Building a strong employee retention plan: Keep your best people engaged

Published Friday 10 October 2025

Table of contents

• What is an employee retention strategy?
• What are the benefits of implementing an employee retention strategy?
• What are the key components of an effective employee retention strategy?
• How to implement an employee retention strategy
• Build a retention strategy that supports your business growth
• FAQs on employee retention

Key takeaways

• Implement regular employee feedback sessions through engagement surveys, one-on-one meetings, and exit interviews to identify retention issues early, as 52 percent of departing employees say their organization could have prevented their departure.

• Prioritize competitive compensation by benchmarking salaries against industry standards and offering valuable benefits like flexible work arrangements, which can be as important as financial compensation to employees.

• Create clear career development opportunities through mentoring programs, training budgets, and transparent growth paths, since 60 percent of employees would choose strong professional development over regular pay raises.

• Establish measurable retention goals by tracking quarterly metrics like overall turnover rate, time to turnover, and high-performer retention to identify problem areas and adjust your strategy effectively.

What is an employee retention strategy?

Employee retention strategy is a structured approach to keeping your best employees engaged and committed to your business. It combines specific actions and policies designed to reduce turnover and build loyalty.

A strong retention strategy gives you clear benefits:

• Save money: Reduce recruiting and training costs, which can range from one-half to two times an employee's annual salary.
• Increase productivity: Keep experienced employees who know your business
• Build team stability: Maintain morale when good people stay

What are the benefits of implementing an employee retention strategy?

Employee retention strategies protect your business from the high costs of turnover while building a stronger, more productive workforce.

Direct financial benefits:

• Reduced hiring costs: Save on recruitment, interviews, and background checks
• Lower training expenses: Keep employees who already know your systems
• Maintained productivity: Avoid disruptions when experienced workers leave, as studies show that even a small increase in weekly turnover can lead to increased product failure.

Indirect business benefits:

• Higher team morale: Prevent the domino effect when good employees quit
• Better customer experience: Maintain relationships with familiar staff
• Stronger reputation: Avoid looking like a stepping-stone employer

A successful workforce retention strategy helps you keep your top talent and maintain productivity. It also ensures your customers continue to receive excellent service.

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

Effective employee retention strategies include six main areas that address why employees leave:

• Technology integration: Streamline workflows and reduce frustrating manual tasks
• Strategic hiring: Find candidates who fit your culture from day one
• Competitive compensation: Offer fair pay and valuable benefits packages
• Career development: Provide clear growth paths and learning opportunities
• Positive workplace culture: Create an environment where people want to stay
• Work-life balance: Support flexibility that prevents burnout

Effective use of technology

When resources are limited, using technology can make your work easier.

• Open communication between you and your employees helps them feel heard and involved. Use tools like company intranets and messaging services to give real-time feedback and support. These tools also help your team work together to improve your business.
• Use cloud-based business software to make remote work easier and help your employees feel connected to their colleagues.
• HR tools can improve the employee experience. Software and automation reduce repetitive tasks and make workloads easier to manage. For example, staff rostering apps let you and your team 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 gives you more time for staff training, development, and mentoring.

A robust hiring process

Start by hiring the right people. The Harvard Business Review found that bad hiring decisions often lead to employees leaving.

• Set a good impression from the start by making sure your job advertisement, job description, and other communications are clear and informative. Try this free job description template.
• Make your applications available online and easy to fill out. Use personalized automated emails to keep applicants up to date.
• During the interview, explain the role, introduce the team, and describe your workplace culture.
• Hire people who fit your business culture. When new employees fit in, your team gets back to full productivity faster and morale improves.

A good onboarding process helps new employees start strong. It also shares your business values and sets them up for success.

Competitive compensation and benefits

Employees want a fair, competitive salary. They do their best work when they feel valued and paid fairly.

• Pay enough to cover the cost of living and housing. Adjust pay for inflation. Increase salary as experience and responsibility grow
• Base pay rates on market averages for similar jobs. Include employee performance
• Offer benefits like staff discounts, loyalty programs, free parking, gym memberships, or medical, vision, and dental plans

Opportunities for career development and growth

Employees want to advance their careers and learn new skills. In fact, 60 percent would choose a job with strong professional development over one with regular pay raises.

• Focus on career development, continuous learning, clear goals, and a transparent path for growth
• Set up a mentoring program. It helps mentors and mentees build skills, share knowledge, and encourage collaboration
• Provide a training budget for courses, workshops, and upskilling on new equipment and technology

A positive work environment and culture

A workplace that respects and supports all backgrounds, genders, and neurodiversity gives you a wider range of talent and experience. This can lead to new ideas, new market opportunities, and better customer experiences.

• Be flexible. For example, provide a quiet space for new mothers, a prayer room for Muslim employees, or a quiet area for neurodiverse staff
• Encourage open communication. Employees should feel safe giving feedback and receiving positive, constructive feedback on their performance.
• Recognize employee achievements. A simple thank you can make a big difference
• Don't micromanage. Be a coach by offering advice, support, goals, and autonomy

A positive work environment attracts and keeps top employees. One SHRM report found that workers in positive cultures are almost four times more likely to stay with their employer.

