Average Employee Retention Rate: How You Can Increase Your Rate

5 Recommendations To Keep Your Employee Retention Rate High

Employers can improve their employee retention rate by taking five specific recommendations to heart.


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Do you still work for your first employer? Probably not. In fact, the Bureau of Labor Statistics reports that the average person has been at their job for 4.2 years. In other words, while some people stay for a long time, turnover is real and expected. Many businesses worry about their employee retention rate, as turnover can be expensive.

The employee retention rate is not the same across all industries. You’d expect that a university that offers tenure to professors has a higher retention rate than the local McDonald’s, which is often considered a starter job. People will come and go from both jobs but not at the same rate.

How Do You Calculate the Employee Retention Rate?

Retention is how many employees stay under your employment. Frequently, Human Resources professionals talk about turnover, i.e. how many employees leave their employment with you. If you have 100 employees and 5 quit, you have a turnover rate of 5% (5/100) and a retention rate of 95% (95/100).

Salary.com reported that in 2018 (downloadable pdf), the total retention rate for all industries was 80.7% which includes voluntary and involuntary terminations. This means that 19.3% of people left a job in 2018, for whatever reason. Most of these were voluntary terminations, with 14% of people choosing to leave their job.

Employee Retention Rate by Industry

Retention rates vary by industry, which is expected. Salary.com found the following employee retention rates:

Banking & Finance: 83.3%

Healthcare: 79.6%

Hospitality: 69.2%

Insurance: 87.2%

Manufacturing & Distribution: 80%

Not-for-Profit: 82.5%

Services: 82.8%

Utilities: 89.7%

Is a Low Employee Retention Rate Bad?

Naturally, companies want to minimize their turnover, as it is quite expensive to replace employees. Employers need to recruit and train every new employee before they can start working as efficiently as the previous person. For some jobs, this training period is brief, but for others, you can expect a long period of six months or more before the new hire performs at an acceptable level.

This, however, does not mean that all turnover is bad. You don’t want your business to remain static; and new people bring new ideas. Additionally, if your industry relies a lot on low-skilled (and thus, low paid) labor, when employees leave, it might mean you have successfully trained them for positions in which they will earn more money.

While this can take a toll on your business, employees moving up into better-paying jobs is great for those individuals and the community at large.

Is a High Employee Retention Rate Good? 

It depends. High employee retention rates can also indicate that your employees are stuck in their jobs. Stagnation can happen when the economy is bad—-there are no other jobs to go to—so employees stay with the company, regardless of their engagement level. As the economy improves, people will leave for better jobs.                                                 

This type of turnover is bad for your business—the first people out the door tend to be the employees who have the best skill sets and who are the most in demand by other employers.

How Can You Keep Your Employee Retention Rate High?

Given the dire consequence of losing your best employees whenever labor markets rebound, you’re probably wondering, how you can keep your employee retention rate high? Organizations with high employee retention rates have best practices that you can apply in your own organization.

These are five key recommendations you can implement to increase your employee retention.

Offer a competitive salary and benefits.

Never assume that because your pay and benefits were fair three years ago that your pay is fair now. This is especially true in expanding industries such as software development and nursing or in cities that are experiencing growth.

You should benchmark your jobs against the market every year and make sure that you pay your employees market rates. As a portion of a complete compensation package, employees also appreciate access to bonuses, profit sharing, activities, and events.

Train your managers.

You’ve heard the saying that people don’t leave jobs, they leave managers. This is true; even though other circumstances such as feeling properly compensated may also affect employee decisions more.

Make sure your managers are well trained in not only management techniques such as effective communication and soft skills but also in employment law. You don’t want to lose employees because they are reporting to bad managers.

Provide growth opportunities.

Most people aren’t happy doing the same job for their entire lives. They want to grow in their careers and earn more money and have more responsibility. If you promote people from within your organization and provide opportunities such as transfers and lateral moves, people can feel confident staying with your company.

This is critically important because the 2017 Society for Human Resources Management Employee Job Satisfaction and Engagement survey pinpointed aspects of employee growth and development amongst five of the top issues contributing to employee job satisfaction.                                                                      

Take employee suggestions seriously. 

Ask your employees for feedback and listen to what they say. If they tell you about a problem, ignore it at your own risk. They expect you to fix whatever is broken. Or, they expect a rational explanation for why the problem is not fixable and a chance to make improvements.

Respond to all complaints of bullying, harassment, and other legal violations promptly and properly. Seek legal assistance and advice when necessary.

Your employees should know how to report bad behavior and they should know that you’ll take care of the behavior if they do. If you ignore sexual harassment complaints, for instance, people will quit rather than tell you about problems. If you ignore bullying, people will quit to escape from their tormenter.

The Bottom Line

Employee retention is important for every business to understand. Understand what your employee retention rate is and how your rate compares to others in your industry and your region. If your employee retention rate is below average, work to fix it. Your employees and your bottom line will both benefit.