Farhan has been working as a software engineer in a fintech organization for more than three years. Although he’s picked up diverse hard and soft skills over the years and is considered a high-performer, there has been little to no upward growth. He feels stuck in his position, starts looking for alternative opportunities and is scooped up by a rival organization. This comes as a blow to his former organization and they struggle to fill his vacancy with an equally competent candidate.

Had Farhan’s former organization focused on employee retention by improving engagement levels and providing new opportunities for growth, they might have been able to prevent losing him to a rival. Let’s find out what employee retention is and learn about the benefits of employee retention. We also have a few strategies to help you boost your staff retention rates.


  1. What Is Employee Retention In HRM?

  2. Employee Retention Rate

  3. Benefits Of Employee Retention

  4. Employee Retention Strategies

  5. Embrace Teamwork



What Is Employee Retention In HRM?

Employee retention in HRM refers to the organizational practice of holding on to employees for a long time by fostering a positive work environment and offering proper compensation, employee engagement opportunities and recognition. Retaining employees is essential to improving organizational productivity, which, in turn, translates to business growth and success.

By contrast, employee turnover refers to the loss of employees over a period of time. Employees may leave voluntarily through retirement or resignation or involuntarily through terminations or layoffs. It’s important to have a proper employee retention program in place to ensure an organization’s employee retention rate surpasses its employee turnover rate.


Employee Retention Rate

Employee retention rate gives the percentage of employees who continued working for an organization over a specific time period. Periodically calculating the employee retention rate can help an organization keep a tab on its workforce, check whether employee numbers are rising or declining and assess the factors impeding employee progress if any. This information allows an organization to fine-tune its onboarding processes and refine its employee retention program.

The first step to calculate the employee retention rate is to determine the time period for which an organization wants to measure the percentage of retained employees. Once that has been decided, organizations use a simple formula to calculate their staff retention rate over the specified time period: (number of employees who remained with the organization during the set period / number of employees the organization started with at the beginning of the set period) x 100.

The number of employees the organization started with at the beginning wouldn’t include any new employees who were hired during the set time frame. Organizations typically measure their talent retention rates quarterly, biannually or annually. A standard employee retention rate for organizations is considered to be between 70-90%. However, staff retention rates are known to vary by industry, and organizations must keep an eye on how their talent retention rates compare to that of their competitors in the industry.


Benefits Of Employee Retention

Organizations, big or small, rely on their employees to keep their businesses alive and thriving. Talent retention can help organizations gain a significant edge in a competitive business landscape. Here are a few significant benefits of retaining employees for a long time:


1. Increased Efficiency

Talent retention increases organizational efficiency. Replacing a high-performing employee who leaves isn’t easy and can be time-consuming with screening tests, interviews and onboarding programs going on in a loop. In the meantime, organizations can run into a barrage of problems because of understaffing. Unwanted delays and communication issues are common, disrupting functionality. Retaining employees keeps projects moving at a steady pace. Employees who are around for a long time are well-versed with business processes and have established a rapport with their coworkers. This leads to the formation of cohesive teams, further increasing all-round productivity.

2. Better Expertise

When employees leave, they take their experience, knowledge and skillsets with them. This can create significant gaps in the expertise level of an organization. Further, studies say it can take almost up to two years for a new hire to reach the level of productivity of the employee they replace. Retaining employees, therefore, helps organizations maintain and achieve better expertise in their field of operation, improving their bottom line.

3. Reduced Costs

Reducing costs is one of the most significant benefits of employee retention. Employee turnover is expensive. Statistics show replacing a salaried employee can cost an organization almost six to nine months of paid salary on average. Retaining employees helps organizations cut down hiring, onboarding and training costs and increase revenue.

4. Improved Brand Image

When employees frequently leave an organization, it can raise questions regarding its workplace policies and internal environment, negatively impacting its reputation in the industry. On the other hand, an organization that maintains a high employee retention rate is able to project a positive brand image, attracting new talent, customers and stakeholders.

