Employee retention strategies: how to measure and improve retention

Retaining skilled professionals is smarter and more cost-effective than constantly replacing them. When people stay, teams keep their knowledge, managers spend less time hiring, and clients deal with familiar faces. Therefore, employee retention deserves the same attention as recruitment.

This guide explains what employee retention means, how to calculate your retention rate, and which employee retention strategies work in practice. It also shows how to turn those strategies into a programme that HR can run, measure and refine every quarter.

What is employee retention?

Employee retention is an organisation’s ability to keep its employees over time. It reflects how well hiring, management, pay and culture work together. In short, it answers one question: do the people you hired stay, stay engaged and keep growing?

Retention is not the same as turnover. Turnover counts who left, while retention counts who stayed. Both numbers matter. However, retention better reflects the long-term health of your culture and HR processes.

How to calculate your employee retention rate

To calculate your employee retention rate, divide the number of employees who stayed for the whole period by the headcount at the start of the period, then multiply by 100. Exclude anyone hired during the period, otherwise the rate looks better than it is.

In plain terms, the employee retention rate formula is: (employees who stayed ÷ employees at the start of the period) × 100. Most HR teams calculate it monthly, quarterly and yearly. They also break it down by department, manager and length of service to find specific turnover hotspots.

Period	Formula	Example
Monthly	(Stayers ÷ headcount at start) × 100	95 ÷ 100 = 95%
Quarterly	(Stayers ÷ headcount at start) × 100	88 ÷ 100 = 88%
Yearly	(Stayers ÷ headcount at start) × 100	82 ÷ 100 = 82%

Why employee retention matters

Employee retention directly affects costs, productivity and morale. Every departure brings recruitment costs, onboarding time and a period of lower output while the new hire learns the role. High turnover also damages trust within teams and slows down projects.

In contrast, strong retention keeps institutional knowledge inside the company. Experienced employees spot risks earlier, improve processes and mentor new colleagues. They also refer people from their own networks, which improves hiring quality. The pressure is real: in 2022, 52% of organisations in the Netherlands struggled to retain their employees, up from 21% the year before.

Seven employee retention strategies that work

The best employee retention strategies combine fair pay, growth, good management and clear structure. You do not need every tactic at once. Instead, choose the three or four that address your main reasons for turnover, and execute them well.

1. Start retention with smart selection

Retention begins during recruitment. Skills and experience matter, but so do values and the way someone likes to work. Teams that share expectations work better together and adapt more easily to change. In addition, hiring for transferable skills, such as analytical thinking, keeps people relevant as roles evolve.

2. Offer visible growth paths

Satisfaction today does not guarantee employee engagement tomorrow. Offer development through training, mentoring and internal mobility, and show how new skills lead to new responsibilities. When people can see their next step inside the company, they are less likely to look for it elsewhere.

3. Invest in managers and culture

The relationship with a direct manager often decides whether someone stays. Therefore, train managers in feedback, coaching and career conversations. Culture matters too, but it goes beyond team events. Flexible schedules, regular one-to-one check-ins and recognition tied to real results shape how people experience work every day.

4. Pay fairly and review pay every year

A well-timed raise can improve retention, especially when market rates rise. Benchmark salaries every year, and use transparent pay bands and promotion criteria. However, money rarely fixes poor management or a weak culture. Counter-offers made after a resignation often only delay the departure, so proactive pay reviews work better than reactive ones.

5. Create structure and clarity

Clear policies on training budgets, career paths and feedback make development fair and predictable. Regular check-ins between managers and employees help monitor progress and keep motivation high. Although this may feel administrative, structure builds trust because everyone knows what to expect.

6. Listen early with stay interviews and exit interviews

Exit interviews reveal what drives people away. However, by then it is too late for that employee. Stay interviews ask current employees what keeps them and what might make them leave. Together, both tools show where to focus your retention effort.

7. Let go when necessary

Retention does not mean holding on at any cost. Continuously trying to please an unhappy employee can create imbalance and resentment in the rest of the team. Moreover, one disengaged person can affect the morale of many. Smart retention strategies recognise when it is time to part ways respectfully.

How to build an employee retention programme

An employee retention programme links data, policy and culture into one system. Start by measuring your current retention rate. Next, find out why people actually leave. Finally, design targeted actions that respond to those reasons, and give each action a clear owner.

• Cover five pillars: pay, growth, management, wellbeing and recognition.
• Assign ownership: one person per pillar, so good ideas do not stall.
• Review every quarter: compare departments, managers and tenure groups to spot patterns early.
• Link to business goals: if you need senior engineers, invest in their growth first; if you need frontline staff, strengthen onboarding and coaching.

How Octagon supports employee retention

Octagon helps companies in the Netherlands and across Europe design retention strategies that fit their workforce. Our HR consultancy covers performance evaluation systems, benefit package advice and structured onboarding and offboarding. In addition, our payroll, employer of record and recruitment services remove administrative work, so internal HR teams can focus on culture and engagement.

We reduce the risks that undermine retention, such as inconsistent policies, compliance gaps and unclear career structures. You keep full control over pay, benefits and working arrangements, while we handle the complexity. To discuss your retention challenges, contact our HR consultancy team.

Frequently asked questions about employee retention

What is a good employee retention rate?

There is no single benchmark, because retention varies by sector, role and market conditions. Compare your rate with your own history and with similar teams inside the company. A falling rate in one department is often a more useful signal than a company-wide average.

How do you calculate employee retention rate quickly?

Take the number of employees who stayed for the whole period, divide it by the headcount at the start, and multiply by 100. Leave new hires out of the calculation. This gives you a clean percentage that you can compare over time.

What is the difference between retention and turnover?

Retention measures the share of employees who stay over a period. Turnover measures the share who leave. Both are useful. However, retention says more about whether your culture and HR processes keep people engaged over time.