A senior accountant hands in her resignation on a Sunday morning. By Tuesday her director has matched the new offer, and by Wednesday she has agreed to stay. HR closes the file. Nobody asks why she started looking, so nobody learns that she has not had a real conversation about her next role in two years.
The counter-offer bought time. It did not change the reason she was leaving.
The short answer: employee retention strategies are the deliberate things an organisation does to keep the people it wants to keep. The ones with evidence behind them target the reasons people actually give for leaving: career growth, schedule and workload, how managers behave, and whether pay feels fair. In the Work Institute's 2026 Retention Report, based on 15,424 US exit interviews, 74.7% of reasons for leaving were classed as preventable. Measure retention first, find which reasons apply in your teams, then fix those.
How to calculate employee retention rate, and how it differs from turnover
Retention and turnover answer different questions, so calculate both.
Retention rate asks: of the people we had at the start, how many are still here?
Retention rate = (employees at the start of the period still employed at the end ÷ employees at the start) × 100
Turnover rate asks: how much movement out was there? The US Bureau of Labor Statistics calculates its separations rate by dividing separations by employment and multiplying by 100. Most HR teams use average headcount as the employment figure.
Turnover rate = (separations during the period ÷ average headcount) × 100
A worked example, with made-up round numbers:
| Item | Illustrative figure | Calculation |
|---|---|---|
| Headcount on 1 January | 200 | |
| Of those, still employed on 31 December | 170 | Retention: 170 ÷ 200 × 100 = 85% |
| Leavers during the year | 30 | |
| New hires during the year | 40 | Year-end headcount: 170 + 40 = 210 |
| Average headcount | 205 | (200 + 210) ÷ 2 |
| Turnover rate | 30 ÷ 205 × 100 = 14.6% |
The two do not add up to 100%, and that is normal. Turnover uses an average that includes new hires; retention ignores them. If 15 of your 40 new hires left within six months, your retention rate would not show it. Your turnover rate would.
Split either number three ways to make it useful:
- Voluntary and involuntary. A layoff and a resignation are different problems.
- Regretted and non-regretted. Losing a strong performer costs more.
- First year and after. Early exits hide inside the overall rate.
To put a cost on the number, use the free employee turnover calculator.
Why people leave: what exit data shows
The largest regular source of exit-interview data is the Work Institute's annual Retention Report. The 2026 edition covers 15,424 exit interviews from 2025. All are from the United States and about 60% were in healthcare, so read it as a strong pattern, not a law.
| Reason for leaving (2025) | Share of exits | What sits inside it |
|---|---|---|
| Career | 19.2% | Growth, promotion, development, a different career, job security |
| Work-life balance | 12.4% | Shift and schedule first, then commute |
| Health and family | 11.4% | Personal health, caregiving |
| Relocation | 9.3% | Moving for reasons outside work |
| Management | 9.2% | Mostly "professional behaviour": how managers treat people |
| Environment | 8.1% | Culture, co-workers, facilities |
| Total rewards | 7.7% | Pay, benefits, perceived inequity against the market |
Career has been the top reason every year since 2011, the report says. Professional behaviour now accounts for more than two-thirds of management-related exits. The 2025 edition found that as much as 40% of all turnover happens in the first year.
People rarely leave for one reason. In a Pew Research Center survey in February 2022 of 965 US workers who had quit a job in 2021, 63% cited low pay, 63% no opportunities for advancement and 57% feeling disrespected. The shares add up to far more than 100% because people named more than one reason.
For Egypt, Saudi Arabia and the UAE, we found no published exit-interview dataset of comparable size. The closest regional evidence is PwC's Middle East Workforce Hopes and Fears Survey 2025, with 1,286 employees across the region: 85% said job security is very important when considering a role (79% globally), and only 46% planned to ask for a pay rise in 2026, down from 71% a year earlier. Our article on why employees leave in MENA covers the gap between what people are promised at hire and what they find.
Why people stay: job embeddedness
Exit reasons explain leaving. They do not fully explain staying. Terence Mitchell and colleagues made that point in 2001 when they introduced job embeddedness: a web of ties, on and off the job, that keeps people in place whatever they feel on a given day.
| Dimension | At work | In the community | What you can influence |
|---|---|---|---|
| Links | Colleagues, a mentor, teams, projects | Family, friends, schools | Buddy systems, cross-team projects, mentoring |
| Fit | How well the job uses your skills and goals | How well the city and lifestyle suit you | Honest job previews, role design, internal moves |
| Sacrifice | What you would give up: a growth path, benefits, status | What moving would cost: a home, a community | Visible career paths, benefits that grow with tenure |
In two US samples, a grocery chain and a community hospital, embeddedness predicted both intent to leave and actual voluntary turnover, over and above job satisfaction, organisational commitment, job alternatives and job search. Every link, every point of fit and every thing a person would lose by leaving is a reason to stay.
The obvious answer, and why to test it
The obvious answer is money: pay more, and match the offer when someone resigns. Test it.
Pay matters, but rarely alone. In the 2026 Work Institute data, total rewards was the seventh-largest reason for leaving. In Pew's survey, as many quitters named a lack of advancement as named low pay.
What leavers say would have kept them. In a Gallup survey of 717 US employees who had left a job voluntarily, run in November 2023, 42% said their manager or organisation could have prevented it. Among them, pay or benefits was the most common single answer, at 30%. The other 70% named something else: their manager, organisational frustrations, career advancement, workload.
The conversation usually does not happen. 45% of those leavers said no manager or leader had discussed their satisfaction, performance or future in the three months before they left.
Fairness counts as well as level. In a field experiment at the University of California, David Card and colleagues (2012) showed a random group of employees a website listing colleagues' pay. Those paid below the median for their unit and occupation reported lower job satisfaction and a higher likelihood of looking for a new job.
