A Retailer’s Guide to Employee Retention: How to Keep Employees Around Longer

Employee retention

Employee retention refers to how well you can keep employees around. It represents your ability to prevent turnover, or the amount of people who leave their job over a certain timeframe. 

When employees stay in their position for a healthy amount of time, that’s a good employee retention rate. Yet, for some businesses, the opposite is true. Hires don’t stick around for too long, and they have to constantly seek new talent. 

What gives?

One in four workers left their job this year. This number is particularly bad for retailers, as the average turnover rate for that sector is around 63%.

Knowing this—especially with the rough onset of the pandemic—it’s not surprising retail businesses everywhere are scrambling to put employee retention at the top of their to-do list.

The good news? You don’t have to struggle with losing your best employees if you follow a few guiding principles. But it isn’t as easy as waving a wand to make your retention dreams come true. 

In this guide, you’ll learn everything you need to know to make employee retention work for you.

What is employee retention?

Before we dive into any retention strategies, it’s important to start with a clear understanding of what employee retention is and what it isn’t. At its core, employee retention is how well a business can keep its employees long term. 

What are you doing to keep your employees engaged and motivated? How are you accommodating their everyday needs? It’s questions like these, and their answers, that directly affect your retention rates.

Still, it’s important to remember that some employee turnover is inevitable. So keep that in mind when you’re thinking about improving employee turnover and increasing staff retention. To have a good idea of where your business stands, the average employee turnover rate, according to the 2021 Bureau of Labor Statistics report, is just over 57% across the board. 

Staffing is always going to be one of the biggest challenges for any retailer. Employees will all have different backgrounds, experiences, and goals with their employment history. The challenge is to figure out what makes the staff member happy and want to come to work every day.

Positive employee retention is directly related to what you’re actively doing to keep the employees you’ve worked so hard to recruit. But before you can outline that, it starts with getting a clear picture of what causes high rates of employee turnover. 

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What causes employee turnover?

Employee turnover is pricey. The cost of replacing an individual employee can range from one-half to two times their annual salary. This begs the question: What’s causing higher turnover rates and why? 

It can often be that your employees are unhappy with their current roles and they don’t see a path to a promotion or a change of position. This is when they’ll often start looking for better options elsewhere. However, it can also be that your company’s mission doesn’t align with employees’ personal goals. 

About half of employees leave a job due to perceived bad managers. Still, there can be a mix of reasons why an employee might leave. But according to Work Institute, the following four main culprits are to blame: 

No opportunity for upward mobility

Employees love having options, especially when those options come with better benefits, more pay, and a chance to be challenged and learn new skills. In fact, giving your highest performers the option of moving up in your company and giving them a chance to develop their careers helps you keep them longer. 

About 91% of employees who’ve left a job say they did it for growth opportunities. 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.” 

At his company, Mikey hires 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 over one year.

Health and family issues

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. Not shocking, but many employees found it necessary to quit their jobs during the pandemic to take care of children or of family members with high risk factors related to COVID, or over fears of contracting coronavirus.

Yet a solid way to remedy employee retention is by being proactive about offering better health 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 won’t be forced to leave their job if they have access to additional sick days to take care of unexpected health emergencies. This, in turn, saves you the long-term cost of having to source, vet, interview, and onboard a new hire. 

Work-life balance issues

Employees will often prioritize their lives over their jobs. In a perfect world, employees wouldn’t have to compromise one over the other. Yet it seems many businesses struggle to find the right balance between productivity and work-life balance. In July of 2021, for example, about 682,000 retail workers quit their jobs. 

Some claim it was because they were searching for better work-life balance. The data shows this isn’t slowing down as workers collectively ask for more flexibility at their workplace. 


Work Institute also found that 10% of employees leave because they simply don’t enjoy the work. It’s tempting to keep employees in the same role, but it often leads to them craving new challenges. 

One of the biggest challenges I’ve had to contend with as a retailer is keeping my employees engaged for the long term. Because of the often unstimulating and repetitive nature of their work, it’s easy for employees to look for other rewarding and exciting opportunities.

