The terms employee retention and employee engagement share far more than a first word. Learn why employee retention is a top concern for companies and how the right engagement strategy can prove decisive.
Blaise Radley
Editorial Strategist
Workday
The only constant in life is change, and the world of work is no different. In a survey of 12,000 workers across 16 countries, ManpowerGroup found that 35% of workers plan to leave their current job in the next six months. Simultaneously, 34% of respondents said that they didn’t have enough opportunities to achieve their career goals at their current employer.
What these statistics reveal is that employees are constantly in search of new challenges. The fortunes of different organizations are forever rising and falling, and the workers driving those changes are perpetually changing too. To ensure their best talent doesn't leave, organizations must understand the link between employee engagement and employee retention.
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Employee retention—also known as talent retention—refers to any effort undertaken by an organization to reduce its turnover. Retention is usually used to discuss people who voluntarily leave their position, but it’s important to also consider involuntary turnover, such as redundancies or firings.
Employee retention strategies were once limited to providing employees with competitive compensation, benefits, and the necessary tools to perform their work. However, as management theory has evolved, so too has our understanding of the drivers of employee turnover.
We now understand that retention is influenced by far more factors than just their salary, from the quality of their onboarding, to the hours they’re expected to work, to the diversity of their workplace. By considering the full extent of each employee’s experience, we can better strategize on how to retain top talent.
Employee engagement refers to the strength of an employee's connection with their colleagues, their manager, and the organization as a whole. Where employee experience refers to an employee’s journey from onboarding to exit, employee engagement is a reflection of the quality of that journey.
Sometimes confused with employee satisfaction, engagement refers to more than simply being happy at work. An engaged employee is committed to their job, their colleagues, and their ongoing development, frequently going above and beyond without ever feeling obliged to.
34% of workers said that they didn’t have enough opportunities to achieve their career goals at their current employer.
Employee engagement is one of the strongest measures for predicting employee turnover. Since retention initiatives involve improving the overall workplace experience to ensure talent for longer, and engagement metrics reflect the quality of each individual’s work life, a company’s retention strategy impacts (and is informed by) overall engagement.
Because engagement is influenced by nearly every aspect of somebody's work life—from office location to the transparency with which conversations around wages and benefits are handled—measuring employee engagement accurately and regularly gives a business strong oversight on the pain points that are impacting attrition. Then, it can create an employee retention plan that accounts for the issues that matter most to employees.
This link between engagement and retention is further strengthened by how both metrics are measured. Historically, the most popular method for understanding turnover was the exit interview, where employees were asked questions about their reasons for leaving, as well as their opinions on the company overall. Similarly, engagement is typically measured through a survey system, albeit much more regularly.
The major business benefit of the latter approach is that the information is available before an employee leaves, giving organizations an opportunity to act before it's too late. Any effort to increase employee engagement based on those survey results will have a positive impact on retention too.
Improved retention can have a drastic impact on a company's bottom line. With the cost of replacing an employee ranging anywhere from 50% to 250% of their annual salary, plus the time required to hire, onboard, and train them, organizations that prioritize retention can drastically cut their hiring spend. But that's far from the only benefit of improving overall retention rates:
1. Reduced recruitment and training costs. One of the clearest benefits of retention is the reduction in the costs of hiring and training new staff. It’s estimated that U.S. businesses lose $1 trillion every year on voluntary turnover. Mitigating that loss can have a huge impact on revenue and business performance.
2. Improved culture and morale. It’s hard to overestimate the impact of high turnover on company culture. When people see a revolving door of exiting colleagues, forming work relationships feels futile, reducing engagement in the process. In fact, a landmark study by Gallup found that companies where a higher ratio of employees had “best friends” would experience 36% fewer safety incidents, 7% more engaged customers, and 12% higher profit.
3. Internal cultivation of high-level talent. The 2025 Workday Global Workforce Report found that 35% of companies offering internal mobility opportunities experience increased engagement and retention. By enabling employees to progress into higher-level roles, not only do you save on hiring times and costs, you also retain them for longer.
4. Stronger customer relationships. Regardless of the industry, customer relationships will always be improved by having consistent points of contact at your company. Not only does high turnover mean customers will likely be dealing with new people each time, it also means that employees won’t have the training or customer knowledge to respond adequately.
