The Complete Guide to Employee Retention

In this guide

• What is employee retention?
• What is employee turnover?
• The impact of high turnover and low retention
• Common causes of low employee retention
• How does onboarding help retention?
• 5 engaging ways to increase employee retention
• 13 ways to improve retention with recognition
• Case Study: How peer recognition saved the day following a merger
• How to measure your employee retention progress
• Common retention mistakes every workplace should avoid
• Recognition is a proven retention driver. Peer recognition helps it happen organically.
• Employee retention FAQ

What is employee retention?

Here's what HR pros, people leaders, and managers need to know about retention:

• It's about daily operations. Perks like flexibility or higher pay help. However, the foundation of proper retention is the everyday employee experience.
• Quitting is the tip of the iceberg. People rarely leave because of one bad day. There are often systemic issues or a buildup of events leading up to it.
• Poor retention is preventable. Improving employee engagement through proven methods such as recognition naturally leads to higher retention rates.

What is employee turnover?

Retention is about keeping existing employees. Employee turnover is replacing them.

Voluntary turnover is the metric that is most relevant to improving employee retention, because it represents employees who quit for any reason. Involuntary turnover is associated with company decisions such as layoffs, firings, and restructuring.

The impact of high turnover and low retention

Recent estimates show that the bare-bones cost of a new hire exceeds $5,000 on average. Other sources report that fully replacing a worker costs 1.5 to two times their annual salary. Even then, this isn't the whole picture.

For every person who leaves, and every person who replaces them, there's a drop in productivity. Funds are diverted to onboarding as an employee with less organizational familiarity works toward meeting the efficiency of the former employee.

Poor retention and turnover rates are also responsible for:

• Damaged reputations. The more quitters, the higher the chance one takes their experience online, hurting recruitment. That's in addition to a growing percentage of customers receiving lower-quality service from inexperienced replacements.
• Lower morale. Employees who remain may have to take on additional responsibilities. They also experience instability and uncertainty in the workplace with every departure. Now they cannot help but privately consider the pros and cons of staying themselves.
• Cultural losses. Everyone is a contributor to the company culture, regardless of its quality. Continuity and trust are important if an organization wants to build a stronger culture.

Common causes of low employee retention

If an employee leaves because they aren't getting paid enough, you'll probably know it. There's a big difference between feeling like you're not being paid enough for your role and feeling like you're not getting paid enough to put up with the following.

Infrequent recognition or appreciation.

Employees who regularly receive recognition are far less likely to leave. In fact, it cuts the risk almost in half. A mix of top-down and peer recognition helps keep praise believable, frequent, and natural (never formal).

Leadership deficits.

Employees are sometimes looking to ditch their manager, not the whole company. Leaders who do not walk the walk, take an interest in employees as people, or set clear expectations aren't helping retention.

Toxic or lacking workplace culture.

It's never just bickering and gossip. Micromanagement dulls confidence and suggests a lack of trust in the workplace. Performance pressure creates unhealthy competition and self-doubt. Siloed and low-collaboration environments are just collections of strangers.

Burnout.

What leaders may phrase as “dreaming big” or “aiming high” can end up stressing the people partially responsible for making it happen. Other sources of workplace stress can increase absenteeism, creating unbalanced workloads for those who do show up.

How does onboarding help retention?

Well-structured onboarding welcomes employees who are more likely to remain in a role for three years or more. On the other side, poor onboarding is a main reason why approximately 39% of new hires begin formulating exit plans in the first six months.

The onboarding process, from the information distributed to the vibes conveyed, should align with what it's really like to work at your company.

Setting clear expectations is a main objective. This may mean streamlining and adjusting the pace and cadence of communications. One of the biggest issues new hires have during onboarding is information overload.

5 engaging ways to increase employee retention

Recognition is the top retention intervention. It works by fostering engagement. Here are larger big-picture concepts that drive engagement in tandem with recognition.

"Retention isn't about convincing people to stay. It's about building a place they don't want to leave. That starts with how they feel on an ordinary Tuesday."

Doug Dosberg, Founder of HeyTaco

1. Revisit compensation and benefits.

When your staff is engaged, other companies have to spend much more to lure them away. How much more it takes depends on what you're offering. Secure market-rate pay, and fluff up the rest.

Benefits. Employees often don't use them because they don't know the particulars. It gets buried during onboarding. They also find that many are hard to access and difficult to use. Their employer might be a little prickly about providing some of them in the first place. That lands even harder when the package isn't personalized to what they need.

As we can see, the key to resolving such challenges isn't even necessarily spending more money. It's reviewing, updating, and instructing-transparent communication. Adjust offerings to the individual. Send them reminders of what they have, with tips on using it.

2. Work-life respect lives alongside work-life balance.

Some degree of burnout is currently impacting approximately two-thirds of employees. They cite reasons such as feeling they have too little time to complete their work, as well as a lack of tools and resources to get it done.

Honoring one's work-life balance is about protecting their personal time. Work-life respect involves one of the best-known burnout preventives: flexibility.

If you don't already, look into offering:

• Remote and hybrid opportunities
• Compressed workweeks and other scheduling alternatives
• Wellness program benefits and resources
• Communication boundaries outside of work
• Educational reimbursements and opportunities

3. Improve employee growth and development.

Employees came in seeing themselves going in one direction, and then just sort of meandered off course. No one seemed to care until they were ready to split.

Provide clearer updates about internal mobility opportunities. Look into possible lateral moves and stretch projects.

