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Employee Retention and Profitability: The Role of Employee-Retention Strategies

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Employee retention is crucial for small-to-medium-sized enterprises, also known as SMEs. This study aimed to explore employee-retention strategies SME leaders use to increase profitability. In this qualitative study, an open-ended questionnaire and Zoom interviews were used to collect data from nine questionnaire respondents and three interview participants from SME leaders in various industries. LinkedIn participants completed an open-ended questionnaire on SurveyMonkey. Participants who chose the option were interviewed on Zoom. The research revealed that SME leaders use different employee-retention strategies to increase profitability. Employee-retention strategies such as work-life balance, recognition and rewards, and growth and development influenced profitability. The results of this study indicate that employee-retention strategies such as (a) profitability effects, (b) listening with a subtheme of communication and leader-employee relations, (c) empowering employees through work-life balance, and (d) growth and development training are essential factors for employee retention to increase profitability. SME leaders should have retention strategies in place and constantly review them as effective retention strategies are different for each employee and organization.

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Factors Affecting Employee’s Retention: Integration of Situational Leadership With Social Exchange Theory

Wei xuecheng.

1 School of Management, Universiti Sains Malaysia, George Town, Malaysia

Qaisar Iqbal

2 Centre for China-India-Pakistan Studies, Sichuan University of Science and Engineering, Zigong, China

3 School of Chemistry and Environmental Science, Inner Mongolia Normal University, Hohhot, China

Associated Data

The original contributions presented in this study are included in the article/supplementary material, further inquiries can be directed to the corresponding author.

Sketching on the Social Exchange Theory (SET), the present study aims to investigate the direct relationship between training and development, work environment, and job satisfaction with employee retention. The contingent role of transformational leadership was also analysed under the Situational Leadership Theory (SLT). Accordingly, we collected data from 287 employees of SMEs in northern China by employing a convenience sampling approach, exhibiting a response rate of 57.40 percent. The Partial Least Square-Structural Equation Modelling (PLS-SEM) analysis was then run to test the proposed hypotheses. The findings revealed a significant positive impact of training and development, work environment, and job satisfaction on employee retention. However, no moderating effect of transformational leadership was indicated on their direct relationship. This study has enriched the literature on employee retention and the leadership arena. To the best of the authors’ knowledge, there is no prior evidence concerning the study’s integrated relationship of the continuous variables. The implications and limitations were finally expressed at the end of this manuscript.

Introduction

Employee retention is intricate in a competitive market, albeit vital for the long-term competitive advantage and organisational success and longevity ( Das and Baruah, 2013 ; Arachchillage and Senevirathna, 2017 ; Kaur, 2017 ; Mahan et al., 2018 ; Paul and Vincent, 2018 ). The current COVID-19 situation has seen employee retention emerge as the core problem for organisations across the globe ( Karatepe and Olugbade, 2017 ; Yousaf et al., 2019 ). Low employee retention results in various issues, that is, increased training and recruitment cost, insufficiently skilled employees, and disruption to organisational operations ( A’yuninnisa and Saptoto, 2015 ; Ping et al., 2021 ). Due to these circumstances, small and medium enterprises (SMEs) view employee retention as highly complex and uncertain ( Park et al., 2019 ; Tian et al., 2020 ).

In China, SMEs are the driving force of its social and economic development ( Hadj, 2020 ; Hui, 2021 ), though they are presently finding it hard to operate at their full efficiency. This situation is exasperated by the COVID-19 pandemic, limited resources, low anti-risk capabilities, and diminished production scale ( Zhanjie et al., 2017 ). These SMEs face bankruptcy and employee retention ( Hui, 2021 ) due to adverse market conditions and economic uncertainty ( Yu X. et al., 2019 ). China possesses approximately 770 million people in its workforce ( Zhang and Chen, 2019 ), albeit maintaining the most significant global average turnover rate, that is, 18% ( Friedman and Kuruvilla, 2015 ; Yu X. et al., 2019 ). Hence, practitioners and academicians continuously report the severity of employee turnover in China ( Karatepe and Olugbade, 2017 ; Afsar et al., 2018 ).

High employee turnover weakens employees’ commitment and sets up negative perceptions of organisations ( Hadj, 2020 ). Privately owned enterprises in China reported a 20% turnover rate, while state-invested enterprises and foreign-invested enterprises displayed 8% and 15%, respectively. Such staggering employee turnover is a pressing issue for Chinese SMEs as they grapple with managing employee retention ( Zhang and Chen, 2019 ; Hu, 2021 ). Thus, practical managerial tools must be employed to alter employees’ behaviours ( Choi and Peng, 2015 ). Given these points, it is imperative to investigate the underlying factors to enhance employee retention, considering the scarcity of research in China ( Hom et al., 2017 ; Yousaf et al., 2019 ; Li et al., 2021 ).

Organisations are currently discussing varying strategies and practices to preserve their employees ( Tanwar and Prasad, 2016 ; Bibi et al., 2018 ). Employee retention is a process through which employees are influenced to stay with their organisations for a longer period ( Hom and Griffeth, 1995 ). Generally, employees are easy to retain, provided they see a good match with their employer ( Umamaheswari and Krishnan, 2016 ). Extent literature concluded the significant role of various elements in relation to employee retention, such as intrinsic and extrinsic motivation factors ( De Sousa Sabbagha et al., 2018 ), job promotion ( Woodall et al., 2017 ), and bonus ( Chinyio et al., 2018 ). Others include organisation commitment ( Perreira et al., 2018 ), compensation ( Colson and Satterfield, 2018 ), and knowledge sharing ( Agarwal and Islam, 2015 ). This list can be extended to peer support, organisational culture, and work-life balance ( Deshwal, 2015 ; Ombanda, 2015 ).

Notably, career development opportunities, benefits and rewards, and psychological factors are deemed vital for employee retention ( Bibi et al., 2018 ; Lyman et al., 2020 ). Academicians and practitioners have developed a consensus about the crucial role of human resource management in developing this idea ( Deshwal, 2015 ; Tian et al., 2020 ). Drawing on the basis of Social Exchange Theory (SET), this study aims to examine the direct effect of training and development, work environment, and job satisfaction on employee retention among China’s SMEs.

The leaders in an organisation commonly initiate change, execute, and interconnect with the desired results ( Bass and Avolio, 1996 ; Bass and Riggio, 2006 ). In essence, employee retention is also not possible without effective leadership ( Covella et al., 2017 ). In the last few years, numerous leadership styles have been examined concerning employee retention, such as laissez-faire, instrumental, transformational, and transactional leadership ( Antonakis and House, 2014 ; Iqbal, 2016 ). Transformational leadership highly impacts employee commitment in contrast to transactional leadership ( Deichmann and Stam, 2015 ). These leaders are highly concerned about real-time problems and establish new benchmarks, develop understanding, shape employees’ behaviours, and accomplish organisational objectives ( Middleton et al., 2015 ; Tian et al., 2020 ; Iqbal et al., 2021a ).

Transformational leadership comprises four dimensions, that is, individual consideration, intellectual stimulation, idealised influence, and inspirational motivation. The first dimension, individualised consideration, is the extent to which leaders understand and prioritise the team member’s needs. Meanwhile, intellectual stimulation is the extent leaders offer support and encourage employees to generate innovative ideas beneficial to delivering optimum performance. Moreover, inspirational motivation provides necessary support to the employees, enabling them to pursue organisational goals. The final dimension, idealised influence, encourages practical examples of a leader exhibiting innovative thinking, faith, pride, uprightness, interest, effective communication, and trust ( Bass and Riggio, 2006 ).

Employees in China prefer leaders who exhibit transformational leadership attributes in the form of role models, non-use of abusive power, selflessness, and centring on employees’ well-being ( Su et al., 2019 ). Hence, transformational leadership has become one of the most crucial roles in the organisational success of China’s SMEs ( Lin and Sun, 2018 ). The current pandemic has resulted in economic uncertainty, environmental challenges, and the suitability of transformational leadership. Therefore, the Situational Leadership Theory (SLT) is applied to investigate its moderating role in the proposed relationship of training and development, work environment, and job satisfaction with employee retention.

Numerous contributions are made in this study concerning the theory and literature. First, the study developed the SET by revealing the direct impact of work environment, job satisfaction, training, and development on employee retention. Second, the insights on the conditional role of transformational leadership were elaborated in the context of SLT. The literature presented conflicting results and lacked clear explanations of the relationship’s nature of antecedents with employee retention ( Abeysekera, 2007 ; Haines et al., 2010 ; Mangi et al., 2011 ; Ahmad et al., 2017 ). In this context, further studies are recommended to better comprehend the training and employee retention relationship ( Bibi et al., 2018 ). Given these points, this study enriches the empirical evidence, specifically regarding the direct connection of training and development, work environment, and job satisfaction with employee retention. The final contribution included the literature on employee retention from the perspective of China’s SMEs.

Literature Review

Theoretical background.

The SET is widely applied to unravel the employer–employee relationship, especially in the employee turnover and retention literature ( Coyle-Shapiro and Conway, 2005 ; Gopalan et al., 2020 ). According to this theory, a person, who benefits from someone, feels obligated to repay that person through positive behaviours and devotion. Furthermore, this theory postulates that employees deliver their optimum performance upon achieving support and perceiving value from their employers ( Eisenberger et al., 2001 ). Hence, the theory is used to investigate the employees’ behaviour, enabling organisations to enforce certain HRM practices and igniting unique social exchange relationships.

From the SET perspective, employee retention can be induced by training and development offered by employers, which facilitate mutual benefits and create reciprocated obligations. This phenomenon occurs because individuals and organisations are involved in exchange relationships ( Raihan, 2012 ). Employees perceive responsibility to repay their employers upon providing a conducive working environment. This repayment may derive in the form of increased loyalty, commitment, and stay for a long time ( Settoon et al., 1996 ). Simultaneously, their job satisfaction and proper behavioural responses will increase, owing to the perception of fulfilling emotional needs ( Iqbal and Hasnah, 2016 ; Latorre et al., 2016 ; Iqbal et al., 2017 ; Rubel et al., 2021 ) and improving employee retention ( Rubel et al., 2021 ). Therefore, the current study posits that job satisfaction and work environment followed by training and development are positively related to employee retention.

A specific type of leadership is required to tackle the distinct needs and current challenges of a particular environment. Hence, according to the SLT, a single leadership style is insufficient for every situation ( Hersey and Blanchard, 1969 ). In this case, effective leadership, that is, transformational leadership, emerges as a promising idea and is applicable across diverse fields. This concept facilitates the concept of adapting to varying circumstances and work environments ( Hersey and Blanchard, 1969 ). In the context of employee retention, an environment must be structured where they feel empowered, valued, and connected to their employers ( Ohunakin et al., 2019 ; Frye et al., 2020 ); thus, this leadership style is consistent with these requirements ( Kim and Park, 2020 ). Consequently, this leadership style enhances the employees’ capability and reshapes the organisational image in the marketplace ( Mwita and Tefurukwa, 2018 ; Singh et al., 2020 ). Drawing on the SLT, the current research claims the moderating role of transformational leadership on the relationship of training and development, work environment, and job satisfaction with employee retention.

Hypotheses Development

Training and development with employee retention.

