The benefits of employee retention: why investing in your people beats recruiting new ones

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Happy employees

Every HR leader knows that staff turnover is expensive. But when you actually calculate the numbers, the true cost is staggering.

Replacing a single employee typically costs between 50-200% of their annual salary. For a mid-level manager earning £50,000, that’s £25,000 to £100,000 per replacement. 

Yet despite these numbers, many organisations treat retention as a ‘nice to have’ whilst investing heavily in recruitment. This is backwards. The return on investment (ROI) of retention far exceeds the ROI of recruitment.

The true cost of turnover 

When someone leaves, most organisations think about recruitment fees and advertising the open role. But these are just the tip of the iceberg. They should also be thinking about the following: 

  • Direct costs, including agency fees (15-25% of salary), job advertising, assessment tools, and interviewing time. For a £40,000 role, recruitment alone costs £10,000-15,000 
  • Onboarding costs covering training, equipment, software licenses, and the time employees spend bringing the new hire up to speed 
  • Lost productivity during notice periods is substantial. Once someone’s resigned, their engagement drops
  •  Initial low productivity from new hires is inevitable. Even exceptional candidates take three to six months to reach full productivity 
  • Knowledge loss, which is perhaps the most underestimated cost. Institutional knowledge, client relationships, and process expertise walk out the door 
  • Team disruption affects everyone. Remaining employees must cover responsibilities, attend handovers, and train replacements 
  • Decreased morale spreads through teams. Colleagues wonder why the person left. Turnover begets more turnover 
  • Reputation damage affects your employer brand. High turnover signals problems to potential candidates 

What actually makes people stay 

The factors that drive retention aren’t the ones most organisations focus on – but they should. Beyond competitive base salary, people stay because they: 

  • Feel valued and appreciated – they want recognition, not just compensation 
  • Have opportunities to grow – ambitious people leave roles that offer no progression
  • Work for a supportive manager – people don’t leave jobs, they leave managers
  • Feel heard and understood – when their voices matter, they stay 
  • Have clarity and purpose – they want to understand how their work contributes 
  • Are part of a functional team – toxic dynamics drive people away fast 

Notice what’s absent? Ping pong tables. Free snacks. Casual Fridays. Superficial perks have minimal impact on retention. 

What matters is the day-to-day experience of being supported, developed, and valued. 

The retention ROI calculation 

Let’s make this concrete: 

Company: 200 employees 
Average salary: £45,000 
Current attrition: 15% (30 people) 
Replacement cost: 75% of salary = £33,750 
Annual turnover cost: £1,012,500 

This company invests £65,000 in: 

If this reduces attrition by just five percentage points (15% to 10%), this means: 

  • 10 people retained 
  • 10 x £33,750 = £337,500 saved 
  • Net benefit: £272,500 per year 
  • ROI: 419% 

And that’s conservative, assuming no productivity gains, team performance improvements, or employer brand enhancement. 

The numbers say it all: the benefits of employee retention are massive. 

Why traditional strategies fall short 

Here are just a few reasons why traditional strategies don’t cut it anymore: 

  • Exit interviews happen too late. And the feedback is often sanitised 
  • Annual engagement surveys are outdated by the time results are analysed. The gap between survey and action breeds cynicism 
  • Retention bonuses don’t address root causes. The money runs out or someone offers more 
  • Generic training programmes aren’t tailored to what individuals actually need 
  • Reactive HR support means problems have festered for months before intervention 

Traditional approaches are too little, too late, and too generic. 

A better approach 

Effective retention strategies are: 

  • Proactive, not reactive – they create environments where problems don’t escalate 
  • Personalised, not one-size-fits-all – what keeps one person engaged might not work for another 
  • Ongoing, not periodic – people need consistent support, not just annual reviews 
  • Manager-focused – HR can’t retain 200 people. But 20 well-supported managers can 
  • Relationship-centred – retention is won or lost in the manager-employee relationship 

AI-powered coaching platforms like MyTeamBuilder change the game by providing managers with always-on access to personalised coaching. Managers can prepare for difficult conversations, understand what motivates each team member, navigate conflicts early, and provide tailored development support. 

 

The compounding benefits of employee retention 

When you improve retention, benefits compound: 

  • Experienced teams perform better – they understand each other’s strengths and collaborate effectively 
  • Institutional knowledge grows – long-tenured employees know how to get things done 
  • Innovation increases – people who feel secure take creative risks 
  • Customer relationships strengthen – continuity builds trust 
  • Recruitment becomes easier – good retention creates a reputation as a great workplace 
  • Training ROI improves – the people you've invested the time and energy in to train don’t walk out the door 
  • Team morale improves – stability feels good 

Making the business case for the benefits of employee retention 

To secure investment in retention: 

  • Calculate your current costs – include recruitment, onboarding, lost productivity, knowledge loss, and team disruption 
  • Show the cost per prevented departure – the ROI is usually compelling 
  • Highlight knock-on benefits – productivity gains, customer satisfaction, employer brand 
  • Present comparisons – show recruitment versus retention spending. The ratio is often heavily skewed 
  • Use industry benchmarks – show your competitive position 
  • Propose a pilot – start with high-turnover teams, track results, then scale 
  • Make it strategic – frame retention as competitive advantage, not just cost-reduction 

Where to start 

Start with the highest-leverage interventions: 

  • Support your managers – give them tools and coaching to engage and develop their teams 
  • Create feedback loops – regular pulse checks, not just annual surveys 
  • Invest in development – make career growth visible and accessible 
  • Address toxic dynamics early – don’t let conflicts fester 
  • Celebrate contributions – genuine recognition has enormous impact 
  • Measure what matters – track engagement, internal mobility, promotion rates, and manager effectiveness 

The organisations that win aren’t necessarily those paying the most. They’re the ones creating environments where people feel valued, supported, and able to grow. 

That requires intentionality, consistency, and the right tools to scale it effectively.  

 

Ready to improve your retention and reduce turnover costs? Book a demo of MyTeamBuilder and discover how AI-powered coaching can help your managers create the conditions that make people want to stay.