In an ever-changing, fast paced job market, organisations must look inward to understand why employees come and go with their jobs. You may be wondering, ‘What is employee retention?’
Employee retention refers to an organisation’s ability to retain employees over time and minimise turnover. It can involve different incentives to encourage employees to stay working for the organisation instead of working elsewhere.
How to calculate employee retention rate
To calculate the employee retention rate for your own organisation, do the following:
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Divide the number of employees at the end of a period, by the number of employees at the beginning of the period.
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Multiply your result by 100 and that should give you your percentage.
A strong employee retention rate is typically around 90%, while the average turnover rate in the UK sits at around 15%. This, of course, can vary depending on the industry.
You could improve your employee retention rate by introducing an employee referral scheme. Referred candidates are more likely to be a better fit, and 40% more likely to be retained after one year compared to non-referral hires.
Positive impacts of good employee retention
A high employee retention rate plays a crucial role in shaping company culture. This is because it allows team members to form closer bonds and strengthen their workplace relationships, which in turn can create a more engaged team, with all employees on the same page.
Often, we can attribute a higher retention rate to good onboarding. A solid onboarding process helps new starters feel prepared and supported when starting their new role, leading to higher job satisfaction and longer tenure.
Employees who see a clear career progression path and receive support for their development are more likely to stay with their employer. Providing professional development opportunities, such as training and promotions, boosts engagement and motivation.
When employees feel their work is meaningful and has purpose, they'll feel an alignment to the company goals, becoming more driven and productive with their work.
Negative impacts of poor employee retention
Poor retention is not only a frustration for backfilling roles, but frequent turnover can make recruitment and training costs really add up. In the UK, the average training cost per employee is £1,530 per year. It would be wise to compare the cost of training against the cost of recruiting to see the benefit of providing ongoing development opportunities at all stages of people's careers.
Lower than average employee retention may signal a disconnect from company culture. If people find no purpose to their work and have lost their passion, morale will plummet, as will productivity. This kind of behaviour can spread to employees who stay even after a colleague leaves, so it's key to do all you can to boost employee morale in the workplace. Consider seeking more regular feedback from your workforce to gauge their attitudes to work and make proactive improvements, such as incorporating pulse surveys into feedback to identify key problem areas to target.
High turnover rates can create a sense of job insecurity among employees and as your experiences staff leave, they take with them valuable company knowledge. Multiple leavers can also render the remaining workforce overworked and burnt out. You can help reduce employee burnout and spot the signs before things escalate with our Burnout Report which features helpful tips from industry experts.
Strategies to improve employee retention
Introduce an employee engagement app or intranet to make communications smarter. Ensure that important company updates are hitting the right people at the right time by using a company intranet software. A good example is ZIGUP, their Oak intranet ‘My HUB’ boasts 77% monthly engagement and had nearly 100,000 hits in one month alone.
Prioritise work-life balance. 46% of people said work-life balance was the main driver for their employee happiness. To achieve a fair work-life balance, consider flexibility with working hours, respecting boundaries and encouraging two-way communication.
Appreciating your employees is crucial in ensuring your employees are happy at work and enjoy what they do. Showing recognition of the value your people bring to the company will contribute to higher employee retention rates. Gallup reports that well-recognised employees are 45% less likely to have turned over in the last two years. 
Effective onboarding showcases a dedication to your people from day one. When new hires feel welcome and valued, they are more likely to feel supported and understand their roles and company culture. An engaging and modern onboarding process can do wonders for first impressions, which can pave the way for strong employee retention as their careers progress.
Conclusion
We know that employee retention refers to an organisation's ability to keep the workforce engaged, satisfied and committed over a period of time. This can be down to many factors such as employee satisfaction, career development opportunities and a competitive salary.
Ultimately, leveraging digital tools and platforms such as an intranet or employee engagement app, allows companies to ensure two way communication is ongoing and employees can give and receive feedback, as well as company updates.
Book a demo or contact us for more information on how we can help you increase employee engagement and boost employee morale in the workplace.