Training and development is the degree to which training within the organisation is offered to the employees to foster their skills ( Delery and Doty, 1996 ). As an overarching HRM practice, it is often considered a broad collection of activities that refer to continual learning and developing general job and career-related skills ( Boon et al., 2011 ). Furthermore, training is the fundamental source of competitive advantage and employee retention ( Umamaheswari and Krishnan, 2016 ; Yamin, 2019 ). Training and development intensify the social exchange relationship between the employee and their employer ( Dysvik and Kuvaas, 2008 ), offering employees valuable abilities, skills, and knowledge ( Fletcher et al., 2018 ). This idea elicits obligations within employees to repay the organisation ( Koster et al., 2011 ).

Training and development programmes deal with the employees’ skills and competencies, enabling them to positively respond to various challenges the organisations face ( Rhee et al., 2014 ). Moreover, positive dispositions of employee growth can be achieved via motivation and modifying their skills or attitude toward organisational effectiveness ( Gope et al., 2018 ; Yamin, 2019 ; Khan et al., 2021 ). These skills and competencies are vital for their managerial positions and professional growth ( Schuler and Tarique, 2012 ; Ambrosius, 2018 ). Past studies have found a positive relationship between training and development with commitment ( Ahmad et al., 2017 ), employee performance ( Sinha et al., 2010 ), and job satisfaction ( Bibi et al., 2018 ). Others include employee retention ( Lee, 2005 ), employee commitment ( Ahmad et al., 2017 ), and employees’ intentions to stay ( Chew and Chan, 2008 ). Therefore, the hypothesis H1 is postulated as follows:

• H1: Training and development significantly and positively influence employee retention.

Work Environment and Employee Retention

The working environment concerns the availability of a conducive workplace ( Edgar and Geare, 2005 ) and is defined as the degree to which employees consider the workplace physically safe. Employees can share their views on their surroundings with their mutual consideration with organisations by assessing the environment ( Lewin et al., 1939 ; Li et al., 2022 ). Some examples of work environment indicators include supervisor support ( Stirpe and Zárraga-Oberty, 2017 ), physical working conditions ( Richards et al., 1994 ), social worker support ( Haggins, 2011 ), and helping behaviours during decision-making ( Subramaniam and Mia, 2001 ). Notably, a study found a significant relationship between work environment and employee retention ( Al-Hamdan et al., 2017 ).

Organisational rules and regulations encompass the work environment, affecting employee retention ( Yam et al., 2018 ). Consequently, an exceptional working environment increases trust among employees, which is useful for employee retention ( Candela et al., 2015 ; Ede and Rantakeisu, 2015 ). The positive energy motivates employees to accomplish their professional goals effectively, enhancing their commitment to the organisation ( Mangi et al., 2011 ; Umamaheswari and Krishnan, 2016 ). The perception of the working environment can either positively or negatively impact specific employees’ job outcomes, such as commitment, participation, and intention to stay ( Gunaseelan and Ollukkaran, 2012 ). Given these points, the discussion above drives the development of hypothesis H2:

• H2: Work environment significantly and positively influences employee retention.

Job Satisfaction and Employee Retention

Job satisfaction concerns employees’ evaluations of their jobs based on perceptions by comparing their actual job outcomes with desired ones ( Schleicher et al., 2011 ). The concept is defined as a positive state where employees share their feelings about their job ( Locke, 1976 ), ranging from moderate- to low-level satisfaction ( Locke, 1976 ; Quigley et al., 2007 ). Furthermore, the idea is considered a causal factor that promotes intentions to stay with the organisation because it is a pleasant psychological state. In this case, individuals perceive content with their work ( Fletcher et al., 2018 ). Therefore, job satisfaction fosters the social exchange between employers and employees, where satisfied employees exemplify positive experiences. This experience is supported by the social exchanges between the employee and the organisation, reinforcing their intentions to stay with the organisation ( Koster et al., 2011 ).

Employees from varying organisations, industries, and geographical locations exhibit different levels of job satisfaction ( AbuAlRub et al., 2009 ). However, job satisfaction positively affects employees’ intentions to stay irrespective of industries and region ( AbuAlRub et al., 2009 ). For instance, a multi-level study found that job satisfaction is positively related to the employees’ intentions to stay in the united kingdom (UK) ( Fletcher et al., 2018 ). Moreover, meta-analytic evidence has demonstrated that those who are satisfied at work are more likely to retain their employment ( Fishbein and Ajzen, 2011 ); therefore, the hypothesis H3 is proposed on the basis of SET as follows:

• H3: Job satisfaction significantly and positively influences employee retention.

Moderating Role of Transformational Leadership

Transformational leadership is considered highly effective in driving employee retention ( Kossivi et al., 2016 ; Amankwaa et al., 2019 ), in which the leaders initiate, execute, and interconnect change with the desired outcomes ( Bass and Riggio, 2006 ). This form of leadership influences employees by altering their perceptions, views, ambitions, and moral standards ( Bass and Avolio, 1996 ). Transformational leaders also offer an ideal approach to employees and exhibit the attributes of significant faith, effective communication, uprightness, trust, and innovative thinking ( Tian et al., 2020 ). These leaders promote intellectual stimulation, idealised influence and inspirational motivation, and individualised consideration. In addition, leaders can facilitate employees by understanding their issues and creating a psychologically safe environment through individualised consideration ( Iqbal et al., 2021b ).

Transformational leaders are viewed as role models and counsellors who encourage them to participate in organisational activities. Supervisor support, training, information accessibility, and counselling lead to higher employee retention ( Ooi et al., 2021 ) and higher employability ( Matsuo, 2021 ). Furthermore, healthy communication positively influences the work environment ( Denton, 2011 ) via sharing of innovative ideas and intellectual stimulation, an indicator of open communication. This approach culminates in improved work that enhances talent management ( Perlow and Kelly, 2014 ). Moreover, open communication and improving resource management in employee allocation ease employees’ adaptation to new work environments ( Castrogiovanni et al., 2011 ).

Organisational support in the form of supervisor support, rewards, and favourable working conditions are vital to stimulating organisation-related outcomes, that is, reduced withdrawal behaviours and commitment ( Rhoades and Eisenberger, 2002 ; Gillet et al., 2022 ). Supervisor support is critical to replenish employee physical and psychological resources to increase their retention probability ( Kalliath and Kalliath, 2014 ). Furthermore, transformational leaders affect employees’ behaviour resulting in high employee retention ( Sow et al., 2016 ). Leaders can develop a reward system within their organisation which is highly effective in retaining employees ( Adekanbi, 2016 ). They must also ensure sufficient resources to employees following the organisational goals. Moreover, shared vision is directly related to the employees’ engagement ( Boyatzis et al., 2017 ) and continuous improvement ( Fardazar et al., 2015 ; Iqbal and Piwowar-Sulej, 2022 ). This leadership style presents a shared vision and elaborates the underlying reasons, enhancing their participation and involvement in decision-making. Previous studies found that transformational leadership negatively impacts employees’ turnover intention ( Maaitah, 2018 ) but positively affects their knowledge base ( Fletcher et al., 2018 ). For instance, a positive impact of various factors on employee retention, that is, idealised influence, inspirational motivation, individualised consideration, and intellectual stimulation ( Jiang et al., 2017 ). Therefore, the following hypotheses, H4, H5, and H6, are proposed:

• H4: Transformational leadership significantly moderates the training and development—employee intentions relationship.
• H5: Transformational leadership significantly moderates the work environment—employee intentions relationship.
• H6: Transformational leadership significantly moderates the job satisfaction—employee intentions relationship.

With reference to the above discussion, the hypothesized model is drawn as shown in the below Figure 1 .

Research framework.

Research Methodology

Context, sample, and data collection.

In China, organisations face fierce pressure to retain employees due to the shortage of skilled and talented employees ( Fu et al., 2020 ). Statistically, 44% of the top management in organisations operating in China view this issue as a critical barrier to employee retention ( Mashiah, 2021 ). China’s manufacturing makes up two-thirds of SMEs ( Zhu et al., 2012 ; Iqbal et al., 2021c ; Xuecheng et al., 2022 ), where most operate in the northern region. Therefore, this study focuses on the SME employees in this region. Moreover, this study requires a minimum of 185 responses based on the sample-item ratio ( Hatcher and O’Rourke, 2013 ). Online survey forms were structured to collect data, comprising six sections that measure various factors. The factors include training and development, work environment, job satisfaction, employee retention, transformational leadership, and respondents’ demographics.

We adopted a convenience sampling approach for data collection, considering China’s time and financial constraints and current COVID-19 restrictions. The present study is cross-sectional in design, where data are collected at a specific time from the employees. The online survey link was disseminated via 500 email addresses with the assistance of the human resource department. Accordingly, 287 responses were received, which is sufficient, indicating a response rate of 57.40%. Furthermore, a gentle reminder was included during data collection to increase the number of responses. In this study, we also marked it mandatory to check against each item in the online survey form, ensuring no missing values in the dataset.

Measurement of Variables

We adopted measurement scales of four continuous variables in the current study. Previous studies have reported reduced quality and high cognitive ability required to collect data using a high Likert scale ( Cummins and Gullone, 2000 ; Iqbal et al., 2020 ). Therefore, a 5-point Likert scale was employed, ranging from 1 = strongly disagree to 5 = strongly agree. Delery and Doty (1996) have defined training and development as the degree to which organizations offer training to employees to foster their skills. We adopted the 4-item scale from Delery and Doty’s (1996) study to measure training and development. For example, one item is “We receive formal development training which increases our promotion chances within the organisation.” Similarly, Bibi et al. (2018) used an identical scale in the context of Pakistan and found it highly reliable (α = 0.918). In this study, the Cronbach’s alpha value of this scale is 0.719.

The work environment is defined as the degree to which employees perceive the availability of a safe and conducive workplace ( Edgar and Geare, 2005 ). Subsequently, 4-measurement items were adopted from Bibi et al.’s (2018) study to assess the work environment. For instance, one item is “We always feel safe working here in this environment.” In the current study, the Cronbach’s alpha value of this 4-item scale is 0.928. Meanwhile, job satisfaction is defined as the pleasurable emotional state emerging from the job appraisal as facilitating the accomplishment of one’s job values ( Locke, 1976 ; Zhang M. M. et al., 2016 ). In this case, we adopted a 3-item scale from Cammann et al.’s (1979) study to measure job satisfaction. An example of this item is “In general, I like working here.” This scale was utilised by Zhang L. et al. (2016) , who found it highly reliable (alpha = 0.870). Accordingly, the Cronbach’s alpha value in this study for the 3-item scale is 0.921.

Transformational leadership is defined as those who have idealised influence, intellectual stimulation, inspirational motivation, and individualised consideration. We adopted 20 items of the Multifactor Leadership Questionnaire (MLQ) to analyse transformational leadership. This analysis was related to the four items, namely intellectual stimulation, idealised influence, inspirational motivation, and individualised consideration. A sample of the item is “my leaders give me tasks with enthusiasm.” A previous study ( Ohunakin et al., 2019 ) indicates high reliability where Cronbach’s alpha values of its four dimensions were between 0.88 and 0.92. In this study, the Cronbach’s alpha values are in the range of 0.875–0.918.

Employee retention is defined as the effort by an organisation to keep desirable employees to fulfil business objectives ( Frank et al., 2004 ; Govaerts et al., 2011 ). We adopted six items ( Govaerts et al., 2011 ) to measure employee retention, for example, “I love working for this company.” The present study’s measurement scale was highly reliable, that is, Cronbach’s alpha = 0.794, aligning with Khalid and Nawab’s (2018) findings.

