How to Improve Your Employee Retention Rate

According to Nectar—a recognition and rewards platform and BambooHR^® Marketplace partner—46% of employees plan to look for a new job in the next three months.

Your people are the key to your organization’s success, so employee retention should be one of your top priorities. While some turnover is inevitable, a thoughtful employee retention strategy can help keep top performers under your roof and improve your retention rate.

On the other hand, failing to prioritize employee retention makes your entire organization vulnerable to costly people operations and lost productivity, ultimately damaging your employer brand.

In this article, we’ll dive into the benefits of employee retention, how to calculate your own retention rate, and practical strategies that’ll entice employees to stick around. Your employees’ happiness shouldn’t be left to chance. With BambooHR’s employee satisfaction software, you can ensure your people feel heard and solve issues before it’s too late.

What is employee retention, and why does it matter?

Employee retention is your organization’s ability to prevent as much turnover as possible within a specific period. A comprehensive retention strategy aims to keep employees engaged, satisfied, and committed to their jobs and the company.

Simply put, the goal of retention is to convince employees to stick around for the long haul. However, a high retention rate has several positive ripple effects on your entire organization, such as:

• Lower hiring costs: Your bottom line will benefit from maintaining your workforce as opposed to frequently finding replacement workers. In fact, you can expect to spend $7,500 to $28,000 in hard costs to hire and onboard a new employee.
• Increased productivity: Soft costs, such as lost productivity, must also be considered when hiring. According to the Society for Human Resource Management (SHRM) soft costs can be as high as 60% of the total cost to hire one employee. When employees aren’t bogged down with training a revolving door of new hires, they can spend time on meaningful projects and contribute to the company’s success.
• Less burnout: Low turnover means employees can focus on the specialties they were hired for instead of shouldering workloads intended for multiple people as HR scrambles to fill open roles.
• Higher employee satisfaction: A high retention rate may also reflect employee satisfaction. Happier employees are more likely to be engaged, loyal, and proud to be in service of your company’s mission.

How to calculate your employee retention rate

Before you can calculate your employee retention rate, you’ll need to set clear parameters. Let’s take a closer look at the steps involved in effectively using the retention rate formula:

Step 1: Define the time frame

Employee retention is commonly calculated annually, but can also be measured quarterly or monthly.

Step 2: Determine which group of employees to measure

To calculate your company’s overall employee retention rate, you’ll need to include every employee across all job levels. On a more granular level, you could also measure the retention rate per manager, the C-suite level’s retention rate, retention rate per region or country, etc.

Step 3: Get the headcounts

Let’s say you want to measure your overall retention rate for 2025. Just count the number of people employed at the start of the period (January 1, 2025), then count those remaining at the end (December 31, 2025). Remember to count only those employed for the entire period.

Step 4: Calculate your employee retention rate

Enter your data into the formula below to calculate your retention rate percentage.

Retention rate formula

(Number of employees remaining at the end of a set period / Number of total employees at the start of a set period) x 100

Step 5: Analyze the results and take action

Generally speaking, a high retention rate may indicate high employee engagement and satisfaction, while a lower percentage translates to high turnover. As you measure different groups of employees and periods, you may notice trends (e.g. how long employees, managers, and executives typically stay with the company). These patterns will help inform your employee retention strategy.

What is a "good" employee retention rate?

A good employee retention rate can vary depending on industry, organizational goals, job market conditions, and other factors. According to SHRM, the average retention rate across the US is 90%.

While it may seem counterintuitive, 100% retention is typically not the goal here since that would mean retaining employees who may no longer be engaged or meeting performance expectations.

Fix your retention rate with a strong retention strategy

If your retention rate sits significantly below 90%, then it’s time to fix it. An effective way to do this is by ensuring you have a strong retention strategy in place. A strong retention strategy can boost job satisfaction, improve loyalty and help you retain top talent.

What is an employee retention strategy?

An employee retention strategy is a plan organizations create and use to reduce employee turnover, prevent attrition, increase retention, and foster employee engagement.

While some turnover is inevitable, building a retention strategy to prevent as much voluntary turnover as possible can save an organization time and money. After all, it’s much easier and much less expensive to train and develop your current employees than it is to continually hire new people.