5. Enhances Organizational Culture

High employee turnover rates can create uncertainty in the workforce. Actively focusing on retaining employees through an effective employee retention program boosts employee morale, confidence and job satisfaction. When employees feel and perform at their best, organizational culture improves. Retained employees are also more likely to remain loyal to an organization.

When an organization’s workforce significantly declines, it runs the risk of overworking its existing staff members—which results in employee burnout, fatigue and resentment. Retaining employees is, therefore, essential to maintain a healthy workflow, boost profits and enhance business growth in the long run. Employee retention in HRM also allows organizations to concentrate on other aspects of their business instead of constantly having to hire new employees and focusing on bringing them up to speed.


Employee Retention Strategies

To ensure you don’t lose your employees to rival organizations, it’s essential to adopt and implement proper employee retention strategies. Let’s look at a few such strategies that experts swear by to retain the top talent in their organizations:

1. Providing Competitive Salaries

A Glassdoor survey shows 45% of employees who quit an organization cite salary as their primary concern. Organizations must ensure the salaries and benefits they offer are at par with industry standards to retain their employees.

2. Recognizing Employees

Employee recognition is a primary driver of staff retention. Appreciating employees through incentives, perks or even a genuine compliment works wonders to keeping employees happy and invested in their work, driving retention. Organizations can opt to celebrate employee achievements and important life events such as birthdays and work anniversaries or introduce peer-to-peer recognition programs.

3. Training Employees

Organizations that invest in the professional development of their employees are able to hold on to them for a long time. This includes introducing official training, certification or mentorship programs, educating employees on their roles and responsibilities and helping them establish a roadmap to pursue their professional goals. It’s also important to allow employees to branch out and take on side projects so that they’re able to expand their skill sets.

4. Engaging Employees

Employee engagement is key to increasing an organization’s talent retention rate. Providing new opportunities for growth, asking for and incorporating employee suggestions and promoting open communication in the workplace can help keep employees engaged and motivated. Organizations can also look to offer regular feedback on employee performance to improve engagement. Feedback helps employees gain a better understanding of their strengths and weaknesses and work on their areas of improvement.

5. Improving Management

Micromanaging or overbearing seniors are a leading cause of employee turnover. Effective management is essential to maintaining a proper employee retention rate. A good manager works alongside their employees to solve problems, encourages employee autonomy and is able to establish a relationship of mutual trust, respect and camaraderie with their team members.

Apart from these, connecting with employees on a personal level and getting to know them better also go a long way to increase employee satisfaction. When employees are happy and feel valued and appreciated, they’re more likely to stay on for a long time, enhancing an organization’s employee retention rate. Conducting exit interviews can also help organizations look into the reasons behind an employee’s departure and work toward addressing predominant issues if any.


Embrace Teamwork

An organization that promotes teamwork and collaboration benefits from higher employee retention rates. Teamwork not only encourages creativity and ingenuity but also allows employees to work toward shared goals, fostering a sense of togetherness and belonging. Harappa’s Managing Teamwork course can be your guide to sailing through the diverse stages of team development. Equipped with the right tools to imbibe team culture, you’ll be able to collaborate with people having different work styles using emotional intelligence. You’ll learn to handle workplace conflicts with empathy, maturity and sensitivity, give and receive honest feedback and accomplish your goals by channeling the various skill sets of your team members.

Frameworks such as the Bruce Tuckman Model, the Social Styles Model and the Skill-Will Matrix will take you through the four stages of team formation and the four common work styles of team members while also helping you assess your team’s skills and willingness to execute tasks. Let’s build allies, leverage connections and create a more transparent work culture. Sign up today for Harappa’s Managing Teamwork course.

Explore Harappa Diaries to learn more about topics such as Importance of Employee Rewards And Recognition, Ways to Motivate Employees, Fun Icebreaker Activities for workplace and How To Develop Networking Skills to build strong professional networks.

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