Analytical Approach

In this study, the research framework is complex due to its prediction-oriented feature and the presence of independent variables, dependent variables, and moderators. Therefore, partial least squares-structural equation modelling (PLS-SEM) was selected following Hair et al. (2020) . This approach is considered a proper analytical strategy compared to covariance-based structural equation modelling (CB-SEM) ( Ringle et al., 2020 ). The technique revolves around the assessment of the measurement model and structural model, though it requires prior evaluation of the former measurement.

Results of the Study

Data screening.

Before analysis, data screening must be conducted, which concerns missing values, outliers, data normality, and common method bias. We ensured the absence of missing values in the current dataset by marking mandatory against each measurement item in the online survey form. Moreover, univariate outliers and multivariate outliers were investigated through Z-score and the Mahalanobis distance test. Accordingly, three responses were removed in the univariate outlier because of the Z-score values greater than 3.29 ( Tabachnick and Fidell, 2007 ). Meanwhile, the Mahalanobis distance test revealed that the P -value of 15 cases is less than 0.001, a clear indicator of multivariate outliers; therefore, the 15 responses were excluded from the dataset.

The normality was assessed based on the skewness and kurtosis values, and in this study, the skewness values of all continuous variables extend from −1.307 to 1.531, which are within ± 3. However, the kurtosis values fall out of the ± 3 range ( DeCarlo, 1997 ), and thus, the data are not univariate normal. The Mardia’s coefficient skewness 0.005 and kurtosis values (β=172.761,ρ < 0.005) confirmed the multivariate normality. Nevertheless, the PLS-SEM does not require data normality; hence, non-normal distribution is not an issue. Next, we applied Harman’s single factor test and the correlation matrix procedure to examine the common method bias. Harman’s single factor test revealed that a single factor only counts for 39.41% < 0.50% of the total variance ( Podsakoff et al., 2012 ), confirming no issues with method bias. The correlation matrix exposed that no single correlation between continuous variables is greater than 0.90 ( Bagozzi et al., 1991 ); thus, the current study is free from common method bias. We have also examined the model fit of hypothesized model based on two-index strategy recommended by Hu and Bentler (1999) . In the present study, hypothesized model was found fit based on comparative fit index (CFI) (0.96 > 0.95) and standardised root mean square residual (SRMR) (0.049 < 0.09) ( Hu and Bentler, 1999 ), as compared to alternative models.

Frequency Analysis

The present study is dominated by male participants ( n = 176, 61.32%), where most participants ( n = 109, 37.98%) fall between the ages of 25 and 35, followed by 85 between 36 and 45. The most significant number of participants ( n = 144, 50.17%) in current research possessed a bachelor’s degree and nine participants (3.14%) with PhDs. Finally, more than 50% of the participants ( n = 153) acquired 5–10 years of working experience, while nine participants with more than 20 years of professional experience.

Descriptive Analysis

In this study, the mean values of training and development ( M = 4.145), work environment ( M = 4.334), job satisfaction ( M = 4.322), and employees’ retention ( M = 4.167) were found significant. Notably, job satisfaction and employee retention values were higher than those reported by a previous study among employees of multi-national enterprises (MNEs) in China ( Zhang M. M. et al., 2016 ). Regarding four dimensions of transformational leadership, idealised influence ( M = 4.132) has the highest mean value. This result is followed by inspirational motivation ( M = 4.121), individualised consideration ( M = 3.973), and intellectual stimulation ( M = 3.670). Moreover, the current descriptive analysis revealed that participants seek more idealised influence than other dimensions of transformational leadership in Chinese SMEs. In other words, a leader’s ability to exhibit high morality, ethics, and personality enables the realisation of high performance within organisations.

Measurement Model Analysis

The measurement model analysis examines the construct reliability and validity, in which the former is assessed with reference to its indicator and internal reliability. This study revealed that all indicator loadings are more significant than 0.50 and less than 0.944, which are deemed acceptable. An item has sufficient indicator reliability provided its factor loading is more significant than 0.50 ( Chin, 1998 ). Moreover, we examined the construct reliability based on Cronbach’s alpha and composite reliability values. A construct has acceptable reliability, provided its Cronbach’s alpha or composite reliability value is greater than 0.70 ( Sarstedt et al., 2019 ).

Table 1 shows that the Cronbach’s alpha values of various items are greater than 0.70. These items comprise training and development (0.719), work environment (0.928), job satisfaction (0.921), employees’ retention (0.794), and individualised consideration (0.889). Other items include idealised influence (0.918), inspirational motivation (0.875), intellectual stimulation (0.882), and transformational leadership (0.885). Similarly, the composite reliability values of these variables are greater than 0.70 (see Table 1 ). Hence, it is evident that all the continuous variables exhibit acceptable construct reliability.

Factor loadings, reliability, AVE, and mean values.

*Means multiplication/interaction of two variables.

Construct validity is formulated on the convergent and discriminant validity, where a construct has sufficient acceptable convergent validity provided its factor loadings are greater than 0.70. Furthermore, its average variance extracted (AVE) must be higher than 0.50 ( Hair et al., 2020 ). The items of all continuous variables must possess factor loadings greater than 0.70 (see Table 1 ). The AVE values of multiple items revealed values higher than 0.50, that is, training and development (0.541), work environment (0.823), and job satisfaction (0.864). Others include employee retention (0.576), individualised consideration (0.706), idealised influence (0.712), inspirational motivation (0.669), intellectual stimulation (0.692), and transformational leadership (0.677) (see Table 1 ).

Based on the above results, all continuous variables possess acceptable convergent validity. We employed Fornell–Larcker Criterion to examine the discriminant validity of the variables. This method confirms the discriminant validity of a variable provided that the square root of its AVE is greater than its inter-constructs correlation values ( Henseler et al., 2009 ). Table 2 indicates that the square root of AVE of all variables is greater than their inter-constructs correlation values; hence, these variables exhibit acceptable discriminant validity.

Fornell–Larcker criterion.

The bold value stands for the square root of the AVE value of respective variable.

Structured Model Analysis

The structural model analysis revealed that training and development significantly influence employee retention (β=0.824,ρ < 0.05) ( Table 3 ). In essence, one unit change in training and development brings 82.40% variations in employee retention, and thus hypothesis H1 is supported. Notably, the findings indicated the significant positive impact of the work environment on employee retention (β=0.274,ρ < 0.05), supporting hypothesis H2. Meanwhile, job satisfaction significantly influences employee retention (β=0.824,ρ < 0.05) (see Table 3 ). In other words, there is a 20% change in employee retention among SME employees in China for one unit change in job satisfaction, supporting hypothesis H3.

Hypotheses testing.

The effect of its interaction terms with training and development, work environment, and job satisfaction were estimated. This approach was conducted to examine the moderating effect of transformational leadership. In this case, the interaction term of transformational leadership with various dimensions does not significantly influence employee retention in SMEs in China. The dimensions include training and development (β = −0.081,ρ=0.233 > 0.05), work environment (β=0.021,ρ=0.856 > 0.05), and job satisfaction (β=0.078,ρ=0.101 > 0.05) (see Table 3 ). Therefore, moderation hypotheses H4, H5, and H6 are rejected.

The current study examined an essential topic in organisational behaviour: what factors are vital to foster employee retention in SMEs? Accordingly, a research framework was proposed and empirically tested based on the SET to analyse the impact of multiple dimensions (training and development, work environment, and job satisfaction) on employee retention. Similarly, the conditional effect of transformational leadership was analysed based on this relationship. Current findings confirmed the positive connection among the three dimensions of employee retention. However, the contingent role of transformational leadership was not supported by the proposed relationship. Only three direct hypotheses are supported in this study, and the findings are elaborated below.

The SET was applied in this study to propose the positive relationship of the three dimensions with employee retention. The data analysis purported the significant positive relations of training and development with employee retention among SME employees in China; therefore, supporting hypothesis H1. This finding aligned with previous studies ( Zheng, 2009 ; Umamaheswari and Krishnan, 2014 ; Bibi et al., 2018 ). Past studies reported a positive impact of training and development on employee retention in Pakistan’s universities ( Bibi et al., 2018 ) and Indian ceramic industries ( Umamaheswari and Krishnan, 2014 ). A similar observation can be found in the hotel industry of Bangladesh ( Rubel et al., 2021 ) and multinational enterprises in Asia ( Zheng, 2009 ).

A study among millennial employees in Bangladesh concluded a significant positive effect of green training and development on employee retention ( Islam et al., 2022 ). Meanwhile, training and development reported a significant indirect impact on employee retention through ethical climate ( Yamin, 2019 ) and employee engagement ( Fletcher et al., 2018 ). Another study reported a negative link between the practices of perceived human resource management and turnover intention among SME employees ( Reese et al., 2009 ). Deng (2018) similarly claimed that family business retains migrant workers by fostering training and development programmes. Therefore, organisations must carefully design and implement these programmes to increase employee retention.

The current research indicated a positive relationship between work environment and employee retention. The results supported this proposition, resulting in the acceptance of hypothesis H2, aligning with previous findings ( Pek-Greer and Wallace, 2017 ; Frye et al., 2020 ; Wu et al., 2020 ). Other studies echoed the current study’s results. For instance, the work environment was positively related to employee retention among generation Y ( Frye et al., 2020 ). Meanwhile, a qualitative study in Singapore suggested that a supportive work environment strongly predicts employee retention in its education sector ( Pek-Greer and Wallace, 2017 ). In China, the work environment indirectly influences employee turnover through workplace violence ( Wu et al., 2020 ) and India’s organisational engagement ( Kundu and Lata, 2017 ). Other studies supported the positive impact of the work environment on the employee turnover intention in China’s health sector ( Wan et al., 2018 ; Wu et al., 2020 ).

This study proved the significant positive effect of job satisfaction on employee retention based on hypothesis H3, leading to its acceptance, parallel to previous findings ( Tanwar and Prasad, 2016 ; Frye et al., 2020 ). A study found that job satisfaction positively affects employee retention in hospitality ( Frye et al., 2020 ). Meanwhile, a qualitative study among IT industry employees showed that employer branding vis-à-vis job satisfaction strongly determines employee retention ( Tanwar and Prasad, 2016 ). On a similar note, Liu et al. (2010) confirmed that job satisfaction is a strong predictor of employee retention in China’s health centres. Zhang M. M. et al. (2016) similarly supported this positive relationship among Chinese employees working for multinational enterprises. In the service industry, the aforementioned three dimensions are viewed as vital factors in promoting employee retention ( Mohanty and Mohanty, 2016 ).

The present study introduced the moderating effect of transformational leadership on the relationship of the three dimensions with employee retention. A transformational leader is anticipated to significantly moderate the training and development-employee retention relationship, though the findings do not support this proposition. Hence, H4 is rejected. In this context, there is no prior study on leadership as a moderating variable on the link between training and development with employee retention. However, a study suggested a green creativity climate as the potential moderator of the green practices-employee retention link among millennial employees ( Islam et al., 2022 ).

The moderating role of transformational leadership on the work environment-employee retention relationship was not supported. This result is a clear indicator of the rejection of hypothesis H5. Similarly, there is no study regarding leadership as a contingent variable on the work environment-employee retention association. Thus, the current study offers strong empirical contributions to the field of training and development followed by the work environment. Meanwhile, job satisfaction possesses substantial weightage in employee retention, and this relationship relies on the organisational climate ( Sips et al., 2015 ). The current research established the conditional effect of transformational leadership on the job satisfaction-employee retention link.