A counter-offer fixes the price of staying, not the reason for leaving. We found no rigorous study of what happens to people who accept counter-offers, so do not plan around the figures that circulate. Pay fairly and at market, explain how pay is set, then work on the reasons pay does not reach.
Employee retention strategies that match the reasons
Each strategy is tied to a reason people give for leaving. Start with the reasons your own data points to.
| Reason people leave | Strategy |
|---|---|
| A poor first year | Structured onboarding |
| Manager behaviour | Hold managers to how they treat people |
| No visible career path | Career paths and internal moves |
| Schedule and commute | Flexibility where the job allows |
| Pay that feels unfair | Pay audits and a clear pay structure |
| Feeling unnoticed | Specific, regular recognition |
| Problems nobody hears | Stay interviews |
- Onboarding. Talya Bauer and colleagues (2007) pooled 70 samples of newcomers. Onboarding worked through role clarity, self-efficacy and social acceptance, which related to commitment, intention to remain and turnover. Plan the first 90 days around those three. Our onboarding program guide sets out the steps.
- Managers. The Work Institute data points to conduct, not technical skill: respect, fairness and accountability under pressure. Make how managers treat people part of how they are assessed and promoted.
- Career growth. Show people the next two possible roles and what it takes to reach them. Post internal vacancies before external ones. In the PwC survey, 81% of regional employees preferred a job that builds transferable skills (69% globally).
- Flexibility. Nicholas Bloom, Ruobing Han and James Liang (2024) ran a six-month randomised trial with 1,612 Trip.com employees in China. Two home-working days a week cut quits by a third, from 7.2% to 4.8%, with no difference in performance reviews or promotions. Liang co-founded the company. For frontline roles, the levers are predictable schedules and shift choice.
- Pay fairness. Audit pay by role and grade, fix the gaps you cannot explain, and tell people how the structure works.
- Recognition. Gallup and Workhuman tracked nearly 3,500 employees from 2022 to 2024. Well-recognised employees were 45% less likely to have changed organisations two years later. It is a correlation, and Workhuman sells recognition software. See our employee recognition model.
- Stay interviews. The research base is mostly practitioner experience, but Gallup's numbers show the gap: of leavers whose manager did talk with them, only 17% discussed what it would take to stay.
Your next step
This week, calculate your retention rate for the last 12 months by team, and separately for people hired in that period. Take the team with the lowest figure and hold five stay interviews there with three questions: what keeps you here, what might make you leave, and what one thing would make your job better.
Frequently asked questions
What does employee retention mean?
Employee retention is an organisation's ability to keep its employees over time, especially the ones it wants to keep. It is usually measured as the share of people employed at the start of a period who are still employed at the end.
What is the employee retention rate formula?
Retention rate = (employees at the start of the period still employed at the end ÷ employees at the start) × 100. If 170 of the 200 people you employed in January are still with you in December, your retention rate is 85%. New hires are left out.
What is the difference between retention rate and turnover rate?
Retention rate measures how many of your starting employees stayed. Turnover rate measures how many people left, usually separations divided by average headcount, times 100. They rarely add up to 100% because turnover counts new hires who leave and retention ignores them.
How can you improve employee retention?
Find out who leaves and why, using exit interviews, stay interviews and retention rates by team and tenure. Then act on the specific reasons: onboarding, manager conduct, career paths, flexibility, pay fairness and recognition. Pay rises alone rarely fix reasons that are not about pay.
What are examples of employee retention strategies?
Examples with evidence behind them include a structured first 90 days, visible career paths, hybrid or predictable schedules, pay audits, specific recognition and stay interviews. Each works best when matched to a reason your own employees give for leaving.
Sources
- Work Institute (2026), 2026 Retention Report, 10th edition (15,424 US exit interviews conducted in 2025). email.workinstitute.com
- Work Institute (2025), 2025 Retention Report: Employee Retention Truths in Today's Workplace, 9th edition. info.workinstitute.com
- U.S. Bureau of Labor Statistics, "Job Openings and Labor Turnover Survey: calculation", Handbook of Methods. bls.gov
- Mitchell, T. R., Holtom, B. C., Lee, T. W., Sablynski, C. J. and Erez, M. (2001), "Why people stay: using job embeddedness to predict voluntary turnover", Academy of Management Journal 44(6), 1102-1121. doi.org/10.5465/3069391
- Parker, K. and Horowitz, J. M. (2022), "Majority of workers who quit a job in 2021 cite low pay, no opportunities for advancement, feeling disrespected", Pew Research Center, 9 March 2022. pewresearch.org
- Tatel, C. and Wigert, B. (2024), "42% of employee turnover is preventable but often ignored", Gallup, 9 July 2024. gallup.com
- Card, D., Mas, A., Moretti, E. and Saez, E. (2012), "Inequality at work: the effect of peer salaries on job satisfaction", American Economic Review 102(6), 2981-3003. doi.org/10.1257/aer.102.6.2981
- Bauer, T. N., Bodner, T., Erdogan, B., Truxillo, D. M. and Tucker, J. S. (2007), "Newcomer adjustment during organizational socialization: a meta-analytic review of antecedents, outcomes, and methods", Journal of Applied Psychology 92(3), 707-721. pdxscholar.library.pdx.edu
- Bloom, N., Han, R. and Liang, J. (2024), "Hybrid working from home improves retention without damaging performance", Nature 630(8018), 920-925. pmc.ncbi.nlm.nih.gov
- Yi, R. (2024), "Employee retention depends on getting recognition right", Gallup, 18 September 2024. gallup.com
- PwC Middle East (2025), "PwC's Middle East Workforce Hopes and Fears Survey 2025", press release, 15 December 2025. pwc.com
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