Employee retention helps ensure high-quality team members stay with your company for years to come. Recruiting, vetting, and onboarding new employees costs your business valuable time and resources. In the US, businesses spend an estimated $1 trillion to replace staff who leave.
That’s why it’s vital to understand employee retention and help ensure the team you worked so hard to hire stays with you.
In this guide, you’ll learn proven strategies to retain existing employees and reduce voluntary turnover.
Table of Contents
- What is employee retention?
- What causes employee turnover
- Why employee retention is important
- 4 benefits of employee retention
- How to calculate employee retention rate
- 6 employee retention models
- 8 employee retention strategies
- Retaining employees at your store
- Improve employee retention with these strategies
- Employee retention FAQ
What is employee retention?
Employee retention is the ability of a business to keep talented employees, and to prevent employee turnover. It includes strategies and processes to retain talent, such as employee appreciation, positive work culture, competitive pay, and work-life balance.
When employees stay at a company for a healthy amount of time, that’s a good employee retention rate. Some businesses struggle to keep employees, and they have to constantly seek new talent.
Employee retention is an issue for most companies. In October 2022, around four million Americans quit their jobs—close to 3% of the workforce. Globally, 40% of workers say they might leave their jobs in the near future. Businesses need to keep their best employees in order to grow and develop.
What causes employee turnover?
Employees leave their jobs for many reasons. Some are voluntary, such as taking a new job. While others are involuntary, like getting laid off.
Employee retention strategies focus on voluntary employee turnover that is damaging to the business. It also focuses on avoidable employee turnover, like an employee leaving their job because they’re moving to a new location.
So what’s causing higher turnover rates and why? Here are the top reasons why employees may choose to leave their job.
Limited growth opportunities
Employees love having opportunities to grow, especially when they come with better benefits, more pay, and a chance to be challenged and learn new skills.
Giving your highest performers the opportunity to move up in your company and providing them with a chance to develop their careers helps you keep them longer.
Around four out of 10 employees who’ve left a job say they did so due to a lack of career development and advancement.
Not giving your best employees the chance to grow is the biggest way you lose them and increase your turnover costs.
Mikey Moran, CEO of Private Label, says the key to retaining employees is to set them up for success with a plan, in a position they enjoy and can thrive in.
“This starts with the hiring process, training, and goal setting with each staff member,” Mikey says.
Mikey hires experienced employees who want to grow and move up to positions with more responsibility. The company also offers a bonus compensation package for all employees who have been with the company for more than one year.
Three out of 10 people say uncaring and uninspiring leaders were the main reason they left a role.
Team members want to feel part of an organization where leaders help employees achieve their best work. It’s frustrating when managers don’t recognize an employee’s hard work or potential. They may feel underappreciated and look for a new work environment where their contribution is valued.
Low salary is a leading cause of people quitting their job. More than a third of employees who left their job said their decision came down to inadequate total compensation.
Staff want to be compensated fairly for their work. Compensation doesn’t just mean a competitive salary––employees want health care policies and other incentives. When staff feel appreciated, they’ll be much more likely to stay with an organization instead of looking elsewhere for work.
Employees will often prioritize their lives over their jobs. In a perfect world, they wouldn’t have to compromise one over the other. Yet many businesses struggle to find the right footing between productivity and work-life balance. Nearly 30% of people who’ve quit their job say it was due to unsustainable work expectations.
High-pressure environments, too many deadlines, and unreasonable workloads can result in employee burnout.
Some 30% of people leave their job simply because they don’t enjoy the work. It’s tempting to keep an effective employee in the same role, but it often leads to them looking elsewhere for new challenges. Patrick Crane, CEO of Love Sew, says that they have struggled with employee engagement.
“One of the biggest challenges I’ve had to contend with as a retailer is keeping my employees engaged for the long term,” Patrick says. “Because of the often unstimulating and repetitive nature of their work, it’s easy for employees to look for other rewarding and exciting opportunities.”
In fact, 59% of employees are so disengaged they are “quiet quitting” according to Gallup’s 2023 State of the Global Workplace report. Which makes employee engagement even more crucial to retaining staff.