However, the present findings do not support hypothesis H6, contradicting Sips et al.’s (2015) findings. The underlying reasons are due to the leaders’ direct role in developing organisational climate rather than their immediate effect on job satisfaction. Moreover, another study revealed that servant leaders indirectly influence employee retention through job satisfaction ( Hassan et al., 2021 ). In Nigeria, a significant positive effect of various elements was found on employee retention in universities. These elements include idealised influence, inspirational motivation, intellectual stimulation, and individualised consideration ( Ohunakin et al., 2019 ).

The current study aimed to investigate the direct effect of factors such as job satisfaction, working environment, and training and development on employee retention in China. This study also intended to examine the moderating role of transformational leadership in the relationship between job satisfaction, working environment, and training and development on employee retention based on cross-sectional data collected from employees in manufacturing SMEs in China. The current empirical findings confirm that all three factors such as training and development, job satisfaction, and the working environment significantly influence employee retention. Among these three variables, training and development have the highest positive effect on employee retention. Yet, present statistical findings do not support the moderating effect of transformational leadership on the relationship of job satisfaction, working environment, and training and development with employee retention.

Theoretical Implications

The present study significantly contributed to the extension of the theory. First, the literature is enriched by offering empirical support on the integrated understanding of the three dimensions and employee retention. Furthermore, extant literature provided contradicting findings on the relationship between the three dimensions. However, the role of transformational leadership as the conditional variable in their relationship is still missing. Second, this study augments the SET by examining the effect of training and development, work environment, and job satisfaction on employee retention. Third, the SLT is extended by providing evidence on the non-significant moderating role of transformational leadership, specifically the correlation of the three dimensions on employee retention.

Practical Implications

The current research offered several recommendations for practitioners and policymakers. Extant literature claims that employee retention is a significant challenge for SME employees in China. In this case, the current work emphasises the three dimensions critical to enhancing employee retention within China’s SMEs. The present findings found that training and development is the most crucial element which increases employee retention within organisations. Chinese SMEs may, therefore, plan their training and development programme more effectively based on their employee’s needs.

China’s SMEs should design training and development programmes that parallel their employees’ career growth. However, previous findings focused on offering training programmes related to company-specific skills rather than general skills. Accordingly, general skills enable employees to effectuate professional opportunities outside the parent organisations. Therefore, these SMEs must evaluate their programmes and perform changes concerning their company-specific skills. Equally important, the top management should employ specific strategies to foster a conducive workplace to improve the work environment and cope with employees’ burnout. Such strategies may include special counselling sessions for stress-induced employees and enforcing flexible work schedules.

The management should centre on developing the work environment, ensuring satisfied employees, establishing open communication, and fostering ideas while offering peer support. Moreover, practitioners should work on the proper fund allocation to develop a positive work environment. The current study reported a significant positive effect of job satisfaction on employee retention. Hence, the human resource and departmental managers are advised to make incremental changes, spurring employee satisfaction, that is, providing a fair salary, rewards, and incentives to their employees. Nevertheless, the moderating effect of transformational leadership does not appear significant in retaining employees for SME management in China.

Based on the above, it is proven that transformational leaders are highly effective in designing an empowered and meaningful work environment. For instance, this form of leadership offers individualised consideration and idealised influence, stimulates intellectually, and motivates inspiration. Thus, practitioners and managers should evaluate the development of leadership. Specifically, in China’s SMEs, policymakers, and managers must critically assess the leadership development programmes in their organisations.

Limitations

The current study possesses several limitations despite the significant theoretical and practical contributions. First, this study was conducted in the northern region of China, hence, increasing the generalisation in the context of China. Moreover, the sole focus on China SMEs may not provide comprehensive information on other emerging and developed economies. Therefore, future studies can enrich the quantitative findings by assessing other developing countries, such as Pakistan and India. The survey form was distributed through the human resource management department, decreasing the chance of randomly distributing the survey form to employees. This situation will hinder the generalisation issue further, especially in a broader population.

Second, this study subjectively measured all continuous variables, and such measurement might influence the presence of common method bias. Practitioners and academicians face extreme difficulty in collecting objective data from organisations. Thus, future endeavours could overcome these limitations by adopting improved research design and employing a qualitative approach to unravel the causal relationship. Third, a direct connection was found between the three dimensions with employee retention. The upcoming research must then investigate the potential mechanisms of these relations. Finally, the current study provided multiple shreds of evidence about the non-significant moderating role of transformational leadership; thus, further examinations must be made on the conditional part of other leadership styles, such as sustainable and servant leadership.

Data Availability Statement

Author contributions.

All authors listed have made a substantial, direct, and intellectual contribution to the work, and approved it for publication.

Conflict of Interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Publisher’s Note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

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Identifying factors for employee retention using computational techniques: an approach to assist the decision-making process

• Research Article
• Published: 31 August 2020
• Volume 2 , article number  1612 , ( 2020 )

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• Zahid Halim   ORCID: orcid.org/0000-0003-3094-3483 1 ,
• Muhammad Waqas 1 , 3 ,
• Cedric A. Edwin 4 &
• Ahsan Shah 1  

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In the today’s competitive environment, employee retention is a challenge faced by many industries. This work aims to identify the factors that influence employee retention. This is done using employees’ feedback and various computational techniques. A survey is conducted within multiple sectors to collect data. The questionnaire is divided into two parts: the first part includes demographic information, whereas the second part contains questions pertaining to employees’ job description and their satisfaction. The questions on the second portion are based on theories like Herzberg’s duality theory, expectancy theory, social cognitive theory, and sociocultural theory. These theories are further linked with factors like motivation, recognition and reward, bullying and work harassment. Later, the frequent items mining technique from the domain of data mining is utilized to identify the frequent factors from an employee perspective toward better retention rates. A test is also conducted to ensure the reliability of the data. The obtained results indicate it to be 87% reliable. A comparison between two frequent items mining methods indicates four times quicker performance of the k Direct Count and Intersect (kDCI) method in identifying key retention aspects from the data. A tool is utilized for analysis of variance (ANOVA) and exploratory factor analysis (EFA) tests to find factors crucial for retaining employees. The result identifies that work environment, reward and recognition, work performance, supervisory support, and income have high impact on employee retention.

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1 Introduction

Human resource is generally the most valuable asset for an organization. Skilled human recourses enable an organization to excel and achieve its objectives efficiently [ 1 , 2 ]. To classify an employee as skillful, her experience acts as a key indicator in addition to other basic credentials [ 3 ]. Organizations prefer to retain their existing skilled employees by offering multiple perks and benefits [ 4 ]. They also try to attract skilled resources using similar measures. At times, such skilled resources are attracted by the competitor organizations. This results in the issue of employee retention [ 5 ]. The issue is dependent on the country’s culture, its economic growth, the number of companies operating in public/private sectors and the availability of skilled human resource [ 6 ]. Interestingly, today`s corporate sector has seen an increased number of employees leaving the previous job to find better opportunities [ 7 ]. Organizations facing this challenge need to adopt new strategies and identify factors to motivate their skilled resources. Human resource (HR) departments maintain an employee retention policy for this task. Such policies are highly dependent on the data from their current staff, organization’s functions, and other previous experiences. Identification of key factors that influence employee retention is an important research undertaking. These factors do depend on the study domain. Previous studies have suggested multiple reasons for an employee to leave an organization. These can be low current pay, competitor offering better career opportunity, organization’s environment, organization’s culture or employees being bullied by the coworkers. On the contrary, an organization can also ask its employees to leave their job due to poor performance, attitude issues or financial crises. All this results in affecting overall health of an organization since new human resource needs to be evaluated, hired, trained, and transferred the domain knowledge. Therefore, skilled employee retention is crucial to many organizations. If an organization fails to retain its current employees, they must invest a considerable amount of money for training new employees again and over again.

Most of the organizations strive to keep their employees satisfied to reduce their turnover rate. Loosing skilled and experienced workers reduces organization's productivity and profitability. Previous studies [ 8 , 9 ] show that to keep “employee happy,” organizations should consider some key factors like knowing the employee well, creating an interactive, innovative, and cultural environment that indirectly keeps reminding your employees to stay loyal to their organization, offering reward, and recognizing best performers. Providing workers with a better leadership also works well in retaining the staff [ 9 ]. Few of the rapidly growing sectors like telecom, information technology and higher education need to know the key factors specific to them that can assist in retaining skilled work force. The work presented here deals with this issue by utilizing computational techniques and the emerging concepts of data mining. The key aim of this study is to find the factors that can increase employee retention in various working sectors. This work uses frequent items mining (FIM) techniques from the domain of data mining to identify factors that commonly exist together to influence employee retention. Finding frequently occurring items in a transactional database is an active research problem. The problem is commonly known as market basket analysis. The applications of finding frequently occurring items range from core computer science problems to a range of multidisciplinary areas of research. The aim of market basket analysis is to find all items in a dataset that occur together above a certain frequency [ 10 ]. Later, these frequently occurring patterns are analyzed to find associations between various factors. This study is based on following research questions.

RQ1: Which factors do the computational techniques identify as crucial for retaining employees and what is the relationship between those factors across multiple sectors in the developing countries?

RQ2: Which demographic and organizational environmental factors influence employee retention across multiple sectors in the developing countries and how these factors rank against each other?

To address the abovementioned questions, this research uses a qualitative approach. The research questions are answered through a questionnaire in this work. A survey was distributed in the major cities of Pakistan such as Karachi, Lahore, Rawalpindi, and Islamabad. The survey questions were built based on the factors such as recognition and reward, advancement and growth, relationship with supervisors, work conditions, income, ethical behavior, organizational satisfaction and commitment, bullying and work harassment. These factors helped to identify the features and their correlation for employee retention. The data analysis was divided into six stages: These include (a) loading raw data from the survey forms to a text file, (b) analysis of data through one-way ANOVA, (c) identification of correlating factors through frequent items mining (FIM), (d) analysis of data through exploratory factor analysis (EFA), (e) analysis of data through Pearson correlation (PC), and (f) analysis of data through regression analysis (RA). The association rule mining technique, which is preceded by the FIM method, is used to analyze and interpret the data. The ARM is a tool that identifies the frequently occurring factors in the responses with other features. The Statistics Package for Social Science Software (SPSS) is also used to analyze the data. One-way ANOVA is used to see a significant difference in data, and the EFA is used to interpret the variables. The Pearson correlation is used to observe the correlation between independent and dependent variables, and regression analysis is used to study the impact of independent variables on the dependent ones. A combinational approach is applied to the data that helps in analyzing the responses.

1.1 Present work aim and motivation

The employee retention is a growing problem in today's modern world, and it needs to be solved using various retention strategies to improve the employees' turnover rate. There is a demand for skilled workers in areas such as hospitals, software industry, universities, banks, and many other emerging sectors. However, unfortunately, the number of qualified employees at times remains low. Organizations are therefore in a need to find ways to reduce their turnover rate. This study aims to determine the factors that can reduce such organizational problems. Specifically, the task here is to determine what factors are used for higher employee retention in various organizations. This study is focused to find the features that influence employee retention and the relationship between independent factors and employee retention. The findings will be useful for many organizations to enhance their retention strategies. This work is motivated by the employees’ perspective rather than the organizational point of view. Therefore, the finds of this work are based on the data collected from various mid- to early-career individuals instead of taking the decisions-makers’ perspective.

