Employee Retention: How to reduce employee turnover by 16%

Joe Caccavale





min read


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What is employee retention?

Employee retention refers to a company’s capacity to keep its employees. It’s often referred to as a statistic too - the percentage of employees who stay at your organisation. 

If an organisation has a 95% retention rate, this means that it has kept 95% of its employees over a given period (usually a year).

Whilst some organisations and jobs will naturally have higher turnover than others, most organisations aim to maintain healthy employee retention, both to keep their best talent and to avoid the cost of hiring a replacement.

How to calculate employee retention rate

You can calculate employee retention rate using this process:

  • Subtract the number of employees who’ve left from the total number of employees.
  • Divide the total number of employees by the answer above
  • Multiply this by one hundred to get the employee retention rate

Whilst it varies from industry to industry, the average employee retention rate in the UK is around 80%.

The remaining 20% is the employee turnover rate.

Why employee retention is important

Cost of hiring a new person

Employee turnover has a very real, measurable cost.

Every time an employee leaves, you’ll need to replace them.

And hiring isn’t cheap.

According to the Center for American Progress, it costs a company around 20% of an employee’s salary to replace them. 

And in the case of high-paid positions, this cost could be up to 213%.

On average, companies in the US spend about $4,000 to put someone in a job.

These figures may sound extreme, but just think about all of the costs involved in hiring :

  • Cost of job board(s)
  • Recruiter fees
  • Interview and admin hours (the wages of everyone involved in hiring)
  • Training/ onboarding time and expenses
  • Loss of opportunity and productivity

Lost productivity 

When someone leaves, they take all of their knowledge and experience with them.

Even once you’ve hired your replacement, they’ll still take time to reach the same level of productivity as the employee they replaced.

In Allied Workforce Mobility’s Survey, 30% of companies said that it takes a year or longer for a new employee to reach the productivity level of a departed employee. 

Think about your current job.

How long did it take you to familiarise yourself with your organisation’s mission, customers, internal language and technology?

Then, how long did it take you to actually nail all of the above and really begin to excel?

You don’t just lose an extra pair of hands when someone leaves, you lose all of the expertise and momentum they’d built up, which gets stopped dead in its tracks and has to be rebuilt from the ground up with a new hire.

Impact on culture

Employee turnover breeds even more turnover.

Nobody likes to see their favourite coworker leave, and when someone goes, remaining employees tend to want to know why - and potentially follow suit.

People can take time to get fully comfortable working with each other, genuine bonds between employees aren’t built overnight.

Your company culture relies on these bonds between colleagues, and so you’ll want to keep turnover down if you don’t want your culture being diluted and remaining employees feeling marginalised.

Employee retention strategies

Hire the right people

Employee retention is often spoken as something to worry about after hiring someone.

But if you get your hiring right, you can actually make sure you hire people who will stay for longer.

Generally speaking, the more predictive your hiring is, the better, more dedicated candidates you’ll get.

Here at Applied, we hire ‘blind.’

This means no names and no CVs.

Instead, our behavioural science-backed assessment entails breaking down parts of the role and turning them into questions and case studies. Whats more predictive than getting candidates to do bits the job itself?

Aside from an improved quality of hire, organisations using our process have found that they see around a 96% retention rate after one year (compared to a national average of ~80% across the UK).

You can get the lowdown on our hiring process here.

When hiring for our own team, we make sure to test for mission and values fit, which are essential in determining whether or not someone is a good match for your organisation - a sure-fire indicator of whether or not they’ll stick around.

You can also ask candidates how comfortable they feel about your organisation’s structure, size etc. Since we’re a startup, we like to make sure potential hires are aware of what this entails.

Make sure you offer flexibility

Sometimes it isn’t dissatisfaction that makes someone leave, but outside factors or responsibilities that conflict with their work.

This is why it’s essential to offer flexible working options to all employees.

Whist you could just extend this to those who express their need for flexibility, some employees might not feel comfortable speaking up, so it's generally best to offer everyone the same benefits and working options.

Flexibility doesn’t just mean working from home.

You should also think about working hours - carers of parents of young children may need to work irregular hours, an option that your competitors probably aren’t offering!

Build your progression framework

Your employees want to feel like they’re going somewhere in your organisation.

To prevent your top talent from feeling as if they’ve ‘outgrown’ the company, you need to put a clear and detailed progression framework in place.

This should show employees exactly where they’re at, and the necessary steps to get to the next level.

Without this, employees who don’t feel comfortable asking for pay rises/ promotions might just take their chances elsewhere.

Your progression framework should also include training. According to Consumer Technology Association, high-skills training and professional development programs are the top benefits that employees want related to training.

Do you want your employees to feel like they can grow and progress with you, or do you want them to reap what they can and move on?

Send out feedback surveys

General happiness and satisfaction are less tangible than employee retention rate, but it can be measured.

We use Officevibe to keep tabs on general wellbeing.

Whilst it won’t tell you who’s going to leave and why you can get an idea of how employees are feeling at an aggregate level so that you can address any issues before they result in employee turnover.

Even if the results aren’t as you’d hoped, you should still consider sharing regular updates with the wider organisation.

Employees that aren’t happy will see that you’re aware of the problems and making an effort to correct them.

We built Applied to help organisations find the best talent using behavioural science. See how our process works via our resources or start a free trial of the platform to take it for a spin.