An organization’s ability to show employees recognition and appreciation for their commitment is key to maintaining morale.
When staff feel undervalued, they’re more likely to look for a workplace that appreciates their contribution. To keep employees on board, businesses need to consider ways of demonstrating their appreciation. This is especially true for long-term employees who have valuable experience and knowledge that competitors may value.
Employees want to feel part of a company’s bigger picture. When they don’t have a say in decision-making, they may feel their input doesn’t matter to the business.
To keep staff invested in long-term growth, it’s important to give them a seat at the table. Micro-managing also limits employees’ autonomy and reduces their ability to contribute meaningfully.
In the post-pandemic workplace, employees crave flexibility. A choice of where and when they work is a top priority. More than a quarter of employees quit their job due to a lack of workplace flexibility.
Businesses that don’t allow employees any choice in work hours, workplace location, and remote or hybrid work risk losing them to competitors that do.
Lack of support for health and well-being
Employees often leave their jobs for health issues, whether personal or family-related. As a business owner, employees leaving for outside health issues is largely out of your control.
A solid way to prevent employees leaving is by offering health programs and insurance. Ask yourself, are there any wellness initiatives you can implement? How can you ensure the well-being of your full-time and part-time employees while on the job?
For example, an employee may not leave their job if they have access to additional sick days for unexpected health emergencies. This saves you the long-term cost of having to source, vet, interview, and train a new hire.
Why employee retention is important
Businesses that prioritize employee retention enjoy significant rewards. Building a solid retention program can help you boost productivity levels and increase team morale. Not to mention, it will lower your recruitment costs and help preserve team-wide knowledge and skills.
Employee retention isn’t just about reducing damage to a business when an employee leaves. It also provides opportunities to enhance company performance across multiple metrics and KPIs.
4 benefits of employee retention
There’s a ton of upside for businesses that make it their mission to retain their top performers. Every benefit you get from increased employee retention affects your bottom line.
To paint a picture, here are four of the best reasons to focus on retention:
1. Increased productivity
Happier employees tend to be more productive. In fact, they can be up to 13% more productive, according to a study by Oxford University. Yet for employees to be more productive, businesses are tasked with investing in their staff from the moment new employees onboard and beyond.
2. Reduced recruitment costs
Employee turnover is pricey. The best way to reduce hiring costs is to lower your turnover rate.
The average cost of replacing an hourly employee is $1,500, while the cost of replacing a salaried employee can range from one to two times their annual salary.
3. Improved company culture and employee engagement
Corporate culture and employee retention go hand-in-hand. The more engaged employees are, the longer they tend to stick with a job. Lower turnover rates help teams build rapport and trust, which makes for a better employee experience. The effects of this feed right into the company culture.
4. Better customer experiences
On that same note, happy employees make for a happier customer experience. It’s not hard to see how that plays out in real time. For example, if you’re running a retail business, happy employees in charge of checking customers out, answering questions, and picking up the phone will give a great customer experience that will turn into repeat business.
How to calculate employee retention rate
Low employee retention rates can be costly, and so is not taking the time to calculate your current retention rate.
Here’s how to calculate your current employee retention rate.
To start, pick a set period of time—for example, one year. Divide the number of employees on the last day of that period by the number of employees on the first day. Then multiply that number by 100 to get the percentage.
(Number of employees on last day of period / number of employees at the start of the period) x 100
Retailers normally track retention on an annual basis. You can use smaller time frames, like six months, if you’re tracking for immediate retention initiatives. The percentage is used to show the stability of your workforce. However, it doesn’t track the departures of those who joined and left during the period, which is your turnover rate.
For example, you have five employees and two leave during the measurement period.
Your retention rate would be 60% using the following calculation:
Retention = (3/5) x 100 = 60%
Good retention rates vary by industry. For instance, the average retention rate in IT sits at 89%, and natural resources is 90%.
If your retention rate is low, it indicates that your employees are having a bad experience with your company.
