How to develop an effective employee retention strategy

What is an employee retention strategy?

An employee retention strategy is a set of actions and plans that aims to keep your workers happy in the workplace. It makes for a positive culture which staff are loyal to. Plus it can save you time, money, and a lot of headaches.

What are the benefits of implementing an employee retention strategy?

Good people are your most valuable asset. When they leave, you don’t just lose their knowledge and skills. By the time you’ve recruited, onboarded and trained a new worker, you’ll have also lost time, money and productivity.

When employees leave, it can affect the morale of the whole team, who begin to wonder if they too should be looking for new jobs. Your business starts to look like a stepping stone to somewhere better. And if you’re losing your top talent, that’s a big red flag – they’re not easy to replace. All of this may also adversely impact the customer’s experience.

A successful workforce retention strategy should help you retain your top talent, maintain productivity and allow your customers to keep receiving excellent service.

What are the key components of an effective employee retention strategy?

An effective staff retention strategy should include these key components:

• Effective use of technology
• A robust hiring process
• Competitive compensation and benefits
• Opportunities for career development and growth
• A positive work environment and culture
• Work−life balance

Effective use of technology

When resources are limited, effective use of technology can help take the strain.

• Open channels of communication between employee and employer are essential in making employees feel listened to, engaged and involved. Communication tools such as company intranets and messaging services can provide real-time feedback, advice and support to staff while enabling them to collaborate in improving the business.
• Consider investing in cloud-based business software, to make it easier for your employees to work remotely but still feel they are working together with their colleagues.
• HR tools can help to improve the employee experience, while software and automation can reduce repetitive tasks and make workloads more manageable. For example, staff rostering apps can enable you and your staff to see who is available for shifts and coordinate schedules.
• Payroll software can ensure you are paying staff accurately and on time. Problems with payroll can quickly become a major source of employee unhappiness.

The right technology to help run your business frees up time and capacity to spend on staff training, development and mentoring.

A robust hiring process

The first step in ensuring your employees are with you for the duration is hiring the right people in the first place. The Harvard Business Review reports that bad hiring decisions are one of the main causes of employee loss.

• Set a good impression from the outset by making sure the job advertisement, job description and any other communications are clear, informative and transparent. You can use our free job description template.
• Applications should be available online and easy to fill out. Personalised automated emails mean you can keep applicants up to date throughout the process.
• During the interview, make sure the applicant understands the role, the people they’ll be working with and the workplace culture.
• Hire for the cultural ‘fit’ of your business. A new employee who meshes well with the team gets productivity back on track faster and improves morale.

Onboarding new employees well ensures that they start off on the right foot. It helps to instil your business’s values and sets them up for success.

Competitive compensation and benefits

The first thing any employee is looking for is a competitive salary. Employees do their best work when they feel valued and fairly compensated for their effort.

• They should be able to afford the cost of living and accommodation where they live, pay should be adjusted for inflation and, as their experience and responsibility increase, so should their salary
• You can base pay rates on average market rates for similar job descriptions, and include employee performance
• Employee benefits can be as simple as staff discounts or loyalty program and free parking or as generous as gym memberships and medical, vision and dental schemes

Opportunities for career development and growth

Employees want to be able to advance their careers and gain learning opportunities with your business – if not, they may start looking elsewhere.

A 2023 survey across New Zealand, Australia and the United Kingdom reported that 46% of those considering quitting put it down to a lack of career opportunities.

• A good talent retention strategy prioritises your employee’s career development, emphasises continuous learning, gives them clear goals and a transparent roadmap for career progression.
• You could consider a mentoring program, which helps both mentor and mentee by building mentoring skills, passing on institutional knowledge, creating a talent pipeline and encouraging collaboration and innovation.
• A training budget is essential to equip employees with everything they need to further their learning, such as external courses and workshops, advanced training, and upskilling to learn their way around the latest equipment and technologies.

A positive work environment and culture

A workplace that respects and supports people of all ethnicities, backgrounds, genders, sexual orientations and neurodiversity will provide you with a diversity of talent and experience, which can also lead to innovation, new market opportunities and better customer experiences.

• It’s all about being flexible; for example, by providing a quiet, private space where a new mum could express milk, a Muslim employee could pray or a neuro-diverse employee could work as respite from a busy open-plan office.
• Encourage open communication. This should go both ways – employees should feel safe offering feedback on workplace improvements while gaining from positive and constructive feedback on their performance.
• Recognise employee achievements. Simply saying thank you for someone’s efforts can go a long way.
• Don’t micromanage. Aim to be a coach (by offering advice, support, goals and autonomy) rather than a boss.

A positive work environment and culture not only attracts top employees, it helps to keep them.

For more information on employment conditions, see: Fair Work Ombudsman - Employee Entitlements

Work−life balance

More and more workers are citing work−life balance as the reason they’re looking for new jobs.