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 in some form. To paint a picture, here are a few of the best reasons to focus on retention:

Save costs on hiring employees

The best way to reduce hiring costs is to lower your turnover rate. A healthy employee retention rate can help companies forgo an average expense equal to 33% of an employee’s salary to recruit, vet, and onboard a new employee. 

Improvement of company culture

Company 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. 

It is most important to establish a healthy working environment wherein employees and upper management work toward a common goal. Companies who are not able to do this can suffer from back-to-back employee resignations.

Increased output

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 engage with the onboarding process and beyond. 

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 won’t scare away customers with dissatisfied attitudes and poor treatment. 

How to calculate employee retention rate

Low employee retention rates can be costly, and so is not taking the time to calculate what your current retention metrics are. 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 are tracking for immediate retention initiatives. The percentage is used to show the stability of your workforce. However, it doesn’t track departures of those who joined and left during the period, which is referred to as your turnover rate. 

Say you have 5 employees and two leave during the measurement period. Your retention rate would be 60% using the following calculation:

Retention = (3/5) x 100 = 60%

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. 

Employee retention models

Retention models can help you navigate the process of finding the best way to retain your employees according to the needs of your business. Here are a few examples worth looking at to help you figure out your best course of action. 

Herzberg’s two-factor theory

With Frederick Herzberg’s two-factor theory, you can explain what fuels motivation in employees. Herzberg breaks it down into two main categories:

  1. Hygiene (Are salaries and the work environment healthy?)
  2. Motivation (Are employees being recognized for their achievements?)

The two-factor approach is a way for business managers to get a clearer picture of how to best motivate, and ultimately keep, their employees. While hygiene-related factors like work environment, promotions, or salaries can be fair, employees can still be dissatisfied with their environment. 

Why? Because there might not be a proper emphasis on their motivational needs—like the need to be recognized or challenged with engaging work. 

In other words, the two aren’t inversely related. You need to optimize for both hygiene and motivation to create a work environment that retains employees. 

Say you own a plant shop with a low employee retention rate and, to remedy the issue, you plan on paying more than minimum wage. Unless that change also comes with an environment where employees are recognized for their hard work, increasing minimum wage by itself likely won’t be enough to fix your retention problems. 

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 out the real reasons behind each choice, you’re better equipped to tackle low retention rates.

Finding out why employees choose to join your business can help you refine your messaging when you write new job descriptions. Learning about why employees stay can give you a glimpse into what you’re offering that makes for a positive work environment and what you might be missing.

Last, you don’t want to skip the research into why employees choose 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.

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 the fundamental needs of humans necessary for survival, it also applies to the workplace.

Maslow's hierarchy of needs

Maslow outlined needs as:

  1. Physiological needs
  2. The need for safety
  3. The need for love
  4. The need for esteem
  5. 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 employees in leadership positions that micromanage your employees and make them feel like they can’t approach them with an issue, your employees’ basic needs are not being met, which is a great chance to improve that dynamic with retention initiatives like wellness programs or a schedule to celebrate employee tenure.

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 that 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. 

Job characteristics model

The job characteristics model is a way to design jobs that break down into four 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:

  • An experience of meaningfulness
  • Experienced responsibility for outcomes
  • Knowledge of the actual results

As employees experience any mix of these three different psychological states, they’re more likely to experience job satisfaction and work motivation. 

With the job characteristics model, you can have a better understanding of what outcomes each job will provide and how you can adjust them so they give the best outcome possible as you try to retain employees. 

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 a few strategies worth considering. 

Strong hiring, training, and onboarding programs

Improving employee retention rates can start along with your hiring process. For instance, if you use the join, stay, leave model and are diligent about surveying your 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 get clear on what you want potential hires to know. Consider that a survey found as many as 31% of new employees left a job within six months because it wasn’t what they expected the position 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. As many as 76% of new employees want on-the-job training. 