Without knowing how many people are leaving, when they’re leaving, and what part of the company they’re leaving from, you can’t possibly begin to work out why employees are leaving.
The 2025 Workforce Trends Report found that 88% of employees were feeling very or extremely engaged. However, the factors driving that engagement weren't positive: 67% cited the tighter job market, while 61% cited job insecurity. Increased engagement and retention based on external economic conditions will only be temporary—long term improvement requires an open dialogue with your staff about what issues are most meaningful to them.
Ultimately, every employee will eventually leave their current role, regardless of how satisfied they are or how much their manager provides them with support. That change might be premised on any number of factors, be it a promotion, a better opportunity with a new employer, or the decision to change career paths entirely. Companies with the highest retention rates preempt those reasons and provide internal development opportunities to match those needs.
Creating space for employees to discuss their development needs is critical. The benefit of an employee engagement survey platform, such as Workday Peakon Employee Voice, is that your employees are asked to share their thoughts regularly through pulse surveys, ensuring they have space to reliably share feedback. In doing so, you increase the chances of an employee leaving their role for another position at your company, rather than a competitor.
In the next section we’ll take a closer look at how your company can assess what your employees value most and how you can best help them achieve their work goals.
The most significant metric to start measuring before planning a new retention strategy is your company’s turnover rate. Without knowing how many people are leaving, when they’re leaving, and what part of the company they’re leaving from, you can’t begin to figure out why they’re leaving. It's only once you’ve assessed the how, when and where, that you can begin to consider the why.
The starting point for understanding the "why" can be found by gathering and assessing employee engagement data. Since the main drivers of employee turnover directly correlate with the drivers of employee engagement, asking how your employees feel about their entire experience at your company—from growth opportunities, to salary, to overall business goals—can help you determine which areas need the most attention.
While there's no one-size-fits-all approach to improve employee engagement and retention, the following three drivers are the factors that have the largest impact on employees at each stage of their lifecycle.
The value of a sincerely inclusive work environment can’t be overstated when it comes to retention.
Without a sense of recognition or opportunities for reward progression, retaining employees will always be difficult. The basis of the employee value proposition is that an employee will perform their working duties in exchange for salary and benefits. If one side of that equation isn’t being upheld, it’s natural that the other side would slip as well.
Recognition and reward can take many forms, whether it’s straightforward remuneration or instituting a platform for employees to recognize their colleagues. People don’t just want to be paid more, they want to feel like valued members of the team. Make space in team meetings and company all-hands to champion individual successes, and ensure that team leaders are empowered to provide meaningful feedback.
Since honest conversations around pay can often prove difficult, employee engagement surveys are valuable. Automated questions remove the potential awkwardness of a team leader asking directly, providing employees a space to speak up that’s confidential and free of judgment. Survey platforms also provide visibility on issues to people higher up the chain with visibility, increasing the likelihood of meaningful action.
After several years of experimentation with remote work, many organizations have now settled into a more static hybrid working model. According to the Demand for Skilled Talent Report, half (48%) of job seekers said they would like to find a hybrid role. But as the lines between home and work continue to blur, it's critical companies are proactive in protecting work-life balance.
This shift in working behaviors has fundamentally challenged the idea that employees need to be on-site to be productive or that company culture is somehow diluted by a hybrid model. Many employees have seen that they no longer need to be limited by a traditional work week, especially when it involves extended separation from their home lives and families. Companies that restrict the working lives of their people without reasonable justification risk alienating existing employees and dissuading prospective ones.
Once again, an engagement survey can help clarify exactly what your employees want, giving you a better overview of how those needs differ across the organization. Perhaps a specific team works best in-person, while another is separated across multiple countries, removing the necessity for them to be in the office bar select hours. Without asking your employees how they feel about remote work and their working hours, your strategy will amount to guesswork.
One of the strongest correlates with high turnover is a lack of professional growth. The Workday Global Workforce Report found that "career path" was the number 1 driver for employees with a tenure between 1-4 years. If employees don’t see a path forward for themselves at your company, they'll quickly look for opportunities elsewhere. If you believe in your people, you need to show them that they have a future at your company.
While promotions are an important part of professional growth and development plans, there’s far more you can do to make your employees feel valued. Career growth can take many different forms, from an employee learning a new skill to expand their responsibilities in their existing role to providing opportunities for cross-departmental collaboration. Job satisfaction is far more important than the prospect of a future promotion when it comes to retention, so ensure that your employees feel fulfilled and challenged in their day-to-day work.
