Why employee retention matters (and how to improve it)

Hiring the right person takes time, money and effort. But if they leave a few months later, you are left repeating the same process. Keeping great people is just as important as finding them, and that’s where employee retention comes in.

In this blog, we look at what employee retention really means, how to measure it, why it matters, and what you can do to improve it in your business.

What is employee retention?

Employee retention is the ability of a business to keep its employees for a long period of time. It means creating a positive work environment where people feel happy, valued, and motivated to stay, rather than leaving for another job.

Strong employee retention is often a sign that your business is doing the right things to support its people. It usually means staff feel trusted, challenged and encouraged to develop. On the other hand, if you're losing people quickly, it could point to deeper problems like unclear progression, lack of support or poor management.

Getting this right means looking at your entire employee experience. Not just salaries and benefits, but how people are treated day to day. When you create a workplace where people feel heard and valued, retention tends to follow.

How to measure employee retention and turnover

If you want to improve how you retain employees, you need to know where you stand. Tracking the right metrics gives you a clear picture of what’s happening in your business and where you might need to take action.

From the numbers to watch to the cost of losing people, these indicators can help you understand the real impact of employee movement.

Retention rate

Your retention rate tells you what percentage of employees have stayed with your business over a set period. It’s a simple measure, but it can reveal a lot about how stable and supportive your working environment is.

A high retention rate suggests that people are engaged, feel valued and see a future with your company. A low rate might mean there are issues that need attention, such as poor onboarding, lack of development opportunities, or unaddressed dissatisfaction. Keeping an eye on this figure can help you catch problems early.

It’s worth reviewing your retention rate regularly. Comparing it across departments, job levels or timeframes can reveal patterns and make it easier to set realistic improvement goals.

How to calculate retention rate

Here’s the formula:

(Number of employees who stayed ÷ Number of employees at the start of the period) × 100

For example, if you began the year with 80 employees and 68 are still with you at the end, your retention rate is 85%. This is a useful benchmark for internal planning and comparing against industry standards.

Turnover rate

Turnover rate tracks how many employees have left your company during a given time period. Unlike retention rate, this focuses on exits – both voluntary and involuntary.

It’s important to look at both types separately. Voluntary turnover shows how often people choose to leave, which could point to deeper issues. Involuntary turnover includes dismissals or redundancies, which may highlight hiring problems or changes in business needs.

A rising turnover rate doesn’t always mean there’s a major issue, but it should prompt you to investigate what’s causing people to leave and whether it could be avoided.

How to calculate turnover rate

The formula is:

(Number of leavers ÷ Average number of employees) × 100

So, if 12 people leave in a year and your average headcount was 100, your turnover rate is 12%. That number becomes even more useful when you break it down by team, seniority or tenure.

Turnover cost

Every person who leaves your company creates a cost. And it’s often more than people expect. Turnover doesn’t just affect recruitment budgets – it impacts time, productivity and team stability too.

Some of these costs are visible, like advertising jobs or using a recruitment agency. Others are hidden, such as training time, loss of knowledge, and disruption to your team’s workload. The longer a role stays unfilled, the greater the cost tends to be.

Understanding the cost of turnover helps make the case for investing in better onboarding, development or employee engagement. Retention-focused initiatives often save money in the long run.

How to calculate turnover cost

There’s no one formula, but here’s what you should include:

• Recruitment spend (ads, job boards, agency fees)

• Internal hiring time (HR, managers, interviewers)

• Training and onboarding time

• Lost productivity while the role is vacant

• Costs associated with mistakes or delays during the transition

You don’t need to get it down to the penny. Even a rough estimate can help you see the bigger picture and plan your budgets more effectively.

Identifying trends and red flags

Numbers alone don’t tell the whole story. To get real insight, you need to spot patterns and link them to what’s happening inside your business.

Are more people leaving after probation? Are exits higher in certain teams or at certain times of year? Are you losing top performers more often than others? These are the kinds of trends that deserve attention.

You can also compare internal data with external benchmarks. If your turnover is much higher than average in your industry or region, that could point to issues in how you attract, support or manage people. Regularly reviewing this data helps you stay ahead of problems before they affect performance.

Why employee retention matters

You’ve measured where you are. Now it’s time to understand why this matters beyond just the numbers. 

In this section, we’ll look at the real business impact of employee retention. If you want to reduce turnover and build a stronger, more resilient workforce, these are the reasons to make it a clear priority.

Reduces costs and improves efficiency

Every time someone leaves your business, it costs you time and money. Recruiting, onboarding and training new staff all take up resources. In some roles, it can take months before a new hire reaches full productivity.

When people stay longer, you save on repeated hiring and reduce the time spent on training replacements. You also avoid the disruption that comes from staff turnover. Teams can stay focused on delivering work, rather than constantly adjusting to new starters or stretched workloads.

Retention doesn’t just cut costs. It helps create smoother processes, clearer communication, and more consistent results across the business.

Maintains continuity and boosts productivity

When someone leaves, their knowledge goes with them. Projects slow down, handovers are rushed, and teams have to pause to reset. That has a knock-on effect on performance, timelines and even customer satisfaction.

On the other hand, when people stay, they become more efficient and more confident in their roles. They’re quicker to solve problems, better at collaborating, and more likely to share knowledge with others. The whole business benefits from that continuity.