The rest of the paper is organized as follows. Section  2 contains a detailed literature review on employee retention and other important factors for the same. Section  3 lists the methodology utilized in this work. Section  4 contains the results obtained. Section  5 lists the policy implications. Finally, Sect.  6 concludes this work and also mentions a few of the further research directions.

2 Related work

This section covers the previous work on employee retention. The section is organized factorwise where the previous work on each factor that can help retain employees is described. The section also contains relevant theories that can help build a conceptual framework for this or other such studies. Previous studies have shown the following factors that influence employee motivation to continue working with the same organization, working environment, organization commitment, reward and recognition, work performance, supervisor support, and income.

2.1 Working environment

The working environment is a factor in an organization where employee tends to show their positive abilities and leadership skills. Authors in [ 11 ] suggest that a positive working environment can have good impact on the employees. They state that different organizations may have dissimilar working environment depending on the clients the organization deals with. Ritter et al. [ 12 ] suggest a working environment that includes a culture where it involves good communication between co-workers, leadership style, and professional growth. In retaining employees, one needs to have a healthy working environment. The good working environment requires an appreciation for others, a strong relationship between colleagues, and no harassment [ 13 ]. Christmas et al. [ 14 ] suggest retaining an employee with good professional skills by improving the organization’s working environment. In order to improve their working environment, organizations should facilitate their employees and provide them necessary equipment that can help the organization in better management. The work in [ 15 ] presents a study on employee engagement. Their aim is to find correlation between purpose and joy in a work environment among the managers and their employee engagement. The domain of study is medical profession, and the data are collected from nurses. The authors use Cronbach's alpha to gauge internal consistency in a population sample. The obtained results do not find any significant correlation between nurse manager meaning and joy in their work and the employee engagement. Their study is limited to a specific set of individuals, and the same method if applied to a different dataset may yield diverse results. The work in [ 16 ] presents a study on employees’ perception on formulation of human resource policies. They also cover the implementation of various human resource retention plans in their work. The focus domain of their work is the hospitality industry. The data in their work are primarily obtained through personal interviews of employees in a specific region within a few cities.

2.2 Organization commitment

Studies have shown that employees with higher commitment stay with the organization for a longer period, whereas those having low commitment leave the organization during early stages. The employees with higher commitment also desire to stay in the organization and work hard with a positive attitude. Previous work identifies that organization's commitment is related to employees’ turnover. Higher rate of commitment level of the organization results in lower turnover. Bashir et al. [ 17 ] represented three dimensions of organizational commitment. Affective commitment is the sense of attachment toward the organization and relation with employee’s characteristics, work performance, and structure of the organization [ 18 ]. For example, an employee stays in the organization because she knows their value in the organization [ 19 ]. Continuance commitment is the realization of a cost that is related to the organization [ 20 ]. For instance, employees will stay in the organization because they know if they leave, they have to face a higher risk of not getting a new job [ 18 ]. The normative commitment deals with an emotional feeling of employees [ 17 ].

2.3 Reward/recognition and work performance

The terms reward and recognition have high impact on employee retention. These factors are used by organizations to motivate their employees. A reward is given by the organizations to the employees for their best performance, which keeps them motivated. The work in Silbert et al. [ 21 ] suggests that organizations can offer reward in the form of cash, bonuses, promotion, recognition, or announcing a worker as an employee of the month, offer trip, and other benefits. According to the authors, organizations present reward to employees so that they keep giving their best performance. Such organizations believe that reward and recognition keep employees motivated for future performance. It is important that employee should think that their perceptions are valued by the organization when they are rewarded.

Work performance is another factor that has an impact on employees and the organization. It is a critical factor for retaining employees. Reviewing the performance of employees can help both the organization and the employees. Employees can be assisted by telling them where they stand in the organization and what are their strengths and weaknesses. In a few cases where employees are highly talented, an increased pay or other benefit does not motivate them; however, performance appraisal does. The organization implies factors like performance appraisal, leadership, reward and recognition, training, and development in order to keep employees motivated to work harder .

2.4 Supervisor support

Supervisor support is defined as a relationship between employees and managers, and it is a factor that has huge impact on the employee retention. The employees tend to stay in an organization when they have good communication skills and strong support from supervisors. When employees have a supportive environment that increases their ability and comfort level of working, they tend to produce excellent results. The authors mention that an organization should be a place where the employee tends to stay. For this, the supervisors should be trained so that they can build a comfortable working environment for the staff [ 22 ]. A study suggested that improved employee’s performance results in a tendency to improve the capabilities of their work [ 23 ].

2.5 Income-related benefits

The work in [ 24 ] stated that employees and supervisors are motivated to work effectively when they are paid and provided with other benefits. There are a number of reasons for employees to be dissatisfied with a job. In addition to an individual’s domestic issues, income is one of the reasons when employees feel dissatisfied [ 25 ]. To improve retention strategies, organizations should periodically increase income scales and other benefits such as good working environment, leadership skills, the workload that employee can bear, and flexible timings. Deery et al. [ 26 ] find other factors such as flexibility in work, learning, and training, provision of resources to employees and reward system to improve employee retention. Gevrek et al. [ 27 ] explore the Schadenfreude effect in employee retention. They study five different salary rises in their work. Their study is based on a dataset constructed over a period of five years by obtaining data from university employees. The obtained results suggest that a one-time, small increase in compensation does not influence employee retention. The work in [ 28 ] aims to identify the retention strategies that have an actual effect on the employee turnover. They present a procedure to build an uplift model for testing the effectiveness of the different strategies for the task at hand. Their uplift model is based on a machine learning classifier, i.e., random forest. It is used for personal treatment learning estimation.

2.6 Bullying and work harassment

Bullying is considered as one of the serious problems at the workplace. Studies conducted worldwide identify increased bullying factor in organizations [ 29 ]. There are direct negative effects of bullying. It is stated that violence in the workplace also increases the factors such as bullying, workplace harassment, and emotional abuse [ 30 ]. The work in [ 31 ] examines the correlation between workplace bullying and high-performance work practices (HPWPs). They also suggest a few possible solutions. The obtained results suggest a positive effect of HPWPs on employee well-being. They also observe that reduced role conflict has an influence of HPWPs and less bullying. A limitation of their work is reliance on single-source, self-reported data. This may have caused biased views.

2.7 Factors that improve retention

There are a few other factors that can improve employee retention. These have been identified by an assortment of research contributions. Past work states that retaining talented employees should be the organization's primary focus. In their work, health, success and safety are correlated with retaining the employees. The studies in [ 32 ] and [ 33 ] identified some strategies for retaining employees and improving employee productivity by including factors in organizations such as appreciating employee on a good performance, mentoring, management, morale, and employee development training. Work in [ 34 ] identifies factors such as leadership skills, utilization of skill, compensation, safety and security and professional success to improve employee retention. A study [ 35 ] conducted in five companies of India on hundred managers and staff concludes that the factors such as income, training possibilities and careful selection of employee improve job satisfaction and commitment. It also has an influence on retaining employees. Another study on middle managers of Nigeria concludes three factors: compensation, advancement growth and affiliation, to be the reason to stay within the organization [ 36 ]. A research on hotel employees discovered that employee tends to stay in an organization for a longer period if they are satisfied with their job and the environment of the organization. The communication has always been a factor through which one can understand the employees better. Studies have shown that poor communication between co-workers leads to a poor employee retention. The economic circumstances and market forces in the world have an impact on the employee’s decision to stay or leave an organization. The certainty of an employee leaving a job and finding another job is when economic conditions are better. A research study found that the better the economic surroundings, the higher are the chances for an employee to leave the organization. Somewhat similar work that utilizes computational methods [ 37 , 38 , 39 , 40 , 41 ] to predict customer churn can be seen in past works. Similar computational methods [ 42 ] can be utilized to predict the retention period of a particular employee in an organization. However, for this, the historical data related to the employee and the company will be required to train the model.

2.8 Employee retention factors in the developing countries

Compensation is considered to be a key factor to retain employees in the developing countries. In this context, the work in [ 43 ] presents a case study of Hong Kong and China. The data are collected from 704 respondents to identify the important compensation components by various organizations. The study also identifies the six most important compensation components from an employee perspective. In Hong Kong, these five factors are salary, merit pay, end-year bonus, annual leaves, mortgage loan, and profit sharing, whereas for China the first three factors are the same as those for the Hong Kong and the remaining three include housing provision, overtime allowance, and individual bonus. This suggests that the employee retention factors vary between various countries and economies. Lall et al. [ 44 ] evaluate the analytical framework of the globalization–employment relationship in the developing countries. The focus of their study is on the manufacturing sector employees. It is observed in the study that globalization may cause an outflux of the talent pool from the developing/underdeveloped countries to the developed nations. Lowell et al. [ 45 ] present a report on the impact of high-skilled mobility from the developing countries. The report focuses on eight countries, namely Bulgaria, South Africa, Argentina, Uruguay, Jamaica, India, Philippines, and Sri Lanka. They identify four issues yet to be researched about. First is to evaluate the particular channels of impact generated by highly skilled emigration. Second is to study the range of feedback effects on the total emigration impact. Third and fourth are how high-skilled migration increases country trade and the need for documentation. Bhatnagar et al. [ 27 ] present talent management strategies for employee retention in a developing country, i.e., India. The author finds that low factor loadings indicate low engagement scores at the beginning of the career. However, high factor loadings at intermediate stages of employment are indicative of high engagement levels. A key finding is that good engagement results in higher retention in the developing countries. The work in [ 46 ] utilizes a new Cultural Intelligence (CI) measure to empirically study the evidence on several key antecedents of CI across five countries. The measure is named as Business Cultural Intelligence Quotient (BCIQ). This or a similar measure can be adopted for employee retention.

Based on the abovementioned literature survey, the conceptual framework developed for the current study is demonstrated in Fig.  1 . As evident from this literature review, a detailed study that identifies key employee retention factors and correlates them with each other using a computational technique for the developing countries is needed. This work aims to bridge this gap.

Conceptual framework of the proposed work

3 Methodology

This section describes the methodology used to collect and analyze the data. Moreover, the section also describes the research design, area and population selected for the study, its sampling procedure/size, and the data collection procedure. This work presents a quantitative research that will answer questions asked from multiple organizations. The queries are related to factors such as work environment, work performance and motivation, organization commitment, and satisfaction, reward and recognition, income, supervisors support and bullying, and work harassment.

3.1 Research design

For the current research study, a quantitative research mechanism is carried out via questioner distribution to a targeted population. The responses were measured through the statistical instrument. Quantitative research is to be carried out for a huge number of population, and they are tested by mathematical and statistical instruments. On the contrary, qualitative research is not appropriate for this research study as qualitative research deals with data related to observation and a specific style. It does not statistically describe findings. The exploratory research answers the “why” and “how” questions, whereas descriptive research focuses on four Ws, namely “what,” “where,” “when,” and “who.” Therefore, the exploratory research methodology is also not applied here because of the close-ended nature of the questioner.

