Sunday, June 20, 2021

The Beginners Guide to Employee Retention

There’s nothing more frustrating than training a promising new employee only to have him or her leave three months later. Or worse, to guide and mentor an employee for a year or three, only to have them jump to a competitor.

With effective employee retention practices, you can develop your employees’ skills and build their loyalty so they’ll want to stay with your company for the long term. There are several aspects to employee retention, and correctly executing on them will create loyal employees who’ll stick around for years to come.

What is Employee Retention?

Employee retention is employees staying with your company beyond the short term. A company with poor employee retention will have employees who constantly leave for other companies. Exceptional employee retention creates loyal employees who stick around long term.

The Basics of Employee Retention

Now that the definition is covered, it helps to fully understand the six core components of employee retention.

Work-Life Balance

Work-life balance is the harmony between work and free time, and it’s one of the most crucial factors in employee retention. A company that handles this right is respectful of its employees and their lives outside of work. Employees who are given ample time to enjoy their lives feel respected and are more likely to be loyal to a company.

The first step to improving work-life balance is to survey your employees. Ask for their feedback on the current work-life balance. Is it sufficient or do they feel overworked? You’ll know if your current program needs improvement once you have their feedback.

One clear way to improve work-life balance is to grant more days off. Adding one week of vacation per year will always be well received by employees. You can also add more personal days and sick days.

Next, you could also limit the number of hours an employee can work in a day or week. If employees are working 12-hour days consistently, it may be time to set a 10 or 8-hour limit. Other examples are adding a longer lunch break, adding multiple breaks, or setting other weekly work limits.

Finally, you might explore ways your company can support its employees in their lives and activities outside of work. Offering childcare to ease the burden on working parents, or sponsoring fun activities for employees and their families, might help in this area.


Compensation is the hourly, monthly, or yearly amount paid to employees. It’s important for employee retention because workers want to be paid the amount they feel their skills are worth. An employee who’s underpaid will feel unappreciated and may grow resentful long term, while workers who feel well-paid will want to stick around.

The simplest way to improve this is to give your employees a raise. Yes, you’ll have to budget more for payroll, but it can save you hiring and training costs long term. Another way is to include annual bonuses or incentive-based compensation. An example of incentive-based compensation is paying a car salesman 1% of every car he sells.

Give your employees the opportunity to earn more as they grow in the company. If another company offers your employee higher pay, try to match their offer–or if you can’t, work with the employee to see if a smaller raise now with a plan for more later would be enough to keep them around.

Your attitude towards compensation should be to pay employees what they’re worth. Trying to slash payroll costs for the sake of the bottom line will always result in higher employee turnover. You don’t need to overpay employees, but it’s okay to be generous.

Skill Development

It’s important to help employees develop long-term skills they can use in the workforce. Employees who feel like they aren’t growing their skill sets may look for an opportunity elsewhere. Improving skill development isn’t as straightforward as some of the other employee retention components, but if done right it can really pay off in long-term loyalty.

The best way is to ensure the job duties match the description listed on the application. You don’t want to hire someone for a sales job, only to have him or her logging data all day. That employee expects to grow his or her sales skills, and you better provide that opportunity.

Another way is to ask employees what skills they wish to develop. Then you can block off time during the day when they can work towards mastering it.


Benefits range from free Tuesday lunches to 401(k) matching. Like compensation, benefits are important for employee retention because they make employees feel appreciated. Think of benefits as bonuses on top of compensation. A company that has excessive benefits will set itself apart from others in the eyes of its employees.

The main benefit you can offer is insurance. This is standard with many companies and can include life, dental, and health insurance. Other standard benefits include 401(k) matching, paid holidays and vacations, free parking, and maternal and paternal leave. Covering these standard benefits is the first thing you should do to improve this core component of employee retention.

Next, it’s time to get creative. Some ideas of additional benefits include a free weekly lunch, gym memberships, travel discounts, and restaurant vouchers. If you have an employee who wants to get a formal education or a professional certification, offer to pay for it. As mental health is a major component in good work performance, you might offer your employees free therapy once a month or the option to take occasional paid “self-care” days off.

There is no limit to the number or type of benefits you can offer. Showering your employees with benefits will skyrocket their loyalty.

Onboarding Training

After compensation and benefits, onboarding may be the most important key to employee retention. If an employee has a bad start at your company, they will already want to leave before they’ve even worked their first few months. Good onboarding will prevent them from jumping ship before they really start to fit in.

A company with effective training shows its employees that it cares about their success from the first day they start. A great way to improve onboarding training is to create standardized training for each role. Standardized training should be ultra-specific to the new hire’s role and duties. Assign someone to show new employees how to complete every daily task. Show them how to navigate the software they’ll be using. Help them troubleshoot the issues they run into in their first few weeks on the job.

Introduce them to employees in other departments. Walk them through how to interact with customers. Give them a chance to sit down with their direct supervisor and discuss goals and plans for the job. This ensures every new hire has an organized program giving them the resources they need for success. New hires will be appreciative of the helpful training, making them more likely to stick around.