Long-serving employees often step into mentoring or leadership roles too, which helps new team members settle in faster and lifts overall performance.

Strengthens your employer brand

Your employer brand is shaped by how people inside and outside your company talk about you. If your current team speak positively about their experience, that carries weight. It builds trust with candidates and reassures clients.

Retention plays a big role in this. High turnover makes people wonder what’s going wrong. But if people stay and grow with you, it shows that your business is a place where people feel supported.

A strong employer brand also makes hiring easier. Candidates are more likely to apply and accept offers if they believe they’re joining a company that invests in its people.

Read more: ​​How to create a strong employer brand

Builds a strong company culture

Culture isn’t just values on a poster. It’s how your people work, communicate and support each other. That kind of culture takes time to develop, and it doesn’t stick if your workforce keeps changing.

When people stay longer, they build stronger relationships. They understand your company’s ways of working and contribute to a shared sense of purpose. This makes it easier to align around goals and keep standards high.

High retention helps you shape your culture intentionally, rather than having it shift depending on who joins or leaves.

Improves client experience

Your clients don’t just buy a product or service — they buy into the people behind it. When your team changes often, it disrupts those relationships. Clients have to explain things more than once, adapt to new ways of working, and deal with delays.

When you retain employees, clients benefit from consistency. They get to work with people who understand their needs, remember the details, and keep things moving without gaps. That leads to better results and stronger long-term partnerships.

It also helps with reputation. Clients talk to each other. If they know your team is stable and professional, they’re more likely to refer others to your business.

Supports long-term growth and business success

It’s hard to scale a business when your teams are constantly changing. High retention makes it easier to plan ahead, invest in people, and build towards long-term goals.

People who stay with you develop deeper knowledge and take on more responsibility. They help train new team members, step into leadership roles, and keep your business moving forward. That level of experience is hard to replace.

If you’re serious about sustainable growth, employee retention needs to be part of the plan. It’s not just about who you hire. It’s about how you keep them.

How to improve employee retention

Knowing why retention matters is only part of the puzzle. The next step is making real changes that help people stay. This isn’t about big, expensive perks. It’s about clear plans, honest feedback, and a working environment where people want to stick around.

In this section, we’ll look at simple, effective ways to improve how you retain employees. These are steps you can take whether you're managing a small team or leading a growing business.

Build a clear retention strategy

If you don’t have a plan, it’s hard to make progress. A retention strategy helps you define what success looks like, what’s driving people to leave, and what actions to take to stop it happening.

Start by reviewing your data. Where are you losing people? At what stage? Why? Use that information to build goals that are focused and realistic. Your strategy might include better onboarding, manager training, or changes to career development.

Once you have a plan, share it. Make sure your leadership team understands the goals and knows what part they play. Regular check-ins help you stay on track and measure impact over time.

Read more: 8 effective employee retention strategies

Understand why employees leave

Don’t wait for someone to resign to ask what’s gone wrong. You need to get ahead of the issue by listening early and often. The more you understand what’s driving decisions to leave, the easier it is to stop it happening again.

Start by making exit interviews part of your process. But don’t stop there. Run regular surveys or stay interviews to find out what your current employees are thinking. Keep it simple and focused. Ask what’s going well, what could be better, and what might make them think about leaving.

The aim isn’t to fix every issue overnight, but to spot the common themes and take them seriously. Even small changes can make people feel heard and supported.

Use data to guide decisions

Retention is emotional, but the best decisions are backed by facts. Data helps you see what’s really going on and which actions are working.

Track basic metrics like turnover, absenteeism and progression. Break this down by department, tenure or role type. Look for patterns. For example, are new hires leaving after a few months? Are high performers getting overlooked for development?

You can also link your HR data to feedback surveys or performance reviews to get a fuller picture. When you act on the insights, let people know. It shows that their input makes a difference and helps build trust.

Involve your managers in the process

Managers have a big influence on retention. Often, it’s not the company people leave — it’s their manager. That’s why involving your managers is essential if you want your teams to stay.

Make sure your managers understand that retention is part of their role. Provide training to help them spot early warning signs, give feedback, and support team development. Encourage regular one-to-one conversations that go beyond just work tasks.

When managers feel supported themselves, they’re better equipped to support others. That creates a stronger connection between your leadership and your employees, which is key to long-term retention.

Revisit your employee value proposition (EVP)

What you offer your employees needs to reflect what they actually want. If your EVP hasn’t changed in a while, it might not match how people work today.

An effective EVP isn’t just about salary or holiday allowance. It’s about flexibility, development, culture and purpose. Speak to your teams and find out what matters most. Then make sure your offer is clear, fair and easy to access.

Keep your EVP visible too. Use it in recruitment, onboarding, and internal comms. When people know what’s on offer and feel it aligns with their goals, they’re more likely to stay.

Read more: (EVP) - Why it matters & how to improve yours?

Employee retention isn’t just about keeping people for longer. It’s about reducing disruption, protecting your employer brand, and building a stronger business. From measuring turnover to understanding why people leave, the steps you take now can make a lasting difference.

As a specialist recruitment agency, we help businesses attract and retain the right people for the long term. Submit your vacancy and start building a team that stays.