3.2 Theoretical framework

The concept of employee retention falls under the theoretical framework of leadership, motivation theory and practice. The theoretical framework of this research is specifically based on the work of Latham [ 47 ]. Latham’s theory not only provides a chronological history of motivation theory and practice, but also presents an “insider view” on leadership and motivation. He presents six distinct eras of how motivation theory and practice has evolved over the past 110 years. The first era, according to Latham, presents the birth of behavioral theory in management and motivation. Industrial and Organizational (I/O) psychologists in this era were not interested in studying inner motivations and considered money to be the primary motivator at the workplace. The second era is marked with the trend of measuring the impact of attitudes on work and employee motivation. This era placed emphasis on the decision-maker and revealed the importance of identifying variables in building theoretical frameworks. The first and second eras are deemed obsolete for the current research due to their unidimensional approach toward measuring employee motivation. However, both these eras are fed into the proposed work indirectly. In the third era, the focus turned toward assessing and forecasting factors that influence employee motivation. This era had the strongest impact on organizational practices in the developing countries. The fourth era introduced the notion of scientific theories and methods in leadership and motivation research. The present research is based on the leadership and motivation theories of the third and the fourth era due to their relevance in the developing countries. According to Latham, we are currently in the fifth era and this period is marked with putting the practitioner at the center and devising frameworks that proactively and holistically aid in taking well-informed decisions. However, the sixth era is the era of the future. Latham predicts that the future of leadership and motivation theory will take deeper roots in psychology and consider the emotions and beliefs of employees. This research aims to provide crucial lessons for practitioners in the fifth and sixth eras.

3.3 Geographical zones

This study is carried out in four major cities of Pakistan, namely Karachi, Lahore, Rawalpindi, and Islamabad. The choice of these sites is made based on their population and availability of larger number of public and private organizations. Karachi is one of the biggest business hubs and also has many other service-oriented companies. Lahore is one of the known cities of the Punjab province, the populationwise largest province of Pakistan, where people are struggling to be retained in their organization, and most of the research data were collected from this zone. Islamabad, which is the capital city of Pakistan, has many organizations, and data were also collected from here. Figure  2 shows an overview of the general research design.

Overall research design

3.4 Population of the study

For this study, the target group was all categories of sectors where we could get a significant number of employees. This was done to analyze the factors which are generally applicable to all possible working classes instead of focusing on just any particular group. The organizations in which this study is carried out are large appliances venders, corporate sector, schools, universities, banking sector, government organizations, hotel industry, information technology companies, hospitals, professional engineers, and telecommunication sector.

3.5 Sampling size and data collection

The sample size is an illustration which tells about the targeted population in the research. To carry this research, a target of 1000 was set and 853 responses were received. However, to achieve more responses, the targeted population could have been increased. For the current study, enough samples were received, i.e., 85.3% turnout rate; therefore, the target was not further increased. Figure  3 lists an overall summary of the data collected. Both primary and secondary methods were used for data collection. It is important for the researchers to test the result of hypothesis, and it is also important to collect data through secondary methods to save time.

Summary of the collected data

3.5.1 Primary data collection

Primary data collection is a method of collecting genuine data. Questioners are the primary data source in this research. These were developed based on existing theories on employee retention. The collected data help to analyze patterns through FIM technique and Statistical Package for the Social Sciences (SPSS). Questioners are the best way to gather data, and it is the most effective and efficient mechanism through which one can measure various factors. This study was conducted on many individuals in diverse organizations. Firstly, all forms were distributed in multiple organizations and within one-month the forms were returned. The data were recorded in a Microsoft excel sheet for further process. Moreover, data analysis was performed through FIM and SPSS.

3.5.2 Secondary data collection

Secondary data collection method was used for reviewing theories and literature from many sources such as research papers, articles, and thesis reports. These sources were used to relate the factors that influence employee retention and learn employee retention strategies.

3.6 Hypothesis

Properly formalized hypothesis enables to guide the research toward appropriate simulation and experiments in order to answer key research questions. For this study, seven initial hypotheses were formed. These are listed as follows:

H1: Better work environment will result in higher employee retention.

H2: Higher organizational commitment results in higher employee retention.

H3: Increase in reward and recognition system results in higher employee retention.

H4: Increase in the individual’s work performance results in increased employee retention.

H5: Higher support and supervision by managers result in higher employee retention.

H6: Increase in employee income results in increased employee retention.

H7: Higher rate of bullying and work harassment results in lower employee retention.

3.7 Research instrument

When large amount of data is needed for a study, a survey seems the most effective way to do the needful. The questionnaire for this study was designed using Google forms Footnote 1 , and also a few instances were printed in the hard copy. The survey form was divided into two sections: the first section asked for the demographic information such as gender, age, experience (overall), experience (with the current organization), organization name, organization category, and monthly income range, whereas the second section asked for the factors affecting employee retention. Moreover, the second section was comprised of 54 questions and these questions were measured by a five-point Likert scale ranging from one to five, where 1 showed strongly agree, 2 showed agree, 3 indicated neutral, 4 showed disagree, and 5 showed strongly disagree. The questions contained in the survey are listed in “ Appendix .”

A few constraints and problems were faced while conducting this study. Some companies refused to fill the survey because they thought that the survey was a bit lengthy and it will take their time. Few did not return the required number of forms requested from them. There were a very few people who did not understand English. For such individuals, questions translated into their local language were used.

4 Results and findings

This section presents the experiments conducted and their results. These experiments are mainly conducted using SPSS as a tool and FIM as a data mining technique. The demographic profile utilized here includes gender, age, overall experience, experience with the current employer, marital status, and income. The experiments are conducted mainly to answer the following questions.

Using computational techniques, which factors are crucial for retaining employees and what is the relationship between those factors across multiple sectors in developing countries?

Using computational techniques, what is the impact of motivation, recognition and reward, advancement and growth, commitment and satisfaction, work environment, individual’s performance, support and supervision by managers, employee income, bullying and work harassment on employee retention across multiple sectors in developing countries?

How do these factors improve the organization’s overall environment and increase the rate of retaining employees?

4.1 Demographic profile

Getting key information about the respondents is important before drawing conclusions about any finding. For the current study, 36% of the participants were female and 64% were male. For this study, age was categorized into five ranges: less than 20 years, between 20 and 30 years, between 30 and 40 years, between 40 and 50 years, and greater than 60 years. According to this categorization, the highest response was obtained from the 20–30-year bracket, whereas the second highest response was from 30–40 category. Based on experience, the highest number of responses came from those who had work experience of less than five years and the lowest number of responses was from individuals having work experience greater than 10 years. Among the respondents, 45.6% were single and 54.1% were married. The highest response rate, i.e., 17.5%, was from the individuals working in the higher education sector. From the salary perspective, maximum responses were from those having annual income between 4329 and 8658 USD and the lowest response rate was from those respondents who had an annual income greater than 16,500 USD.

4.2 Factor analysis

This study focuses on various factors such as working environment, organization commitment, reward and recognition, work performance, supervisor support, income, bullying, and work harassment for employee retention. Table 1 lists the mean, standard deviation, and significant difference between male and female respondents using one-way ANOVA for the employee retention factors. When both male and female were asked about the working environment in their organization, the mean for males was 1.75 and for females, this was 2.10. This indicates that male agrees on working environment to be important for employee retention, whereas females neither agree nor disagree. There was no significant difference between male and female considering organization commitment. Considering this factor, the mean for male participants is 2.52 and for female it is 2.55 indicating their disagreement. The reward and recognition factor has a significant difference. The male participants have a mean of 2.00, and females have a mean of 2.34 which lies in the agreeing range. The factor work performance has a significant difference where the mean value for males is 2.45 indicating their agreement and females have a mean of 2.90 that shows they neither agree nor disagree. When questions related to the supervisor’s administration were asked, the results indicate no significant difference between males and females. For the factor of income, there is a significant difference observed in the male and female groups, where the mean for men is 2.44 and for women it is 3.21, indicating their disagreement.

Table 2 lists the results when considering all factors and grouping these by age. The results show the highest mean for bullying factor and work harassment, considering the age-group greater than 60. The work environment has the lowest mean, i.e., 1.41 for the age-group of 40–50, whereas the highest standard deviation of 1.672 is for the factor work performance considering participants having age less than 20 years. The lowest standard deviation is 0.840 for the factor work environment within the age-group of 40–50. A significant difference is observed for the factors of working environment, reward and recognition, supervisors support, and income within the various group of ages. As shown in Table 3 , all single and married respondents have the highest mean and standard deviation in bullying and work harassment factors and the lowest mean and standard deviation in working environment factor.

Table 4 lists the results grouped professionwise. The factor work environment here got the highest mean in the domain of medicine, and the lowest mean is obtained for the individuals working in telecommunication sector. The highest standard deviation is for hotel industry, while the lowest standard deviation is for the vender category. The organizational commitment has the highest mean value in the education sector (schools) and the lowest mean in the banking sector. However, the highest standard deviation is noted in government employees and the lowest standard deviation is observed in employees of the professional engineering companies. The reward/recognition being the third factor has the highest mean and standard deviation in hotel industry, and that has the lowest mean and standard deviation in telecommunication sector employees. The factor work performance has the highest mean in medicine sector and professional engineering, while it has the lowest mean in the field of education sector (schools). The highest standard deviation of work performance is observed in the hotel industry, and the lowest standard deviation is in the professional engineering sector employees. The highest mean and standard deviation of supervisor support are also for the hotel industry, and the lowest mean and standard deviation are that of the telecommunication department. The highest mean of income is observed in the telecommunication department, whereas the lowest mean is observed for the individuals working in the hotel industry. The income factor has the highest standard deviation in medicine domain and the lowest standard deviation in the government employee. The highest mean of the factor bullying and work harassment is observed in the education sector (schools), and the lowest mean is observed for the hotel industry. There is no indication of a significant difference in factors except for bullying and work harassment.

Table 5 lists the results grouped salarywise. The work environment factor has the highest mean between those respondents who earn more than 27,166 USD annually and the lowest mean for those respondents who earn between 8767 USD and 16,235 USD. The exploratory factor analysis is used here to uncover the underlying patterns. By applying EFA on two categories of experience, the results show that these factors can further be divided into three groups. Table 6 summarizes the results of this.

4.3 Hypothesis

To test the hypothesis formed in Sect.  1 , a correlation between various employee retention factors is computed (see Table 7 ) and the regression analysis is performed (see Table 8 ). Based on these, the formed hypothesis is either accepted or rejected.

4.3.1 H1: Better work environment will result in higher employee retention

The findings for hypothesis H1 indicate that the working environment is positively correlated with employee retention, which means a better working environment in an organization results in higher employee retention. The p value is less than 0.05 which means that there is a significant relationship between working environment and employee retention. The working environment`s B value is 0.294, which means that this factor has 29.4% of an impact on employee retention. The t value also shows that it has high impact on employee retention. Based on these results, H1 is accepted.

4.3.2 H2: Higher organizational commitment results in higher employee retention

The results in Tables 7 and 8 indicate that organizational commitment is slightly correlated with employee retention. The p value for this suggests that there is no significant relationship between organizational commitment and employee retention. The organizational commitment`s B value is 0.034, which means that this factor has 3.4% influence on employee retention. The t value also shows that it has low impact on employee retention. Therefore, H2 is rejected.

4.3.3 H3: Increase in reward and recognition system results in higher employee retention

The findings in Tables 7 and 8 for hypothesis H3 indicate that reward and recognition is positively correlated with employee retention. The p value for this is less than 0.05, which means that there is a significant relationship between reward/recognition and employee retention. For this factor, B value is 0.330, which means that this factor has 33% impact on employee retention. The t value also shows that it has a significant impact on employee retention. Therefore, this results in accepting H3.

