What is Employee Retention?

Employee retention refers to an organisation’s ability to keep its employees over a specified period. It’s not just a HR metric — it’s a strategic business imperative. While turnover indicates the rate at which employees leave, retention reflects the effectiveness of an organisation in creating an environment where people want to stay. In other words, if you’re asking “what is employee retention?” or looking for an employee retention definition, it’s about maintaining a stable, engaged workforce over time.

The modern retention landscape has evolved. Post-pandemic realities, hybrid work structures, rising employee expectations, and economic uncertainty have fundamentally shifted how people engage with work. Talent is more mobile, values-driven, and discerning than ever before.

According to CIPD, the average  employee retention rate in the UK is 34%, with 27.4% moving to new employers and 6.6% not working a year later. Furthermore, the average cost of replacing an employee in the UK is over £30,000. This includes lost productivity, recruitment, onboarding, and training costs. More importantly, turnover disrupts team morale, weakens culture, and hinders long-term performance.

This article explores why retention has become more challenging, how to measure and improve it, and what organisations can do, practically and strategically to keep their best people.

Why Retaining Talent Is Getting Harder

Generational Shifts

Millennials and Gen Z now dominate the workforce. Unlike previous generations, they expect purpose-driven work, flexible environments, and clear growth opportunities. They’re more willing to switch jobs if their current employer doesn’t align with their personal values or career aspirations.

Burnout and Wellbeing

Employee burnout has become a widespread issue, exacerbated by blurred work-life boundaries and constant digital connectivity. Without proactive wellbeing support, burnout leads to disengagement and eventual departure.

Lack of Progression

One of the top reasons people leave jobs is the absence of clear career paths. Stagnation breeds dissatisfaction. Employees need to see a future with their employer — one that includes development, challenge, and upward mobility. According to LinkedIn, 94% of employees would stay longer at a company that invests in their learning and development.

The Real Cost of High Turnover

Turnover isn’t just a people problem, it’s a performance problem.

Here’s why:

• Productivity loss: Departing employees take institutional knowledge with them, disrupting workflows and slowing progress.
• Recruitment & training costs: Hiring and onboarding new employees is time-consuming and expensive.
• Cultural disruption: High churn weakens team cohesion and erodes trust.
• Reputational damage: Organisations with poor retention struggle to attract top talent.

Measuring Employee Retention: Metrics Should Track

To build a strategy around employee retention, organisations need to start with clear, data-driven insights. Yet, surprisingly few do — according to CIPD, only 17% of employers calculate the cost of labour turnover, and just 12% collect data to evaluate and improve retention initiatives. This presents a huge opportunity for competitive advantage.

Understanding Retention vs Turnover

Employee retention rate and employee turnover rate are often discussed interchangeably, but they measure opposite sides of the same workforce coin:

• Turnover rate reflects how many employees leave during a specific period.
• Retention rate shows how many employees stay during that same timeframe.

Analysing both gives a fuller picture of workforce stability, culture, and the effectiveness of your people strategy.

Explore: What Is People Management? How to Manage Difficult People Effectively

How to Calculate Employee Turnover Rate

Example: If 34 out of 100 employees leave over 12 months, the employee turnover rate is 34% — aligning with the current UK average.

• Of this, 27.4% move to new employers
• 6.6% are not working one year later (e.g., due to retirement, sabbaticals, or unemployment

Retention and turnover are two sides of the same coin. Understanding both gives a clearer picture of workforce stability.

How to Calculate Employee Retention Rate

Using the same example, a 34% turnover rate means the employee retention rate is 66%. This is significantly below the healthy benchmark of 85–90%, which high-performing organisations typically aim for.

Why This Is Important

• Cost of Replacement: Replacing an employee can cost up to £30,000, including recruitment, onboarding, and lost productivity (Oxford Economics).
• Productivity and Culture: High turnover undermines team cohesion, causes disruption, and can damage morale.
• Benchmarking: Regularly compare your figures against industry norms to identify problem areas and opportunities to improve.

Whether you’re trying to reduce attrition or improve long-term engagement, tracking both retention and turnover rates gives you the foundation for smarter workforce planning.

