7 crucial factors influencing retention of employees. Easy way to calculate the retention rate.

Retention of employees is one the most important problems in human resources management just after the acquisition of talent. Difficulties related to staff fluctuation, globalization and opening of the labor market to foreign, remote workers influence retention of employees negatively. It is difficult to retain a talent in the company when the global labor market offers not only high salaries but additional benefits. Here it is worth to notify that the success of the company depends on its employees. This is the reason why the adequate personnel policy that keeps the retention rate high is so important. Let’s find out what are the major factors influencing retention of employees in the company.

7 crucial factors influencing retention of employees – table of content:

1. What is retention of employees?
2. What is the right level of retention rate?
3. Factors influencing retention of employees
4. Summary

What is retention of employees?

The term retention comes from the Latin world retention that means arrest, stoppage, hence the retention is the ability of the company to keep the employees in place – especially those qualified and skilled.

Employee retention rate is calculated according to the following formula:

Example: at the beginning of January of 2021 the company had 100 employees, then we check how many employees is hired in January 2022, and it is 82 employees. Note: newly appointed employees are not under consideration. The result is: 82:100= 0,82 x 100 = 82%

The retention rate between 2021 and 2022 is 82%. The calculation of the employee retention rate may be done for different intervals of time.

Employee retention rate is the main source of information about the number of loyal employees, who stay with the company for longer period of time.

What is the right level of retention rate?

In practice of human resources management it was never specified what level of retention rate is proper.There is no standard. Because the needs, culture, structure, and aims of the companies that are distinctively different and determined by the industry, organizational culture and external environment, it is impossible to set the level of retention rate. It is hard to assess if the employee retention rate of 90% is satisfactory. It is reasonable to set own, measured regularly, standards for retention.

High level of employee retention rate that stays stable in the subsequent periods of time indicates that employees are satisfied with the work conditions, salaries and their career paths, as well as that the offers that are available on the labor market are not as attractive to encourage them to leave.

In some situations high employee retention rate may indicate that individuals are happy with their work, they feel safe, but they are not necessary effective. Such phenomenon can be observed in the public employment sector, where employees work for many years at the same positions, accustomed to the safety (low risk of contract termination), forbearance of the supervisors, tolerance for frequent absences and unplanned holidays.

Unfortunately, what is frequent, the effectiveness and quality of work in such places is is low and the quality of work and effectiveness is alarmingly low. Here the employee retention rate as a measurement tool is not reliable. To avoid misjudgment rate or retention of employees should be measured in combination with effectiveness, productivity and employee satisfaction.

Factors influencing retention of employees

Factors influencing employee retention in the company are perceived differently by the employees and by the employers. The differences in perception concern usually the level of importance of such factors. Still, because the retention is closely related to the behavior of employees their opinion matters the most. Human resources practice identifies seven main factors that influence retention of employees and those are:

• Salary – the amount of salary cannot be different from the average amount offered by the market in the given industry
• Clear career path – fast pace of market development coupled with rapid development of new technologies forces constant improvement of skill. Training and professional growth are the basis for proper motivation of employees
• Trust – employees that trust their supervisors feel stronger allegiance with the company, sense of belonging and identify themselves with the organization
• Safety and employment stability – are the key aspects influencing level of work satisfaction
• Distance between the place of residence and workplace – employees value their time more than money, shorter commuting time, convenient access to the work location strengthens the bond between the employee and the company
• Interpersonal relations – closely connected to the organizational culture of the company. Positive relations help to develop a community and strengthen comfort of employees
• Low levels of stress – occupational stress is one of the most detrimental factors in the workplace, it influences the wellbeing of employees negatively and lowers the effectiveness of work

To create the right strategy of employee retention the key role is the knowledge of factors that motivate the employees to stay in the organization. The keep your employees in place provide good working conditions and take care of all factors that were discussed above.

Summary

Human resources management connected to the retention should be based on reliable analysis of employee satisfaction and effectiveness of work performance. The results of the analysis should give responses to at least three basic questions: What motivates the employees to stay with the company? What keeps them in place? Why employees decide to leave the company? All the information gathered allow to introduce the adequate retention policy.

It is worth to remember that salary is the most efficient motivational factor that keeps key employees in the organization. Maintenance of high level of retention rate is beneficial for company because it helps to save time and money needed for recruitment, as well as provides security of employment, better financial results and strengthening of the brand image.

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