Now you know your retention rate percentage. Once you pair that with employee retention models to inform your strategy, it makes the process a lot easier.
6 employee retention models
Retention models can help you find the best way to retain your employees according to the needs of your business.
Here are six examples worth looking at to help you figure out your best course of action.
1. Stay interview model
Stay interviews are planned conversations that help leaders better understand what interests and motivates employees. They’re becoming an increasingly popular way to help improve retention—in the US, close to 30% of HR managers said they use stay interviews to boost employee retention. The aim is to support career development and retain good employees.
Stay interviews give leaders the chance to:
- Uncover what employees like and dislike about their job
- Find out why an employee may consider quitting
- Identify what employees want to achieve in their careers both in the short and long term
Stay interviews encourage a closer connection between employees and leaders. The key to successful stay interviews is to listen and take action on what team members say. When an employee shares their vision for their career, direct them to projects and learning opportunities that help them get there.
2. Job embeddedness theory
The job embeddedness theory is that employees are more likely to stay when they are more embedded within an organization.
Job embeddedness considers three aspects of the employee-organization relationship:
- Fit: How well-suited an employee is to their role.
- Links: The connections between an employee, other team members, and the organization’s larger network.
- Sacrifice: What they would lose by leaving.
How to increase job embeddedness:
- Encourage a community spirit among team members
- Lead one-on-one feedback sessions
- Offer learning and development opportunities
3. Join, stay, leave model
You can use the join, stay, leave model to figure out why employees choose to join, stay, or leave your business. By finding the real reasons behind each choice, you’re better equipped to tackle the underlying problems behind low retention rates.
Learning why employees choose to join your business can help you refine your messaging when you write new job descriptions. Knowing why employees stay can let you know what you’re offering that makes for a positive work environment and what you might be missing.
You don’t want to skip the research into why employees decide to leave. Why are employees disengaged? What isn’t up to their standards? Is leadership the issue? Do they feel like they don’t have enough work-life balance?
The more insight you can gather into the three phases of the employee lifecycle, the more prepared you’ll be to improve your retention rates.
4. Maslow’s hierarchy of needs
We can’t talk about employee retention models without mentioning Maslow’s hierarchy of needs. While it was primarily designed to describe human’s fundamental survival needs, it also applies to the workplace.
Maslow outlined needs as:
- Physiological needs
- The need for safety
- The need for love
- The need for esteem
- The need for self-actualization
Looking at your work environment through Maslow’s hierarchy of needs helps you gauge how you can meet employee needs so they stay motivated and engaged.
For example, if you have staff in leadership positions who micromanage their employees and make them feel like they can’t approach leadership with an issue, your employees’ basic needs of psychological safety are not being met. To fix this, address the situation and look for opportunities to improve the staff dynamic. Retention initiatives like wellness programs or a schedule to celebrate employee tenure can help rebuild that trust and meet your employees needs.
5. Human motivation theory
Human motivation theory explains that every person is motivated by three general incentives: the need for achievement, the need for power, and the need for affiliation. This is especially true for high achievers who like accomplishing milestones and reaching goals.
Once you know this, you can apply it to your workplace. How can you fulfill your employees’ general need for achievement? How can you empower them to make decisions and take responsibility for specific projects and tasks?
Understanding what motivates your employees from a psychological perspective can take you a lot farther than providing free cookies in the break room.
6. Job characteristics model
The job characteristics model is a way to design jobs that break down into five sections:
- Skill variety: How many different skills are your employees partaking in?
- Task identity: Do employees fully complete their work?
- Task significance: Is there intrinsic meaning in the job employees are doing?
- Autonomy: How much control and agency do employees have in their own work?
- Feedback: Are your employees receiving constructive feedback?
If implemented right, these five characteristics positively influence employees’ psychological states, including:
- Finding meaning in their work
- Feeling responsible for outcomes
- Knowledge of the actual results
As employees experience any mix of these three different psychological states, they’re more likely to feel satisfied with their job and motivated to work.
With the job characteristics model, you can have a better understanding of what outcomes each job will provide. You’ll also know how you can adjust them so they give the best outcome possible as you try to retain employees.