• Employees should not feel they have to answer emails or check their phones on weekends or outside normal working hours
• You can encourage a good work−life balance by enabling job-sharing, remote work, flexible hours or a compressed work week
• Remote workers cite less commuting, fewer interruptions, fewer distractions, fewer meetings and greater autonomy as drivers of greater productivity
• Encourage people to use their holiday, parental and sick leave when they need to (and lead by example)
• Be flexible if someone needs to leave early for a family event, take sick leave to look after a family member, has child-care problems or is the caregiver to elderly parents

Learn more about managing a remote team

How to implement a employee retention strategy

Here’s a practical step-by-step guide to implementing an effective employee retention strategy.

1: Conduct employee surveys and feedback sessions

Carry out employee surveys to gather feedback. Acting on feedback is essential for understanding your employees’ needs and improving engagement. Regular employee engagement and satifaction surveys and feedback sessions provide valuable insights into employee satisfaction.

When an employee does leave, find out why with an exit interview.

2: Set measurable goals and track progress

• Establishing clear retention goals and key performance indicators (KPIs) helps track the effectiveness of your strategy of reducing turnover.
• Work out who is leaving (your top performers?) and when. If it’s within a year of hiring, your recruitment process may be in need of an overhaul.
• Regularly reviewing these goals and figures helps ensure that you stay on track and can make any necessary adjustments.

3: Develop competitive compensation and benefits packages

• Offer salaries that are benchmarked against industry standards.
• Research the pay being offered by similar businesses in your area and by your competitors. Your employees will move to another employer for the right salary.
• Offer an attractive employee work and benefits package. Bear in mind that flexibility around working hours and allowing staff to work from home can be as attractive as financial benefits.
• Ask your employees which benefits are most important to them and be sure to know which are legally required.
• Carry out regular reviews of your salary structure and employee benefits.

4: Unlock career development and growth opportunities

Employees are much more likely to be satisfied in their work if you:

• create a learning culture, with access to learning opportunities, training and upskilling
• create career paths within the business as you may lose employees who realise they must leave to further their career
• provide mentorship opportunities and continuous feedback and ask your employees where they would like to be and create a plan to help them achieve it
• offer a range of career development opportunities and think beyond formal training

5: Set up recognition and reward systems

Establish a system for regularly acknowledging and rewarding employees’ contributions and achievements.

• Offer a variety of rewards, such as bonuses, gift cards, or extra time off, to cater to different preferences
• Ensure that the criteria for rewards are transparent and consistently applied to avoid any perceptions of favouritism

6: Create a positive work environment and culture

Fostering an inclusive and supportive work environment where all employees feel valued and respected goes a long way to helping retain your people.

• Organise team-building activities and social events to strengthen the sense of community and improve workplace culture. However, do not force staff to take part in these activities, especially if they’re out of hours. Eating into their family time is a reason to resign.
• Recognise employees’ hard work and career milestones.
• Address any workplace issues or conflicts promptly and carefully to maintain a positive atmosphere.

7: Promote work−life balance

A healthy work−life balance is crucial to avoid burnout, not just for your employees but for you too.

• Offer flexible work arrangements, such as working from home, flexible hours, and compressed work weeks, to help employees balance their personal and professional lives
• Implement wellness program that support employee physical and mental health, such as free flu jabs, health screenings, massages at work, or gym memberships or discounts
• Encourage employees to take their allotted time off to prevent burnout and promote well-being

8: Regularly review and update the retention strategy

The effectiveness of your team retention strategy should be regularly reviewed.

• Adapt your strategy in response to changing needs, new challenges, and evolving industry trends
• Involve employees in the review process to gather their input and ensure that the strategy remains relevant and effective

Employee retention strategy FAQs

Implementing an employee retention plan can be challenging. We’re answering some of the most frequently asked questions.

What is the most effective method for retaining employees?

There’s no exact science to retaining employees. However, cultivating a positive and inclusive company culture that values employee well-being, growth, and engagement is a great place to start.

This includes providing a supportive work environment, ensuring competitive compensation and benefits, providing clear career development opportunities, maintaining transparent communication, recognising and rewarding contributions, and promoting a healthy work−life balance.

What are the key challenges in employee retention?

One of the key challenges in employee retention is employee burnout. This can be addressed by promoting a healthy work−life balance through flexible work arrangements, encouraging regular breaks, providing wellness program, and regularly assessing and redistributing workloads to prevent excessive stress.

Through supportive management and by prioritising employee well-being, businesses can reduce burnout and improve retention rates.

How can you tell your retention strategy is working?

Monitor your employee retention statistics to track the success of your strategy. Your employee turnover rate is calculated by dividing the number of employees who leave during a year by the average number of employees, then multiplying by 100.

Using qualitative insights and feedback, both from staff who are leaving (through exit interviews) and those who are staying, will highlight any issues and help you adjust your strategy.