4.3.4 H4: Increase in the individual’s work performance results in increased employee retention

The findings for hypothesis H4 indicate that work performance is positively correlated with employee retention. The p value is less than 0.05, which means that there is a significant relationship between work performance and employee retention. The work performance's B value is 0.311, which means that this factor has 31% of an impact on employee retention. The t value also shows that it has significant impact on employee retention. Based on these figures, H4 is accepted.

Accepted or rejected hypothesis

4.3.5 H5: Higher support and supervision by managers result in higher employee retention

The findings for hypothesis H5 in Tables 7 and 8 indicate that supervisor support is positively correlated with employee retention. The p value is less than 0.05, which means that there is a significant relationship between supervisor support and employee retention. The B value of supervisor support is 0.253, which means that this factor has 25.3% of an impact on employee retention. Therefore, H5 is accepted.

4.3.6 H6: Increase in employee income results in increased employee retention

The findings for hypothesis H6 indicate that income is positively correlated with employee retention. The p value of this factor is also less than 0.05, which means that there is a significant relationship between income and employee retention. The B value for income is 0.299, which means that this factor has 29.9% impact on employee retention. The t value also shows that it has high impact on employee retention. Based on these figures, H6 is accepted.

4.3.7 H7: Higher rate of bullying and work harassment results in lower employee retention

Finally, the findings for hypothesis H7 indicate that bullying and work harassment is slightly correlated with employee retention. The p value for this factor is not greater than 0.05, which means that there is no significant relationship between bullying and work harassment and employee retention. Therefore, H7 is rejected. Figure  4 pictorially represents the acceptance or rejection of the seven hypothesis.

4.4 Frequent items identification

The FIM technique [ 48 ] from the domain of data mining is utilized here to find factors that frequently occur together to influence employee retention. The FIM is used over transactional databases to find all those items that occur together above a certain frequency, known as the minimum support. In order to utilize FIM in this work, first all responses were converted in a database transaction format. Each row of the database represented all responses from a unique respondent. This formed a dataset with 853 records. Later, this dataset was partitioned into various categories to identify frequently occurring job retention factors for a specific group. This categorization was done for the following attributes: gender, marital status, overall experience, job description (organization), and income. Table 9 lists the results of this experiment. There are a number of algorithms available to extract the frequent items from a dataset. The output of all these algorithms is the same. However, they consume different amounts of execution time. From an application point of view, it does not matter which FIM algorithm is utilized as long as the dataset size is not extremely large. This work utilizes the AIM Footnote 2 (Another Itemset Miner) implementation of the FIM technique to extract patterns. For the sake of completeness, Fig.  5 shows a comparison of time consumed by AIM against another FIM algorithm, i.e., k DCI ( k Direct Count and Intersect) for various minimum support (minSup) values. The figure indicates that k DCI is quicker that AIM in finding the frequent itemsets.

Performance comparison between kDCI and AIM in finding frequent items

4.5 Reliability test

A reliability test was conducted before any other test to make sure that the data are reliable. The Cronbach’s Alpha test was performed for the reliability of the data, and results indicated that the collected data were 87% reliable. Table 10 lists the results of this. The value of Cronbach’s alpha ranges between 0 and 1. A Cronbach’s alpha value greater than 0.6 is considered reliable. As shown in Table 10 , the value obtained for the collected data is 0.874 indicating the reliability of the collected data.

4.6 Comparison

This section presents a qualitative comparison between the present work and past contributions regarding the identification of factors that influence employee retention. The comparison is based on seven factors, i.e., has the work considered multiple sectors, are the data mining methods utilized, is there the use of computational methods in drawing conclusions, what is the sample size, what is the geographic location of the study, is the study employee centric or organizational centric, and does the survey contain open-ended questions. The choice of comparison methods is made here due to their closeness to the task at hand and recency. Table 11 lists the quantitative comparison. It can be observed that the present work utilizes data mining methods and covers multiple domains as compared to the past works. Additionally, the majority of the past work utilizes the computational methods to gain insights about the employee retention. The table also indicates that the use of open-ended questions is rare while collecting the data. A few works have not mentioned their sample size; therefore, this field is left blank in the table.

5 Policy implications

Labor laws in many developing countries are at a nascent stage. Debates on employee rights, such as medical cover [ 49 , 50 ], provisions of sabbaticals, data protection, diversity management, investing in human resource through training and development programs, etc., are still isolated practices only functional in a handful of multinational organizations in the developing world. This research provided an in-depth understanding of the impact of demographics on employee retention across multiple sectors, which will enable policymakers to (a) develop retention strategies in the backdrop of severe competition, (b) improve organizational long-term sustainability, (c) improve organizational brand name through providing better working conditions to employees, and (d) understand the dynamics of employee retention across multiple sectors and industries.

Increased global competition has inevitably led to a severe competition in talent acquisition and retention. Organizations, today, are not only competing for customers, but also for employees. Thus, losing a resourceful human talent can be devastating for an organization. If an organization is facing quick turnover, this can adversely affect its long-term sustainability. Talented employees are not only hard to find; they exist in clusters. Therefore, if an organization loses a dissatisfied employee, a bad word-of-mouth gets spread about the specific organization, which may then find it extremely hard to attract talented employees. Conversely, if an organization has a low employee turnover, the organization shall be able to contest and survive in highly competitive markets, ensure long-term sustainability, and celebrate a good brand name.

For policymakers, this research provides the basis to understand and re-evaluate the systems and practices of motivation; recognition and reward; and advancement and growth, by placing a strong emphasis on organizational justice. Policymakers shall be able improve their decision making through this research by considering numerous variables, which may impact employee behavior, specifically retention. This work enables policymakers to systematically diagnose and comprehend organizational structures and communicational channels in light of employees’ relationship and authority dynamics with the supervisor, thus redefining organizational esprit de corps in the developing world across multiple sectors. Through this research, policymakers shall be able to decipher the complexities of work conditions and highlight aspects which contribute to or pose a challenge to employee retention. Policymakers are interested in developing customized policies for clusters of employees who have similar ethical behavior and income level. This research dived deep into how ethical behavior and income level impact employee retention and how policymakers should distinguish between employees of varying ethical behaviors and income levels. Another policy implication of this research is that it shall enable policymakers to develop policies and practices which place emphasis on organizational commitment and satisfaction. The results revealed a strong relationship between organizational commitment and satisfaction, and employee retention. Policies and practices addressing organizational commitment and satisfaction shall not only ensure that talented employees are retained in the organization, but shall also attract new and budding talent more effectively and efficiently. Finally, bullying and work harassment has become a serious concern for several organizations in the developing countries. Gender discrimination discourages several women in the developing countries to either quit or switch their workplace. Bullying, harassment and gender discrimination are not only severely unethical, but also bring the organization in the limelight for the wrong reasons. Thus, this research provides policymakers with the insight and tools to develop proactive policies to discourage bullying and work harassment and encourage fair and equal treatment of all employees.

In a nutshell, at a microlevel, this research delivers policymakers with the right variables and tools to assess the state of employee retention in an organization. At the macrolevel, however, this research provides an in-depth analysis of trends and patterns of employee retention across multiple sectors. The research sheds light on how policymakers can encourage organizations to improve employee retention through training and development programs, medical cover, sabbatical, flexible working hours, etc. Through these techniques, policymakers can benchmark best practices for employee retention. Moreover, this work highlighted which sectors are severely suffering from low employee retention, thus allowing policymakers to target specific sectors/industries on a high-priority basis.

Like any other research, there were a few limitations of this study. The aspect of training and development was not considered in this work. Another limitation was that few respondents thought that survey forms were too lengthy and even some organizations rejected to fill out these. This study was only limited to the boundaries of Pakistan. The findings may be different if applied to a different country or may vary if considered different demographic variables.

6 Conclusion

Retaining skilled employees has always been a major concern for any organization across the globe. Organizations spend a significant amount on their training and development programs for this purpose. This work presented computational methods to identify factors for employee retention using their feedback collected through a questionnaire. The focus here was to identify factors to improve employee retention strategies based on the computational methods. A survey was conducted mainly within four sectors, namely health care, business, academics, and banking sector, to collect the data. The survey was divided into two parts: the first part included demographic information and the second part contained questions pertaining to employees’ job description and their satisfaction. The questions on the second portion were based on theories such as Herzberg's duality theory, expectancy theory, social cognitive theory, self-determination theory, social bonding theory, and sociocultural theory. The findings showed that the factors such as work environment, organization commitment, reward and recognition, work performance, supervisor support, income and bullying and work harassment have an impact on demographic profile. When these factors were correlated with employee retention, the statistical tests illustrated that, except organization commitment and bullying, all variables were identified to be strongly linked with employee retention. These factors have tended to have a power through which organization can improve the working environment and facilitate not only their client but also the employees.

From the extension point of view, there are many other factors that can be used for employee retention other than those utilized here. These may include training and development, medical cover, sabbatical and paid leaves, to name a few. This research can extend to multiple countries, and the effect of various cultures on the employee retention can be studied. The survey form can also have a few open-ended questions so that the investigation can better identify what an employee feels like when given an option to mention any factor of her choice.

Data availability

The data that support the findings of this study are available on request from the corresponding author. The data are not publicly available due to containing information that could compromise the privacy of research participants.

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Halim, Z., Maria, Waqas, M. et al. Identifying factors for employee retention using computational techniques: an approach to assist the decision-making process. SN Appl. Sci. 2 , 1612 (2020). https://doi.org/10.1007/s42452-020-03415-5

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Introduction

What is employee turnover, capital one and employee attrition, literature review, loss of knowledge, data analysis / findings, conclusions, recommendations, list of references.

Organizational changes and financial turbulence are the main reasons for both voluntary and involuntary employee turnover in any organization. If a company wishes to recruit a raw candidate, it has to spend a lot on recruiting, training, placing and employing that new candidate into its workforce. If such trained recruits and well experienced personnel leave the organisation, the organisation would loose heavily both financially and administratively.

The main cornerstone of any organisation is its high performing employees. If such high performing employees started to leave the organisation, then it signals some warning sign that the organisation is in bad weather. Further, there exists negative kinship between turnover and performance and employee turnover seems to be the major conclusive evidence , signalling that high paid employees would less likely to desert than low paid employees.{ Hong & Chao 2007:217). If an organisation is frequently looses high paid employees , then it has to invest more on training , rehiring and employing new recruits in their position.

However, attrition by low paid employees may not hamper the growth of an organisation as it will easily recruit new employees in their place and these low paid employees may not be bestowing to the fulfilment of an organisation’s vision and mission.

Employee turnover is a serious benchmark issue. Since, it includes recruitment cost and filling vacancies, loss of productivity from jobs remaining vacant and the costs associated with imparting of training to new recruits , enhanced operating cost which lessen output, and eating into corporate profits. The costs of employee turnover estimation may differ widely and based on whether all cost elements are taken into considerations.

There are three well-authenticated components of employee turnover cost are as follows:

• Staffing costs – This includes the expenses relating to the recruitment of job applicants like job-board postings or advertising, checking out the background of the applicants, past track record , prior employment checks, medical screening, and so on.
• Vacancy — while a situation remains vacant, the productivity will be paralysed and the productivity of the overall company staggers to cope with being understaffed.

Training – The time of substitute employee, other temporary employee’s time and valuable possessions like online courses, workbooks, training fees, documentation that completion of training and time and amount spent to train each new associate and to smooth the progress of their changeover to full productivity. This being a technology oriented era, recruitment is being made with use of technology like online skill test, psycho analytical and objective test. Online job test also helps employer to minimise employee turnover as it enhances employee motivation and job satisfaction.