8 employee retention strategies
It’s one thing to find employees that have staying power. It’s another to know how to keep them long term. Here are eight retention strategies worth considering.
1. Strong hiring, training, and onboarding programs
Improving employee retention rates starts with your hiring process. For instance, if you use the join, stay, leave model and survey employees on why they decide to join, you can use that information to inform your hiring process going forward.
Here’s where you can refine the messaging and clarify what you want potential hires to know. Consider that a survey found as many as 31% of new employees quit within six months because a position wasn’t what they expected it to be.
During the hiring process, your job descriptions should cover bases like: Can they expect training? What motivating factors should they have? What kind of soft skills are you looking for?
Let’s not forget about the onboarding process. As you onboard employees, don’t leave them alone with a large packet of information to read through. Poor onboarding and training are some of the top reasons why new employees quit early.
2. Competitive compensation and benefits
If your goal is to increase employee retention, you’re better off offering competitive compensation and employee benefits, especially in the face of lower job loyalty. When asked about what they would change about their workplace, 28% said improvements to pay and benefits. That same survey found that a 22% salary increase is enough for employees to go work for a competitor.
One popular benefit is flexible paid time off (PTO). Yuvi Alpert, founder and CEO of direct-to-consumer jewelry brand Noémie, finds millennial employees are more concerned than other generations about how work fits into their life.
“The challenge in retaining them as employees is creating a job structure in which they do not have to rearrange the things they like to do around their work responsibilities,” says Yuvi.
To help meet employees’ needs, Noémie implemented a more flexible PTO program.
“By being creative with our PTO, we can ensure that our business is a part of their lifestyle and not something that gets in the way of it,” Yuvi said.
3. Employee recognition programs
Everyone likes to be recognized for their positive contributions. As an employer, you can leverage the need for recognition to ensure your employees feel valued and appreciated.
It’s not just about increasing salaries. More than half of employee engagement is driven by non-financial recognition.
Employment recognition ideas could include:
- Gift cards
- A long weekend break
- Meals out in restaurants
- Employee of the month leaderboards
Recognition leads to employees feeling more confident and respected, which feeds into overall job satisfaction. Just like you don’t want to skip employee recognition initiatives, you also don’t want to miss an opportunity to recognize your employees for their positive contributions.
4. Conduct exit interviews
Conducting exit interviews can be part of your join, stay, leave model. As employees give notice and complete their last few workdays, take the time to pull them aside and have them fill out an exit survey.
This is where you want to ask all the questions that will give you the most insight. Questions could include:
- What prompted you to seek a new position?
- How satisfied were you with the company culture?
- What would you change about leadership?
- Did we equip you with the training and tools to do your job well?
- What would you change about your position?
- How could we have made your time here better?
The more specific and direct you can be with your exit survey, the more valuable data you’ll have to work with as you onboard and offboard employees.
5. Consistent feedback
Feedback is a two-way street, and companies that act on employee feedback have higher engagement rates than those that don’t. What does this mean for your employee retention strategy?
You want to find a way for your employees to feel heard. While an anonymous tip box can be an option, so can scheduling periodic employee reviews. Your business leaders must make the time to talk to each employee about how they’re doing and how they can improve. Laura Jimenez, co-founder of ISHINE365, found success with touching base with employees regularly.
“Employees always want their issues resolved quickly. Listening to them and treating them as individuals, not just people who work there, is key to employee retention,” Laura says. “See what is going well with them and see what is going wrong. Don’t try to fake interest in their lives, but do express real concern if you can.”
As you give constructive feedback and take in what your employees are concerned about, you’ll have a better idea of what’s not working and how it can be improved.
6. Provide clear career paths and growth opportunities
Employees want to feel like they have options. They also want to be part of the future of your business. Studies show that clear growth paths lead to higher employee morale.
This might look like allowing employees to choose a different type of job that will lead to professional development. It could also mean that you inform them about possible management positions and what it takes to get there.
When you’re trying to provide clear growth paths, lead with communication. Employees won’t be able to make choices within your company that they aren’t aware of.