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Competitive compensation and benefits

Feeling appreciated and acknowledged for hard work is a positive for any employee. But like Herzberg’s two-factor theory states, hygiene, or the need for fair compensation, is an important puzzle piece of employee satisfaction.

If your goal is to increase employee retention, you’re better off not skimping on competitive employee compensation and benefits, especially in the face of lower job loyalty, as 54% of employees would leave their job for a pay raise and 20% would leave for better benefits. 

One popular benefit is flexible paid time off (PTO). “Millennials are more concerned with how work fits into their lifestyle. 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,” explains Yuvi Alpert, founder and CEO of direct-to-consumer jewelry brand Noémie.

In response, Yuvi 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,” he adds.

Costco is another great example of what providing competitive compensation and benefits can do for a business. A recent analysis put its turnover rate below 6%. Even its part-time employees receive some benefits, and it pays workers more than minimum wage. 

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. As many as 83% of employees are happier when they’re recognized in the workplace.

Reltaionship between recognition and happiness at work

Recognition leads to employees feeling more confident and respected, which feeds into overall employee satisfaction. Just like you don’t want to skimp on employee recognition, if you follow Herberg’s two-step theory, you also don’t want to skimp on recognizing your employees for their positive contributions. 

Conduct exit interviews

Conducting exit interviews can be part of your join, stay, leave model. As employees turn in their 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 like:

  • 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. 

Consistent feedback

Feedback is a two-way street, and companies who act on feedback have higher engagement rates than those that don’t. What does this mean for your employee retention strategy?

You want to devise 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. 

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. 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 dish out constructive feedback and take in what your employees are complaining about, you’ll have a better idea of what’s not working and how it can be improved. 

Provide clear career paths and growth opportunities

Employees want to feel like they have options. They also want to feel like they form a part of the future of your business. Studies show that clear growth paths lead to higher employee morale.

This might look like being flexible about employees choosing a different type of job that'll lead to professional development in a different area. But 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. 

Offer flexible work options

Flexibility is a big part of effective employee retention strategies. The more flexibility you can offer your employees, the better. Surveys have shown that flexible work options lead to higher retention rates. That way, employees don’t feel like they have to find a better environment where they provide work-life balance.

For instance, remote work is becoming the norm and will be for about a quarter of US workers by 2025. 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 for what jobs. It’s one of the best ways to ensure more work-life balance. 

Retaining employees at your store

It’s costing businesses as much as $19 billion to recruit, train, and replace employees that leave. Avoid being another business that’s part of that statistic by implementing the right strategies. 

Bottom line: Get curious about what motivates your employees, what they need, and how you can create an environment of employee engagement that provides it so they can do their best work. This way, you reduce your high turnover costs, improve culture, and create a place where employees truly feel appreciated.

With a defined employee retention approach, your business stands a better chance of growing and attracting top talent long term.

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Employee retention FAQ

What is meant by employee retention?

Employee retention is the ability of an organization to retain its employees over a period of time. It is a measure of the organization's success in creating and maintaining a positive work environment that encourages employees to stay in their positions. Employee retention involves creating a culture that values employees and their contributions, offering competitive wages and benefits, providing development opportunities, and fostering a sense of engagement and loyalty.

What are 5 employee retention strategies?

  1. Offer competitive wages and benefits
  2. Foster a positive work environment
  3. Provide feedback and recognition
  4. Help employees develop and grow
  5. Ensure a good work-life balance

Why is employee retention important?

Employee retention is important because it helps organizations maintain a productive and efficient workforce. It also helps reduce employee turnover, which can be costly in terms of hiring and training new staff. Additionally, employee retention helps create a positive work environment, as employees who feel valued and appreciated are more likely to remain with the organization.

What is good employee retention?

Good employee retention is when a company is able to maintain a high level of employee engagement, satisfaction, and commitment. It is achieved through providing a positive work environment, competitive compensation and benefits, and meaningful work. Also, employers should strive to create a culture of open communication, trust, and recognition for employees. By creating an environment that values employee contributions and encourages their growth, a company is more likely to retain employees for the long-term.