Benefits of an effective retention strategy

The focus of a retention strategy is just as it sounds: retaining employees. However, an effective retention strategy is about more than just getting people to stick around your organization longer. Other positive outcomes include:

• Lower turnover
• Lower hiring costs
• Increased employee productivity
• Higher employee satisfaction
• Stronger work relationships
• Less work-related stress
• Less burnout

6 employee retention strategies to try

Not sure where to start? Fear not. We’ve compiled 6 suggested employee retention strategies for you to try below.

1. Optimize the hiring process

If an employee isn’t a good fit for their position or your workplace culture, they’re more likely to leave regardless of the employee retention strategies you put in place. That’s why it’s important to attract and select the right candidates from the very beginning

This involves changing your attitude towards your job descriptions. For example, if you’re not clear about your expectations and values from the outset, your new employee may feel blindsided and unprepared. To avoid this, focus your efforts on crafting compelling job descriptions that accurately outline key responsibilities and qualifications.

Job descriptions are also your chance to highlight what makes your organization unique. For example, if one of your values is agility, clearly highlight the importance of autonomy and fast decision-making in the advertised role. Clearly explaining your mission, vision, values, and company culture should help attract ideal candidates to join your team.

2. Improve your total compensation strategy

Compensation is one of the most fundamental factors that can affect employee performance, job satisfaction and, ultimately, retention. This doesn’t just mean offering the big bucks: it means offering competitive pay, compelling rewards, and equal pay in your workplace.

Some meaningful compensation retention strategies include:

• Close pay gaps. Use HR data to identify areas of pay disparity, such as gender, and close those gaps
• Standardize your compensation strategy.  Comparing your compensation offerings with other businesses means you can remain informed and competitive in the marketplace. Having set bands based on different levels and locations can help you create a more equitable experience for all
• Be transparent.  Sometimes just sharing the rationale behind your pay decisions is one of the best employee retention strategies you can implement. Not only do open conversations make your employees feel more valued and fairly compensated, they also help to create a stronger company culture.

3. Nurture a healthy company culture

Nurturing a supportive, enticing and productive company culture is one of the most effective ways to retain employees.

During the interview stage, ask candidates where they have demonstrated your company values in their previous role, or which value they embody the most. These questions go beyond the job description to help ensure whoever you hire is the right fit for your company culture.

If you don’t yet have a clearly defined company culture, begin by considering these three pillars:

• Communication: How do your employees communicate with you and with each other?
• Accountability: What are the consequences of outstanding or mediocre performance?
• Community: How do your employees relate to each other and your business?

Recognizing and rewarding a job well done, creating employee resource groups, and offering paid time off to volunteer can also help nurture a healthy culture for your people.

4. Prioritize praise and feedback

One of the most demoralizing experiences at work is feeling unrecognized. Even if you make your values clear from the outset, it’s still important to recognize employees who exemplify those values in their work. When you routinely praise employees for their hard work, they notice.

There are, of course, some dos and don’ts for employee recognition. One of the most effective, yet most often overlooked, employee retention strategies is simply to increase and improve your praise and feedback initiatives. If you can offer monetary rewards for a job well done, too, then there’s even more incentive for your employees to value you and their jobs.

However, don’t let praise be your only form of feedback. Offering advice around areas of improvement in a fair and supportive environment can also motivate employees and give them a sense of progress within your business.

5. Offer a clear career path

According to SHRM, lack of career opportunities or development is one of the top reasons employees leave their job.

As an employer, it’s important you show your employees that you’re invested in their career paths by offering programs such as job rotation, lunch and learns, and education reimbursement. In turn, they’re more likely to see a future with your organization.

Even if you’re giving regular wage increases to your employees, they’re more likely to job hop if they don’t feel like the organization is investing in their professional growth.

Some effective employee retention strategies to consider include:

• Additional training to help employees reach the next level
• Regular target setting
• Creating performance milestones
• Providing internal workshops and seminars of interest
• Internal hires and promotions
• Open dialogue between management and employees around progression plans.

6. Encourage transparent communication

The old adage rings true: communication is a two-way street. Employees want transparency from leadership (about the good and the bad)  and  avenues to voice their ideas, concerns, and feedback without fear of retaliation. Options include hosting all-hands meetings, team syncs, and one-on-ones to accommodate both outspoken and more reserved employees. Being open with your workforce builds trust, and encouraging employees to speak up affirms they’re valued and respected.

Review what you offer and retain top talent

Don’t leave employee retention to chance. Take some time to calculate your employee retention rate and review what you offer to see where you can implement any employee retention strategies covered.

Ensure your people feel heard and solve issues before it’s too late with BambooHR^®  employee satisfaction software.

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