Mentoring programs can be an effective way of inspiring team members to think more about their career development at the company.
7. Offer flexible work
Flexibility is a big part of effective employee retention strategies. Today’s workers demand flexible work options, so the more you can offer, the better. Letting employees have some say in when and how they get work done will lead to higher retention rates. That way, employees don’t feel like they have to find a better environment where they provide a healthy work-life balance.
For instance, remote work is becoming the norm and businesses that employ remote workers are less likely to face hiring delays and disruptions. This applies to the retail industry too. Customer service and virtual assistant positions can come with higher flexibility because they can be taken care of virtually.
As a business owner, it’s worth taking the time to understand what flexibility can be offered. It’s one of the best ways to ensure more work-life balance.
8. Prioritize employee well-being
To do their best work, people need to feel both physically and mentally healthy. Prioritizing well-being helps reduce the risk of burnout and employees quitting due to stress.
Setting up wellness programs can help encourage staff to take care of themselves as well as find support if they need it.
Here are a few ideas to kickstart your employee well-being programs:
- Mental health support
- Gym memberships
- Monthly wellness stipend
- Annual company-wide retreats
- Paid time-off policies
- Parental leave
Retaining employees at your store
High employee turnover rates in retail are nothing new. Annual employee turnover among retail workers currently stands at around 60%. Retailers often find they need to replace multiple team members at their stores every year.
This challenge continues to grow too. McKinsey reports that 63% of retail managers are considering quitting. It’s never been more important to find ways of retaining frontline retail staff.
Here are strategies and tactics to use to retain your retail team members.
Flexibility remains an important issue for frontline retail workers. Some people have even left traditional work to take on gig work.
Retail leaders must consider how they can offer flexibility to those on the frontline. This could include letting employees increase or decrease their hours to allow them to work other part-time jobs. Consider letting them choose which store locations work best for them on certain days and have a say in how their work gets done.
Make daily tasks more engaging
Boring and repetitive work is a top driver of turnover in retail—around a quarter of frontline retail workers say they quit due to a lack of meaningful work.
Some retail employers are finding ways of automating repetitive activities so that workers can spend time on more meaningful tasks in the store.
Retailers need to assess employees’ most monotonous tasks and then find ways to streamline them. Doing so can boost productivity and satisfaction, since employees can focus on more interesting activities.
Provide better management training
Managers are the base for improving retail staff retention. Factors that are in managers’ control, like inspiring leadership, micromanagement, and career development, heavily impact retail employees.
Managers can also share frontline feedback to help leaders create a better retail employment experience. Plus, managers are at the frontline, executing your retail retention strategies.
Investing in retail managers shouldn’t be undervalued—they’re the key to retaining staff of all levels.
Prioritize providing better management training to help create a better work environment. Make management training a continuous effort. Don’t just offer a one-time course to potential or current managers. Instead, provide monthly workshops and masterclasses. Encourage managers to share feedback with you and ask when they need additional support to resolve specific issues.
Offer full-time work to high-performing temporary staff
Retailers often need to hire a large volume of seasonal staff for busy periods of the year like holidays and summer shopping months. Instead of starting from scratch and repeating the recruitment, vetting, and onboarding process, aim to re-hire the same employees next season.
If you’re impressed by a temporary employee’s performance, consider making them a full-time offer. That way, you won’t need to use human resources’ valuable time and energy to find a new recruit.
Improve employee retention with these strategies
It costs US businesses an estimated $1 trillion to recruit, train, and replace employees that leave. Avoid being another business that’s part of that statistic by implementing the right strategies to retain employees.
Get curious about what motivates your employees, what they need, and how you can create an environment of employee engagement so they can do their best work. This way, you reduce your high turnover costs, improve workplace culture, and create a place where employees feel appreciated.
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Employee retention FAQ
What is meant by employee retention?
What are 5 employee retention strategies?
- Offer competitive wages and benefits
- Foster a positive work environment
- Provide feedback and recognition
- Help employees develop and grow
- Ensure a good work-life balance