Company culture refers to the values, characteristics, and expectations of an organization and its employees. Great company culture is essential for employee retention. Employees of a company whose culture lacks leadership, integrity, and support will leave quickly.

While not all company cultures align with every employee, building a welcoming and supportive culture can greatly reduce turnover. This isn’t done overnight, and it starts with the leadership team. If your culture has been subpar, host a company-wide meeting in which the leadership shares their plans for positive change. Then lead by example and your employees will follow.

To keep employees around, create a culture that is supportive, motivated, and ethical. Create a culture where employees feel encouraged to ask for help, are congratulated for achievements, and are driven for further success. If you establish this, your employee retention rate will improve massively.

3 Tools to Improve Employee Retention

Three tools you should consider to help with employee retention efforts are a PEO service, compensation management software, and employee survey tool.

PEO Service

Purchasing a professional employer organization (PEO) service is an excellent way to help manage employee retention-related tasks. PEO services help administrate HR tasks like benefits, payroll, and time off. PEO services can save businesses on insurance and grant access to better health, IRA, and 401(k) plans. We recommend checking out ADP TotalSource.

ADP TotalSource is a PEO service that’s used for payroll, talent management, risk assessment, employee benefits, and human resources. It lets employers offer enterprise-grade vision, dental, and medical care along with 401(k) plans. It has a system employees can use to request and schedule time off. This provider helps improve the core competencies of employee retention.

Compensation Management Software

Compensation management software helps employers administer employee compensation. This will help you optimize salary budgets, adjust compensation policies, incorporate employee performance data, and plan bonuses. This time-saving tool will help you compensate your employees without headaches.

Employee Survey Tools

An employee survey tool allows you to collect important information from your employees. Use the tool to pose a question to your employees like “Do you feel satisfied with your work-life balance?”. Employees will then be prompted to answer the survey, and you will see their feedback. This tool helps employees feel heard and understood, positively impacting retention.

3 Tricks for Employee Retention

Improving employee retention takes time, but there are some tricks you can implement today to speed up the process.

Offer a Holiday Bonus

A holiday bonus (usually scheduled around the winter holiday season) is a simple way to boost employee loyalty. The first step is to announce the bonus during the month of December. Send a company-wide email thanking your employees for their hard work throughout the year. At the end of the email, announce they will be rewarded with a holiday bonus because they deserve it.

A common holiday bonus is $1,000, but feel free to adjust this amount if it feels appropriate. (If a flat amount doesn’t work for you, try basing bonuses off of a certain percentage of employee salaries.) Make sure to include the specific amount in the email.

You also don’t have to wait for the holidays to offer bonuses! Cash bonuses of any type are quick ways to keep your employees happy. This is especially helpful if you have any type of commission-based or quota-focused workers.

Offer an Extra Week of Vacation

This may seem counterintuitive, but giving your employees an extra week of vacation will actually increase their performance and productivity. It’s one of the best ways to improve employee retention because it shows you care about their personal lives. (Remember work-life balance!)

To implement this, announce it to your employees via email. Similar to a holiday bonus email, let them know how much you appreciate them. Announce the extra week of vacation in the next part of the email.

It’s okay if a full week isn’t workable for you yet. If you can’t add an extra week, add three days. If you can’t add three days, add one. This will help your employees avoid burnout, and they’ll appreciate your generosity.

Institute Company Happy Hours

A company happy hour is when all employees are invited to a venue outside of work hours to socialize. It usually involves alcohol, but you can leave this out if it’s not a culture fit. The key here is hosting it outside of work hours. A company lunch doesn’t count. Company happy hours are great for improving culture and employee camaraderie.

The first step is to pick a venue. Unless you run a tiny startup with a handful of employees, you’ll need to contact the venue ahead of time. Some venue ideas are a bar, restaurant, or corporate venue. Let the venue know how many people you plan to have and rent it out if needed. Second, you’ll need to get drinks and snacks if they aren’t provided by the venue.

The third step is to announce it to your employees via email. Include an RSVP button so you know how many people to expect. Company happy hours should never be mandatory, but they should be highly encouraged. An event like this will allow all departments to interact in a social setting. If hosting fun events becomes a habit, you’ll see improvement in employee retention.

What to Do Next

Now that you know how to improve employee retention, what next? First, you should conduct a little more research outside of this post. We recommend two posts on titled Best PEO Companies and Sales Compensation Plans – The Complete Guide. These will give you a better understanding of PEO services and how to compensate your sales team.

Next, it’s time to take action. Start by sending an anonymous survey to your employees asking for feedback on the six core components of employee retention at your company. Ask about work-life balance, skill development, compensation, benefits, training, and culture. After receiving their feedback, start by focusing on the component that needs the most improvement.

From there, you can use the information in this article to take corrective action. If employees are complaining about a lack of work-life balance, offer more days off. If it’s a compensation issue, be more generous with payroll. If it’s a culture issue, use the advice in this post to start making the culture more welcoming and supportive. Fill these needs one at a time, over time, to create a team of loyal employees.

from Quick Sprout