Key Retention Metrics to Track

Tracking a variety of data points gives HR teams a more nuanced understanding of employee retention challenges and opportunities. Here are the key metrics to monitor:

• L&D Participation and Application: Track who is engaging with training opportunities and how they apply new skills on the job. Low uptake might signal a lack of awareness or misalignment with employee needs. High participation can correlate with stronger retention and internal promotion rates.
• Voluntary and Involuntary Turnover: Break down your turnover data to distinguish between employees who leave by choice and those whose departures are employer-driven. High voluntary turnover may signal cultural or engagement issues, while high involuntary turnover can point to hiring mismatches or poor performance management.
• Average Tenure: This metric reflects the typical length of time employees stay with your organisation. A short average tenure may indicate issues with onboarding, engagement, or career development. Compare across departments, roles, and demographics for deeper insight.
• Internal Mobility Rate: Internal promotions and lateral moves show whether employees have room to grow within the business. A low mobility rate may highlight a lack of career progression or transparent internal recruitment practices.
• Engagement Scores: Use survey data to gauge how connected employees feel to their roles, teams, and the organisation. Low engagement is often a precursor to attrition, especially if feedback isn’t acted upon.
• Exit Interview Themes: Analysing the common reasons cited during exit interviews can uncover recurring pain points. Are people leaving due to poor management, lack of development, or work-life balance issues? Turning qualitative feedback into actionable insights is key.

Explore: People Analytics and HR Data: A Guide for Modern HR Teams

What Drives Employee Retention

Career Development and Upskilling

According to LinkedIn’s Workplace Learning Report, 94% of employees say they would stay at a company longer if it invested in their learning and development. Career stagnation is one of the most common reasons people start looking elsewhere.

Ways to support this:

• Offer accredited training such as CIPD qualifications
• Provide leadership coaching and mentorship schemes
• Build personal development plans and track progression
• Encourage participation in cross-functional projects

When employees see a clear path forward and feel that their employer supports their growth, loyalty follows.

Flexible Work and Autonomy

Flexibility has shifted from a perk to a basic expectation. A report by McKinsey found that 52% of employees would prefer a more flexible working model post-pandemic, and many cite lack of flexibility as a deal-breaker.

Done right, flexible work leads to:

• Higher job satisfaction
• Improved work-life balance
• Increased productivity
• Greater trust between employees and managers

However, flexibility must be accompanied by clear communication, inclusion efforts, and performance clarity to avoid creating silos or inequality.

Leadership and Culture

Leadership behaviour shapes the employee experience. Gallup research shows that 70% of the variance in team engagement is determined solely by the manager.

Key traits of retention-friendly leadership:

• Active listening and empathy
• Transparent decision-making
• Recognition and feedback
• Inclusion and psychological safety

Toxic cultures and micromanagement are among the top causes of voluntary turnover. Building a culture rooted in respect, inclusion, and shared values is foundational.

Fair Pay and Meaningful Benefits

While pay is rarely the only factor behind departures, perceived pay inequity or lack of benefits can erode trust. Benefits that support life outside work — such as mental health support, flexible leave, and L&D stipends — have growing appeal.

Key practices:

• Conduct regular salary benchmarking and pay equity audits
• Communicate the full value of your reward package
• Tailor benefits to meet diverse employee needs (e.g., parental leave, mental health resources, financial wellbeing tools)

Ultimately, retention is driven by the cumulative effect of how employees are treated, developed, and supported.

Explore: What Is Employee Engagement and How to Improve It?

7 Strategies to Improve Retention

Retention isn’t achieved through a single initiative — it requires a layered, consistent approach across the employee lifecycle. Here are seven practical, evidence-based employee retention strategies to help you reduce turnover and build a more loyal workforce:

1. Conduct Stay Interviews

Rather than waiting for exit interviews, use stay interviews to proactively uncover what motivates employees to stay and what might prompt them to leave. Conduct these conversations informally and periodically, focusing on questions like:

• What do you enjoy most about your role?
• What would make your job more satisfying?
• Have you ever thought about leaving? If so, what triggered it?

Action Tip: Document themes and trends, and act visibly on feedback to build trust.

2. Offer CIPD-Aligned Training Programmes

Learning and development is a top driver of engagement. CIPD-accredited training not only boosts individual capabilities but signals long-term investment in employees’ careers. This is particularly valued by HR and L&D professionals looking to futureproof their roles.

Action Tip:

• Publicise success stories from staff who have advanced through training
• Embed learning goals in performance reviews
• Offer a mix of on-demand and cohort-based learning

3. Build Clear Career Pathways

Ambiguity around progression can lead to disengagement. Transparent career frameworks allow employees to understand how they can grow within the organisation.

Action Tip:

• Develop role matrices with defined competencies
• Conduct regular career development conversations
• Provide internal mentorship or sponsorship opportunities

4. Improve Internal Mobility

Employees are more likely to stay if they can change roles without leaving the company. Internal mobility supports both career development and organisational agility.

