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Glossary: HR & Recruiting Definitions

What does employee retention mean?

Employee retention is considered an important element of recruitment and serves to maintain the attractiveness of the employer or company through promotional measures. It’s all about building a strong emotional bond, or loyalty, from employee to employer, which should secure employee commitment in the long term. Therefore, employee retention further helps contribute to achieving the company’s long term goals.

Employee retention is aimed at both acquired talent and talent that is yet to be recruited. It has a strong impact on the employer image and can be considered a sub-discipline of employer branding. 

Why is employee retention important?

The basic premise for actively and purposefully retaining employees is built on the hypothesis that employees who are happy and content at work will not consider changing jobs. Ideally, they also won’t be as receptive to active poaching attempts by other companies. 

In addition to these positives, content employees are often more motivated, and therefore more productive. As well as this, if employers manage to retain employees over a long period of time, they will benefit from a lower staff turnover rate. 

As long tenures are rare in today's workplace—especially within the fast-moving start-up scene—this, in turn, has a positive impact on the employer's image. It suggests that employees' expectations were met, or even exceeded, when they joined the company. This makes it much easier to attract more talent of a higher quality.

Benefits of successful employee retention

Retention measures offer high performers positive incentives to stay with a company. In addition to having a better employee retention rate, organisations may also benefit from:

  • Improvement of the employer image
  • Higher likelihood of recommendations/referrals
  • Reduced staff turnover
  • Resource savings in talent acquisition
  • Improvement of the working atmosphere
  • Increased productivity and employee engagement

What does employee retention entail?

How loyal employees are to a company depends primarily on how satisfied employees are with their choice of position and employer. Satisfaction is measured by how valued and supported employees feel within the organisation and is built on several criteria.

Criteria for employee satisfaction

In order to successfully retain employees, these points, in particular, must be ensured to a degree that is satisfactory for employees:

Fulfilment of expectations and needs: The signing of the employment contract is accompanied by certain expectations and desires on both sides. If employers stand by their word and meet or exceed these, the foundation for good employee retention is laid. However, this alone is not enough.

Attractive working conditions: An appealing work environment, good organisation strategies, a positive culture and attractive working conditions provide the basic attractiveness of the workplace. A sense of belonging should also not be overlooked.

Offering fringe benefits: Whether it’s free meals, sports and health offers, flexible working hours, or support with childcare, offering additional benefits that make life easier for employees helps employee retention. Meeting their needs expresses goodwill and appreciation, which employees expect for their loyalty.

Availability of progression opportunities: The changing world of work constantly creates new areas of responsibility, which can overwhelm employees. However, if they are appropriately supported to grow into new areas of responsibility and to be able to develop profitably, they are much more willing to actively engage in the goals of their company and to drive their achievement.

Who is responsible for employee retention?

Both HR managers and leaders within departments and teams are responsible for identifying and initiating appropriate measures to strengthen employee retention.

Since they work with the same people on a daily basis, leaders usually recognise declines in employee satisfaction much earlier than HR managers and can thus initiate improvements in a more targeted and needs-based manner.

How can employee retention be improved?

Companies that want to improve their employee retention should focus on these four measures:

Define goals

Firstly, a company should be clear about how it wants to be perceived externally. This vision should then guide all conceivable employee retention measures.

Conduct employee satisfaction surveys

Employee satisfaction enables conclusions to be drawn about the likelihood of upcoming job changes. For this reason, regular and anonymous surveys and feedback from employees are a good indicator of the need for retention measures. 

Take collective and individual action

The reasons for employee dissatisfaction can vary massively. In order to facilitate employee retention across the board, measures should be tailored to individual employees (e.g. promotion or sabbatical), teams (e.g. team events or feedback rounds) or the entire workforce (e.g. more holiday allowance).

Monitoring success

Employee retention rate provides information on the success of the measures mentioned above. This can be determined monthly, quarterly or annually depending on your organisation's size and goals. 

The repetition and evaluation of surveys should also be used to monitor success. Higher satisfaction should also result in a higher retention rate. If this is not the case, improvements may have to be made.

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