Hiring’s hard enough, but keeping great people? That’s a whole other challenge. If you’ve ever watched a talented employee hand in their notice just as they were getting into their stride, you’ll know how disruptive it can be. That’s where employee retention comes into play – not just as an HR box to tick, but as something that can make a real difference to your business’s stability, culture, and bottom line.
Especially for small and medium-sized businesses in the UK, holding on to good people can make or break your momentum. Recruitment costs are high, onboarding takes time, and when someone leaves, it’s not just their skills you lose; it’s their knowledge, their relationships, and their rhythm with the rest of the team.
What is employees retention, really?
It’s not just about who’s still showing up to work on Monday. Employee retention is about creating the kind of workplace where people want to stay. It’s how well you’re able to keep your team engaged, supported, and progressing, so they don’t start browsing job boards on their lunch break.
What fascinates me is how retention tells a deeper story. If people are leaving, there’s usually a reason – poor management, lack of opportunity, burnout. But if they’re staying, thriving, and recommending your company to their friends? You’ve built something worth holding onto.
How do you calculate employee retention rate?
Let’s get practical. If you’re wondering how do you calculate employee retention rate, it’s pretty straightforward. Take the number of employees you had at the end of a set period (say, a year), divide it by the number you had at the start of that period, and multiply by 100. That gives you a percentage: your retention rate.
So if you started the year with 50 people and ended with 45, you’re looking at a 90% retention rate. Not bad. Keep in mind, industry averages vary: turnover in hospitality and retail is naturally higher, while sectors like finance and public admin tend to see more stability.
One thing worth pointing out here is that retention rate doesn’t account for internal churn. A company might start and end the year with the same headcount, but if half the staff left and were replaced during that time, it would still show a high retention rate, even though the team dynamic has completely shifted.
That’s where staff turnover comes in. Turnover measures how many people actually leave during a given time, regardless of whether you replace them. So while retention tells you who stayed, turnover reveals the movement and instability underneath. The two metrics are often misunderstood or lumped together, but they tell very different stories.
Why is employee retention important?
If you’ve ever had to recruit in a hurry, you already know why is employee retention important. Replacing just one employee can cost upwards of £30,000 – and that’s not even factoring in lost productivity, morale dips, or the time it takes for a new hire to get up to speed. Some research even pegs the cost at up to twice a person’s annual salary.
Beyond money, there’s continuity. Long-standing employees hold valuable knowledge about your business, your clients, and how things get done. When they stay, so does that knowledge. They also tend to collaborate better, mentor newer team members, and keep your company culture grounded.
And don’t underestimate the power of reputation. Businesses with high retention rates are naturally more attractive to job seekers. If your team is sticking around, word gets out that you’re doing something right.
So – how to increase employee retention?
There’s no one-size-fits-all, but I’ve found that listening is a good place to start. Employees aren’t just motivated by salary (though let’s be honest, that helps). They want growth, flexibility, recognition, and a sense that their work matters.
Here are a few ideas that actually work:
- Flexible working: The shift towards hybrid and remote work isn’t going anywhere. Offering flexibility shows trust, and trust builds loyalty.
- Career development: People don’t leave jobs; they leave jobs that go nowhere. Think mentoring, internal promotions, and paid training.
- Strong leadership: Managers set the tone. Invest in leadership training that focuses on empathy, communication, and support.
- Recognition: It’s amazing how far a simple thank-you can go. Tailor rewards to what your team actually values (and don’t assume it’s always money).
- Workplace culture: Inclusive, supportive environments are essential. Culture is often the deciding factor when people consider whether to stay or go.
And let’s not forget onboarding. The first few weeks in a job shape someone’s entire experience. A thoughtful, well-paced welcome can dramatically increase the chances they’ll stick around.
For SMEs, the stakes are higher
If you’re running a smaller business, every hire counts – and so does every departure. You don’t have the luxury of a massive HR team or endless resources, so the relationships you build with your team really matter. Retention is personal. It’s culture. It’s clarity. It’s trust.
Interestingly, the next generation entering the workforce (students and recent graduates) are showing particular interest in companies that offer meaning, growth, and flexibility. They want more than just a job; they want a place to belong and develop. If you’re looking to hire a student or recent grad, platforms like Unibeez are making it easier to find people who are eager to work, learn, and stick around if they’re treated right.
What it all comes down to
Employee retention isn’t just about keeping people in seats. It’s about creating the kind of company that people don’t want to leave. That’s not always easy, but it’s always worth it.
The best part is that the things that improve retention (good leadership, clear communication, flexibility, and respect) also make your business better overall. Whether you’ve got 5 employees or 50, taking retention seriously is one of the smartest investments you can make.
