What Your Employee Retention Rate Says About Your Company

The employee retention rate signifies an organization’s ability to keep its employees. The higher the rate, the more the company is successful in keeping the employees loyal, and vice versa. Naturally, the employee retention percentage says a lot about your company. And while it’s impossible to eliminate turnover, putting down more effective retention strategies can help you maintain a higher percentage of employees and establish a better reputation in the market.

Retention rate does not only help the organization cut down on employee turnover and employee attrition costs but also makes the business stand out as a reliable career option. This makes it easier for the company to work with the best team of skilled and expert professionals. Also, some industries are prone to lower retention rates than others – mainly because of lack of employee benefits such as a student loan payoff calculator, difficulty of work, and low wages – but maintaining a decent employee retention rate and reducing employee turnover can be of great value.

Keep reading to learn why.

Why is Employee Retention Important

Monitoring employee retention rate is crucial to find out the reasons for the increased turnover. Keeping a track can help an organization identify the disengaged employees and also figure out the reasons why. Employee retention is an imperative subject because the turnover costs can be wildly beyond the budget. According to a study, replacing an entry-level employee can cost 40% of their annual salary to the organization.

The surefire way to dismiss this expense is to improve retention strategies. Also, keeping a track would help the organization figure out the room for improvement.

Factors That Could Lead to a Higher Turnover Rate

Several factors could encourage an employee to quit and look for better opportunities. Here are the most common ones:

Low Morale

Failure in maintaining a great employee experience can lead to low employee morale. Compromised work culture is the leading cause of employee disengagement. If the organization isn’t able to boost the employee morale, it’s likely to motivate the employee look for new job opportunities.

Financial Insecurity

Every individual in the job market is here to earn – both money and experience. And the financial factor is undoubtedly the most significant when it comes to employee satisfaction. If an employee fails to meet his or her financial obligations, it is natural for them to look for job options with better financial benefits.

Financial insecurity can be very stressful for employees. In some cases, employees are ready to let go off of the other benefits if they’re not compensated fairly. Since every individual needs to earn enough for sustenance, financial insecurity can be a big reason why your employees decide to leave you.

Lack of Engagement

Engagement is another leading factor that’s directly associated with a high turnover rate. Employees who are disengaged feel unimportant. This affects their motivation to work and leads to low self-esteem and morale. Highly engaged employees are often more loyal to the organization as compared to those who feel lack of engagement.

Why Improving Retention Rate is Crucial

Numbers reflect the real position of an organization. Therefore, it is crucial to work on the numbers and improve retention rate. But instead of highlighting the benefits of improving retention rate, we will discuss about the costs that an organization has to bear if it fails to do so.

Here are just some of the major costs that add up if you have to replace your employees:

Hiring Process

It’s not just the lack of productivity where you’re losing the money when an employee quits. Factorize the cost and time that’s invested into finding and hiring the replacement. It’s not a one-off thing; it’s a whole procedure.

It starts with creating a job ad, publishing it to various forums, and then promoting it. Next comes the time that’s utilized in screening and interviewing potential candidates. And once the best ones have made the cut, you can decide and pick one. This entire process requires time, money, and resources.


Also consider the cost of training and onboarding your new hire. Providing quality onboarding experience is crucial as this too helps you reduce employee turnover in the long run.

Training can be a costly business for most organizations, especially for those with smaller budgets.

Productivity Dips

Poor employee retention rate does not only harm the productivity levels, but it is also going to be bad news for the entire team. In some cases, such events can lead to crippling consequences for the rest of the team members as well as for the overall workplace culture.

If a lot of your employees are leaving your company, it can create a sense of curiosity among other employees, leaving them confused if they should continue the trend. This can also affect the concept of team work and can make developing new relationships at work a tedious task.


All in all, it is important to understand that employee turnover is a blatant and serious problem, and underestimating the financial consequence is not an option. The growing turnover can put the organization on a constant curve of loss while also putting their integrity in question.