity gets drastically affected by employee resignations. In some cases, it’s difficult for productivity to return to its peak level because of the skills lost by the company.

Organizational Knowledge

Senior and experienced employees that leave the company also take their knowledge with them. The knowledge they’ve garnered over time is an irreplaceable resource that contributes greatly to any organization.

Businesses seek that level of experience because of its added value. Imagine if competitors were able to snatch that resource to their benefit.

Improving Employee Retention

How do we retain employees and keep them satisfied when they might have different needs? Here are the steps you need to take to get your employee retention plan on the right track.

Know the needs of employees

Whether it’s monetary benefits, responsibilities, job fulfillment, or sense of belongingness, not every employee will have the same priorities. The only way to identify an employee’s priorities is by asking them.

Employees choose to leave when they feel like their problems in the workplace aren’t addressed. One way to make them feel accommodated is by asking them directly. This builds trust in the relationship between the organization and its employees.

Let employees express themselves freely. Only when we know what issues need to be addressed can we come up with the most appropriate solutions to improve their job satisfaction.

Create a positive workplace culture

Aside from scrapping the idea of physical working conditions that are dirty, messy, and unhealthy, there are other factors to look out for when trying to solve a stressful and toxic work culture.

Work-life balance is a must for any modern workplace because of the stress involved in fast-paced jobs. Employee burnout is a developing crisis that affects at least 21% of the population.

Try to make employees feel that work is a cooperative effort performed by teams, in order to reduce stress. Cooperation is part of healthy workplace dynamics that gives employees greater engagement and satisfaction.

Provide feedback and guidance

Managers also play an important role in employee retention. Beyond assigning tasks and evaluating performance, they’re responsible for providing constructive feedback and guidance to their subordinates.

The trust in the relationship between employees and managers helps in retaining and cultivating young talents in an organization. Career paths and issues in the workplace are best discussed with managers who are willing to listen.

A sense of belongingness starts with employees opening up, sharing their thoughts, and eventually contributing to the organization’s productivity. That is something that money can’t buy but can be provided by anyone in the organization for free.