Work−life balance

Many workers say work–life balance is why they look for new jobs. Research shows that not enough focus on employee well-being is a top reason people leave poor workplace cultures.

• Don't expect employees to answer emails or check phones on weekends or outside normal working hours
• Encourage work–life balance with job-sharing, remote work, flexible hours, or a compressed work week
• Remote workers say less commuting, fewer interruptions, and more autonomy help them be more productive
• Encourage employees to use vacation, parental, and sick leave. Set an example by doing the same
• Be flexible if someone needs to leave early for family events, take sick leave for caregiving, or has child-care issues

How to implement an employee retention strategy

To keep your best people, you need a clear plan. Start by finding out why employees leave, then build solutions to keep them.

Follow these steps to create a retention strategy that works:

1. Conduct employee surveys and feedback sessions

Employee feedback shows why people stay or leave. Regular surveys and conversations help you spot issues early. This matters because 52 percent of exiting employees say their organization could have done something to keep them.

Key feedback methods:

• Engagement surveys: Measure job satisfaction and identify problem areas
• One-on-one meetings: Create safe spaces for honest conversations
• Exit interviews: Learn why good employees choose to leave

Act on feedback. When employees see their input leads to change, they are more likely to stay engaged.

2. Set measurable goals and track progress

Measurable retention goals help you see what works. Use clear metrics to track if you are keeping your best employees.

Essential retention metrics:

• Overall turnover rate: Track the percentage of employees leaving annually
• Time to turnover: Identify if people leave within their first year
• High-performer retention: Monitor whether your best employees are staying
• Department-specific rates: Spot problem areas in your organization

Check these metrics every quarter. Adjust your strategy to fix issues before they grow.

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 a benefits package that includes flexible hours and remote work options. These can be as valuable as financial benefits.
• Ask employees which benefits matter most. Make sure you know which benefits are required by law.
• Review your salary structure and benefits regularly.

4. Unlock career development and growth opportunities

Employees are more satisfied when you:

• create a learning culture with training and upskilling. Businesses that offer professional development see 34 percent higher retention rates
• create career paths so employees can grow without leaving
• provide mentorship and continuous feedback. Ask employees about their goals and help them create a plan
• offer different career development options, not just formal training

5. Set up recognition and reward systems

Set up a system to regularly recognize and reward employees' contributions.

• Offer rewards like bonuses, gift cards, or extra time off to suit different preferences
• Make reward criteria clear and apply them consistently

6. Create a positive work environment and culture

A positive work environment helps employees stay. It creates a culture where people feel valued, respected, and supported.

You can build community and belonging in your workplace in several ways:

• Inclusive practices: Welcome employees from all backgrounds
• Optional team activities: Offer social events, but don't require attendance
• Recognition programs: Celebrate achievements and anniversaries
• Conflict resolution: Resolve workplace issues quickly and fairly

Forced participation in after-hours events can backfire. Respect your employees' personal time to support work–life balance.

7. Promote work−life balance

A healthy work–life balance helps prevent burnout for you and your employees.

• Offer flexible work options like remote work, flexible hours, and compressed work weeks
• Offer wellness programs like free flu shots, health screenings, massages at work, or gym memberships
• Encourage employees to use their time off to prevent burnout

8. Regularly review and update the retention strategy

Regular strategy reviews help you keep your retention efforts effective. What worked last year may not work today.

Follow these steps to review your retention strategy:

• Quarterly metric analysis: Check turnover rates and employee satisfaction scores
• Employee input sessions: Ask your team what's working and what isn't
• Industry trend research: Stay current with workplace expectations and benefits
• Strategy adjustments: Update policies and practices based on your findings

Ask employees for input during reviews. They may spot issues you miss and will value being involved.

Build a retention strategy that supports your business growth

Keeping your best people helps your business grow. A strong retention strategy saves you money and builds a positive workplace. With the right approach and tools, you can create a culture where your team feels valued and wants to stay.

With Xero, you get financial clarity to invest in your team. Use Xero to manage payroll and track expenses for benefits and training. See how your retention efforts impact your bottom line. Support your team's growth and try Xero for free today.

FAQs on employee retention

Implementing an employee retention plan can be challenging. Here are answers to some of the most frequently asked questions.

What is the most effective method for retaining employees?

There is no single way to retain employees. Start by building a positive, inclusive culture that values well-being, growth, and engagement.

To do this, provide a supportive work environment, offer competitive pay and benefits, give clear career development opportunities, keep communication open and transparent, recognize and reward contributions, and promote a healthy work–life balance for employees.

What are the key challenges in employee retention?

Employee burnout is a major challenge. You can reduce burnout by offering flexible work, encouraging breaks, providing wellness programs, and managing workloads.

Supportive management and a focus on well-being help reduce burnout and improve retention.

How can you tell your retention strategy is working?

Track your employee retention statistics to see if your strategy works. Calculate turnover rate by dividing the number of employees who leave in a year by your average number of employees, then multiply by 100.

Use feedback from exit interviews and current staff to spot issues and adjust your strategy.