The best way to discover what an employee's professional growth goals is to ask. Not only does a confidential survey platform enable employees to discuss specific needs that they may feel uncomfortable raising directly with their team lead—such as training and development that may prompt a department change—it also gives managers oversight on who is satisfied with their existing workload and who’s looking for the next step forward.
Professional development is meaningless without recognizable markers of progress. The more frequent those markers, the more valued an employee will feel.
The strongest weapon businesses have in the fight against attrition is employee sentiment data. Once you know what your employees think, you can understand how to keep them engaged. For each of the following eight proposed strategies, we’ve included a tip for how engagement surveys and metrics can inform your retention plans at every stage.
1. Start with the essentials. There’s no replacement for the basics when it comes to retention. Ensure that your employees have a smooth onboarding process, seamless salary payments, the proper tools to do their job, and a working schedule that is fair and equitable. Equally important is ensuring your employees are able to have an open and honest dialogue with management about anything they might be lacking to carry out their job effectively.
2. Enable honest communication. One of the best ways to improve engagement (and therefore retention) is by improving the methods of communication at every level of the business. A survey platform that enables confidential feedback can be critical for opening honest lines of communication, but it's also important to consider how mangement communicates important announcements, and how internal communication tools are utilized.
3. Be transparent and fair about pay. If an employee believes they’re being underpaid compared to their colleagues or similar roles at other organizations, that can provide a strong motivation to quit. By [roviding transparency on the pay bands for each job level, as well as regularly researching regional and market differences for specific roles, you help to create an environment where everyone feels seen and supported.
4. Promote psychological safety. A major factor influencing engagement and retention is psychological safety. If an employee doesn’t feel able to share their feedback, they’ll often find external avenues to voice their frustrations, such as Glassdoor or LinkedIn. A confidential survey option is a strong starting point, but people leaders have to openly welcome opinions, no matter whether that feedback is supportive or dissenting. That freedom of expression in turn builds a stronger culture, promoting higher retention.
5. Prioritize training and development. Growth goes beyond moving up the company ladder—consider how you can enable employees’ specific needs, from developing new skills to prospecting potential career changes. That might mean creating internal mentorship programs, providing access to a relevant eBook or educational video, allocating budget for employees to take external training courses, or enabling short-term, cross-departmental gigs.
6. Implement benefits that matter. When we discuss perks it’s easy to default to images of beanbags and snacks, but benefits can have a huge impact on engagement. Providing access to health benefits—from medical insurance to wellness options and fitness classes—as well as social opportunities is a great way to improve your employees’ personal and professional lives. If you’re a smaller company with more limited resources, you can still provide your employees with space to give feedback on what benefits matters most.
7. Support your people leaders. Supporting your employees won’t work without proper help in place for people leaders. When creating new retention strategies and incorporating new engagement solutions, ensure that managers have the appropriate training to operate efficiently. More than that, your entire management team needs to understand that areas marked for improvement don't reflect negatively on them but instead are a sign for the whole business needs to pull together.
8. Develop internal recognition initiatives. Professional development is meaningless without recognizable markers of progress. The more frequent those markers, the more valued an employee will feel. By enabling employees to nominate their peers for good performance and providing a forum where those achievements can be shared, you bolster the sense of community. What’s more, those initiatives don’t always require a prize attached to them—the act of being recognized among peers for their work still creates a sense of belonging.
Reducing employee turnover starts in one place: Listening to your employees. By making time to understand their concerns, acknowledging the issues they're facing, and building your future plans around those findings, you embed your employees into the organization your company is going to be in the future. That way, the employees that do leave have still left their mark on shaping your organization for the better. set, using them as a means by which to test the waters and find areas to optimize.
But the process doesn't end there. Once you’ve started to take action, the most important thing you can do is ask more questions. Are people happy with the changes? Do they feel that their most pressing concerns are being addressed? And where would they like to see further improvements made? By showing that any employee feedback is heard, taken onboard, and then incorporated into your ever-evolving employee engagement strategy, you’ll turn potential naysayers and leavers into active advocates for your company.
To learn more about how engagement improves retention, explore Workday Peakon Employee Voice, our employee engagement solution.
This article has been updated since it was first published in June 2022.
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