Action Tip:

• Advertise all roles internally before external posting
• Encourage cross-departmental secondments or projects
• Build an internal talent marketplace platform or system

5. Recognise Achievements Regularly

Recognition, when done consistently and authentically, significantly boosts morale. It doesn’t always need to be financial — verbal appreciation, awards, or peer-nominated acknowledgements can be equally powerful.

Action Tip:

• Tie recognition to values and behaviours, not just output
• Create a recognition programme with monthly or quarterly highlights
• Encourage peer-to-peer shoutouts

6. Prioritise Wellbeing and Mental Health

CIPD Wellbeing report found that 76% of HR professionals cite employee wellbeing as a top priority. Employees who feel mentally and physically well are more engaged and less likely to leave.

Action Tip:

• Offer flexible working policies that support life commitments
• Provide mental health first aiders or access to counselling
• Run regular wellbeing surveys to measure impact and adapt initiatives

7. Train Managers in Coaching and Empathy

Managers play a critical role in influencing retention. Equipping them with coaching skills, emotional intelligence, and inclusive leadership tools empowers them to create high-trust, high-performance environments.

Action Tip:

• Include soft skills training in management development programmes
• Pair new managers with experienced mentors
• Regularly assess management effectiveness through feedback and performance data

These employee retention tactics not only reduce turnover but improve engagement and productivity across the board.

Explore: Talent Management: Strategies, Systems & Solutions for HR Leaders

Retention Tactics for Specific Challenges

Retention challenges often vary depending on company size, workforce demographics, or organisational context. Here are targeted tactics tailored to common scenarios:

Small Businesses on a Budget

Small businesses can offer creative employee retention bonuses like extra holidays, learning credits, or flexible hours. These non-traditional rewards are often more meaningful than cash incentives.

Actionable tactics:

• Flexible Scheduling: Allow personalised work hours or hybrid setups
• Skill-sharing opportunities: Create peer learning sessions and internal mentoring
• Transparent communication: Make employees feel heard and involved in decisions
• Low-cost recognition: Use thank-you cards, team shoutouts, or leadership spotlights to celebrate wins

Gen Z and Millennial Retention

These generations crave meaning, flexibility, and rapid development. According to Deloitte, 49% of Gen Z and 44% of millennials plan to leave their jobs within two years if they feel undervalued.

Actionable tactics:

• Offer purpose-led projects aligned with social or community impact
• Deliver regular feedback through micro check-ins
• Provide digital-first learning tools to suit their preferred formats
• Launch reverse mentoring programmes to encourage cross-generational knowledge exchange

Retaining High Performers

Top talent has high expectations and multiple opportunities. Retaining them requires proactive engagement.

Actionable tactics:

• Provide stretch assignments to challenge and engage
• Create individual development plans (IDPs) with defined growth timelines
• Involve them in strategic projects to build influence and visibility
• Offer succession planning discussions to show long-term commitment

During Organisational Change

Mergers, restructures, or leadership changes can spark anxiety and attrition.

Actionable tactics:

• Communicate early and transparently about changes, timelines, and impacts
• Reinforce organisational values to provide stability
• Engage team leaders as change champions to cascade key messages
• Create forums for two-way dialogue where employees can ask questions or voice concerns

The Role of Onboarding

An employee’s first impression often sets the tone for their tenure. Effective onboarding boosts retention and engagement from day one.

Actionable tactics:

• Build a structured 30/60/90-day plan with goals, support, and milestones
• Assign onboarding buddies for cultural integration
• Gather feedback after onboarding to continuously improve the process
• Introduce L&D opportunities early to signal investment in their future

Retention Is a Strategy, Not a Perk

To summarise, define employee retention as the conscious effort to keep talent engaged and committed. Using the right employee retention strategies and metrics like the employee retention rate formula, your organisation can reduce turnover and strengthen its workforce foundation.

Ready to futureproof your team? Explore Avado’s CIPD courses and start building a culture people want to stay in.

• CIPD Level 3: The CIPD Level 3 Certificate in People Practice is ideal for anyone looking to start a career in either HR or Learning and Development.
• CIPD Level 5: The CIPD Level 5 Associate Diploma in People Management will help you build on your existing HR knowledge.
• CIPD Level 5 L&D: The CIPD Level 5 Diploma in Organisational Learning and Development is the most comprehensive course available for L&D professionals, ideal for you if you want to formalise your existing experience, skills and knowledge.
• CIPD Level 7: The CIPD Level 7 Advanced Diploma is aimed at expanding learners’ autonomy so they can strategically direct organisations and their people.