What is Employee Retention?
Employee retention is the organizational ability to keep employees and reduce voluntary turnover. It is typically measured as a rate: the percentage of employees who remain with the company over a defined period, usually one year.
In more detail
Retention matters because turnover is expensive. SHRM and the Work Institute have estimated replacement costs at 50% to 200% of annual salary depending on role seniority. High retention compounds: institutional knowledge builds, client relationships deepen, and recruiting spend shrinks.
Drivers of retention include compensation, career development, manager quality, work-life balance, culture, and recognition. The US Bureau of Labor Statistics publishes quits rates through JOLTS, a key macro indicator. For offshore teams, retention often runs higher than US benchmarks when the provider offers local market-competitive compensation and benefits.
How it works
- Measure annualized retention rate (active at end / active at start).
- Conduct stay interviews to surface risks early.
- Benchmark compensation quarterly.
- Invest in manager training (biggest single lever).
- Offer growth paths and internal mobility.
- Run structured exit interviews to learn from leavers.
Related terms
Mini FAQ
Varies by industry. 85-90% annual retention is strong for most roles; retail and hospitality run much lower.
Manager quality is the number one driver in most research. Compensation is often second. Growth opportunity is third.
With competitive local pay and benefits, managed offshore teams often retain better than US equivalents.