Plan for:

• Quarterly career path discussions
• Mentorships
• Continued training
• Workshops and lunch and learns
• Weekly or biweekly 1:1s with managers

4. Nurture a more inclusive culture.

Creating community isn't just about flexing an enviable culture with parties and games. It provides holistic support to its inhabitants, preventing burnout and sustaining engagement.

Start building connections with:

• Employee Resource Groups
• Frequent contact with remote employees
• Water cooler-style breaks and short team activities
• Sharing common interests and non-work-related catch-ups
• Special cross-department collaborations

5. Imbue roles with purpose and meaning.

When employees know how their work contributes to success or makes other tasks possible, their job has meaning. With meaning, they build a connection that keeps them engaged. When they're engaged, they remain retained.

Sort out what an employee does that aligns with a company's values. Someone can know their job is to sit and type specific information into designated fields and be okay with that. When their manager points out that their attention to detail has increased accuracy by 15% that month, it has purpose. When they tie this to the company's core commitment to excellence, it has meaning.

Make successes visible, and put facts behind them where possible. Recognize the qualities and behaviors that the company considers necessary for success.

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13 ways to improve retention with recognition

A lack of appreciation is one of the most common gripes during exit interviews. This confuses some leaders. They definitely remember thanking everyone at the holiday party. And don't they always buy donuts on Employee Appreciation Day?

Intermittent gestures aren't enough. Here are more than a dozen ways to improve the quality of recognition for stronger engagement and then, better retention.

1. Manager shout-outs.

Employees should be recognized by a manager at least once a week. Meetings are a great start. This fits within a culture where praise is part of a ritual.

2. Team celebrations.

Building stronger team bonds can improve retention by giving employees a place to belong, regardless of how they feel about their manager.

3. Reliability.

There are forms of recognition that only happen occasionally. But clarity in communication, informal praise, and inclusivity need to be everyday occurrences to have an effect.

4. Handwritten thank-you messages.

If top-down recognition isn't making a mark, make it a memento. Mailing or dropping off a handwritten note detailing the positive impact someone has had is simply more memorable.

5. Change often and keep building.

If the needle isn't moving much, don't just persist-evolve. Try new ways to recognize people. Staying flexible and diverse means there will eventually be something that resonates with everyone.

6. Tie recognition to core values.

When employees identify with a company's brand, they're more inclined to remain in place. Put values out front, refer to them regularly, and give anyone who champions them more visibility.

7. Milestone recognition.

Acknowledging birthdays honors the human. Celebrating work anniversaries honors their commitment. Do not miss these occasions.

8. Strive for authenticity.

Many organizations get tunnel vision on compensating for toxicity or a lack of recognition. Be wary of replacing these with vague niceties. Real recognition is specific and true.

9. Surprise perks.

Up the delight factor and make positive feelings stand out more with surprises. A special reward, a day off, or lunch on the company. It shows that the company doesn't have to schedule good things; they can happen spontaneously here.

10. Feedback loops.

Opening up dialogue and bringing employees in on making decisions is a big deal. Don't just invite feedback. Make them productive exchanges that everyone benefits from.

11. Find novel reasons to appreciate them.

Inclusivity in recognizing employees isn't a blanket thanks intended for whole teams. It means everyone deserves individual praise. Expand recognition beyond outstanding acts and highlight the everyday stuff.

12. Real-time recognition.

Don't wait around for the “right” moment. If someone is helpful, solves a problem, shows progress, or lifts the mood, praise them right away.

13. Peer involvement.

Peer recognition tools increase the frequency and authenticity of recognition. It makes sure people get public praise for acts that managers don't see.

How to measure your employee retention progress

Ready to lightly crunch some numbers and see how everything's paying off? Do this monthly.

1. Find two numbers: the number of employees at the beginning of the month, and the number of employees at the end.
2. Divide the number of employees who remained by the number of employees at the beginning.
3. Multiply by 100.

If you stay above 90%, you're doing an excellent job. If you start dipping into the 70s, implement new strategies.

It's also worth it to spend time and effort measuring employee engagement. Drops in engagement are the harbinger of departures to come.

Common retention mistakes every workplace should avoid

Here are a few words of caution, a cache of caveats, that can hinder progress. As you implement new retention strategies, beware of:

• Delayed action. Offering someone a raise or cash incentive only when they've submitted their resignation is a no-go. Focus on the growth and engagement of who you have.
• Ignoring burnout. Employees who begin interacting less, call in sick more often, or begin procrastinating and doing less are at risk of leaving. Work-life balance isn't just a buzz phrase.
• Letting leadership slide. Share data, survey results, and the true cost of turnover with leaders. Their participation in recognition programs and willingness to get on board with a total rewards approach make all the difference.
• Set-it-and-forget-it implementation. Recognition, benefits packages, incentives, flexible arrangements, and learning opportunities have a few things in common. But here's the most important: they all require personalization and regular review to remain effective.

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Recognition is a proven retention driver. Peer recognition helps it happen organically

The high cost of turnover and the reputational damage of poor employee retention can't be ignored or erased. They can still be a lesson that organizations learn and recover from.

Some strategies take time. Curating a robust lineup of growth opportunities and rolling out a slick new onboarding process can take a hot minute. What doesn't take time to go into effect is recognition.

Roll it out next week, start introducing rituals, and watch something more than a regular “thank you” occur. Those small attitudinal shifts pile up to create a sense of belonging. People stay where they belong.

Teams use HeyTaco to:

• Recognize everyday contributions in real time
• Reinforce company values through appreciation
• Build consistent engagement across teams

No formal programs required. Learn how HeyTaco works and try it risk-free for 30 days.