What is the Average Turnover Rate?

For all industries, the average employee turnover rate is about 24% per annum. It is somewhat greater in the “Retail” industry and ranges approximately about 40%and slightly lower in others like transportation, it ranges about 17% and in manufacturing it ranges about 13%.

The effect of employee turnover

For any business leader, appealing, developing and retaining talented employees should be the number one priority and this is due to ever increasing employee turnover, an aging population, and a contracting workforce, thus, retaining the talented employee is like a war for talent and offers executives and managers with the mechanism that is required to win that war.

In the recent past, companies have gone to combat over product leadership, quality, price, and customer service. However, now the next great corporate struggle will be the war for talent. The top management and coaches of all flourishing sporting franchises are personally aware that their future success reckons on their capacity to magnetise and retain talent. Thus, retaining the talent has become number one priority now. According to Business Week that over the next decade, about 22% of senior management and 25% of all other management positions across all industries, regions, functions will become vacant.

Further, a shrinking workforce, aging population, and a growing intolerance for the illegal immigrant population that offer majority of the unskilled labor in the US as of today and one is going to have a talent and labor crisis of monumental proportions in the near future Enticing and retaining talented people is going to be the number one precedence of every CEO or manager who is very serious about gaining the struggle for talent.

Realising the significance of retaining talented employees, Capital One, a leading bank in U.S.A has taken many steps to attract talented and to retain the talented in the organisation by offering more fringe benefits and attractive pay pockets. This research essay is going to analyse the Capital One’s employee’s retention strategies in detail.

Capital One is the leading bank in USA. Besides banking operations, it also engaged in debit and financial merchandises and other credit card merchandises and services. Capital One is the leading American Credit card issuing company with an outstanding of $ 35.3 billion and having 44 billion accounts. It had $ 109 billion in deposit and is having about $ 147 billion in managed loans outstanding as on December 31, December 2008.

In United States, Capital One is the fourth largest issuer both Master card and Visa credit cards and is the tenth largest depository institution on managed credit cards outstanding in U.S.A. Besides operating all over U.S.A, Capital One is also operating in Europe through Capital One Bank (Europe) as an indirect subsidiary of COBNA, UK and is having branch in Canada.

Capital one is engaged in diversified banking operation concentrating mainly on commercial and consumer lending and accepting deposits from public. The main business segments of Capital One are National lending and local banking. Capital One local banking segment includes the company‘s branch national deposit collection activities, treasury services. Its commercial business segment includes the domestic consumer debit and credit card activities. The national sub-lending segment of Capital One includes its international lending sub-segment and its auto finance segment.

Its local banking segment used to offer customary banking products mainly through an extensive branch network in Louisiana, New Jersey, Connecticut, Texas and New York. Its different products under this section includes consumer and commercial loans , consumer and commercial deposits scheme , treasury management services.commercial credit cards , trust services and other banking associated products like brokerage , insurance ,investment and merchant services. Further, the Local Banking segment provides liquid accounts like money market and time deposits like certificate of deposit accounts mainly through internet channels.

Further, its card sub-segment division offers a broader range of business and credit card and small business products. It also offers unsecured closed-end loans on whole of US market which Capital One specialised in customising to needs of varied consumer preferences. Brand advertising is extensively carried to propagate their product offerings.

Their customoised products contain products offered to a broader range of consumer credit risk profiles and products concentrating on consumer’s special interest. Under auto finance sub-segment, Capital One buy retail instalment contracts, secured by used and new automobile or other motor vehicle loans through its dealer networks in US market. Further, under direct market scheme, it offers auto finance facilities directly to end users through internet. It also offers refinancing of customer’s current motor vehicle loans. In the auto finance sector, Capital One is the fourth largest non-captive provider in US as of December 31 2008.

Both in UK and Canada, it offers credit card products across the consumer risk spectrum. In the first quarter of 2009, Capital One will conclude acquisition of Chevy Chase Bank F.S.B which is the largest depository institution in Washington D.C area in an approximately $ 20 million deal.

As of December 31, 2008, Capital One employee’s strength is around 25,800. Capital One is giving more significance to its man power and thus it calls its employees as “associates “rather than staff. Capital One (CO) considers that its central part of its philosophy is to maintain and attract a highly competent staff. Further, CO always holds its relations with its current associates to be cordial and satisfactory. One of the specialties of CO is that none of its workforce is covered under a collective bargaining agreement. (Form 10-k 2009:10).

About three-fourths of its employees are non-exempt employees who are called as phone associates who have been employed in call centres. Approximately, CO employs roughly 3,000 call –centre based associates every year. This is mainly to keep equipped with its growth since from the early 1990s’.

CO is badly needed to explore mechanisms to redefine its hiring practices. CO is well aware that to meet its increasing demand of 40% growth in the need of associates , it is finding arduous to cope with high rate of employee turnover and to explore novel means to recruit and retain quality call centre associates , to minimise employee turn over and cost associated with it and to maximise its turnover.

Thanks to its patented software IBS which helps it to gather data and employ the same from profiling customers to administer their accounts , verifying managerial and performance of employees and finding and training the apt people.

It had high employee turnover in 1998. Capital one knows employees are the assets of the company and they are essential to maintain 40 billion accounts. In 1998 and in 2002, 2008 it faced high employee turnover or attrition.

Capital One employed various strategies to retain the employees and also to attract more employees. Thus, by employee retention, it has realised that it can add more value to the company.

This research is going to analyse why some employees leave even well paid jobs? I am going to use the following objectives in this research study: 1)Examine the relationship between high staff retention and low employee turnover, 2)Assess the impact of relative HR policies on Staff Retention(general HR Policies used; not specific to CO) and 3)Examine methods of improving Staff Retention at CO through the use of improved HR Policies.

By using the case study of Capital One , a leading bank and issuer of debit and credit card company in USA, this research essay analyses why there high rate of employee turnover in CO despite of the fact that it offers many facilities like amenities centre , liberal pay package , retirement benefits , stock options scheme to its employees. Further, there is a direct link between job performance and employee turnover. This research will analyse why high paid jobs with so much liberal benefits like Capital One is witnessing high rate of employee turnover. Main reasons for the high employee turnover in Capital One will be analysed in length and breadth in this research essay.

Employee retention is the method of deliberate and conscious attempts to preserve the quality individuals who contribute more to the company. It is the stimulus strategies employed by most successful companies to check the drain on the company revenues caused by excessive employee turnover. Employer retention is mirrored in their occupational injury rates. Fewer accidents are being sustained by these companies and this is not magical. There will be low employee turnover rates when liberal benefits and high compensation are offered. It is to be noted that there is direct correlation between fewer injuries/accidents and low employee turnover. Likewise, there is direct link between high employee retention and low employee turnover.

Some of the employee retention techniques are enumerated as follows

It is to be noted that an organisation should have in place a concise job description in writing for each position so that employee and supervisor understands without ambiguity what is to be expected from them. For all employees, periodical performance analysis should be completed for each employee. Both positive and negative feedbacks have to be highlighted as a constructive feedback arrangement. Thus, employee performance analysis will also serve as an effective management tool for training, retention, promotion and reassignment decisions.

One of the reasons cited by the employee who relinquishes his employment abruptly is that unhappiness over the company’s training program. To obviate this, “life skills” training is being imparted nowadays not only to augment productivity but also to increase retention. As an employee retention measure, this type of training is being imparted over the last few years. (Keith, Wertz & Bryant: 27).

If pay package of designed in such way to include either all or a combination of more than four of the following will always see that there is always high staff retention and low employee turnover:

• Attractive salary or wages
• 401-K savings scheme
• Dental / Medical insurance
• Paid holidays
• Flexible working time
• Stock options scheme (ESOP)
• Relaxed dress code
• Wellness Programs
• Employees assistance program
• Birth day party

Employee retention and low turnover rate can be achieved if employees experience growth in their employment by being awarded with recognition and responsibility. Employee should not be demoralised and rather they should be encouraged to develop a sense of pride and remain longer if they feel secure and content in their job. Appreciation of employee’s performance will always increase the productivity.

Labour turnover has pivotal effect on the profitability of a business as the real cost of replacing employees is very high. Normally, a turnover costs include the following:

• The exit interview – its cost and time consumption
• The obliterated cost of lost production, due to low self-esteem among the existing employees who have to pick up the slack.
• Job opening advertising costs
• New candidates interview and its associated cost
• Training cost for the new employee

Further, high turnover may bring following negative impact to any business.

• Lower operational efficiency
• Lack of innovation
• Unable to achieve premium price for superior product or service
• Lower productivity
• Increase in exposure to risk (Kearns: 188).

When there is large employee turnover, the employees who left the organisation will take knowledge that was imparted with them. This includes knowledge of internal processes and systems and knowledge of customers. Further, employees also take with them knowledge of organisational culture and kinships with other employees which helps in accomplishing the work in an effective and efficient style.

The cost of hiring new employees will include costs of advertising, interview and testing time. Travel expenses incurred for hiring new employees or travelling expenses reimbursed to those candidates who attended interview will also form part of the recruitment costs. Moreover, new employees will take at few months to settle down in their job and hence it will less productive for some time. It is estimated that the cost relating to employee who being non-productive in the first six months is about 25%

Termination Costs

A company may have to incur higher unemployment insurance rates especially when employees are laid off due to lack of work. Termination cost also includes extended health benefits and severance pay.

Loss of Output

If an employee resigns and if that particular position is not refilled instantly, the company loses that employee’s output while the position remains vacant. In the late 1990’s, when U.S.A was under strong and vibrant economical condition, this lag time had considerable impact on the financials of any company. For instance, a company’s averages $ 300,000 in annual sales per employee, then a position that remains unfilled for a quarter costs the company about $75000 in revenues.( Dian , Chu & Ban :220).

HR Policies on Staff Retention

The first step in minimising the employee turnover is to have a successful hiring process that screens out those applicants that do have the desired skill sets and characteristics that are essential for them to thrive. For instance, in hotel industry, which is renowned for having high employee turnover average and in some cases, this being 100 percent. However, there are certain reputed hotel chains which are having only less than 20 percent employee turnover.

A major contributing factor for this low rate is the wide-ranging hiring process that probable employees must encounter through before they are actually hired. This process contains deep interviews with many key managers and skill and personality tests to make sure not only that they have technical acumen required, but also they will accommodate well with the cultures of these organisations. (Dian, Chu & Ban: 221).

Communication is the key retention strategy for any organisation. It is said that honest communication always build trust and trust is a pivotal element to retention. To get commitment, there should be trust between employer and employee and both should be open and honest to each other. Some companies have second thought to exchange vital information. However, some companies make it point to inform its employees how much money they made or lost and also let them to know how much it costs to administer a business.

Some companies do have corporate culture that is supportive, inclusive and fun and is regarded as one of their robust retention tools. Thus, the role of HR in aligning with these corporate goals is to safeguard the organisation’s culture and to enable the organisation to meet its obligations to its customers and employees.

If the HR retention policy is strong and vibrant and company is widely admired as a best place to work for, then recruitment cost could be saved substantially by recruiting candidates either from within or through referrals. Such companies would have employees who stick to the company for more than 15 or 20 years and they have been considered to be an asset of the company. Some good companies shall take long time for recruiting a candidate as it know ii being a long term commitment once if they are selected. Finding the right employee for the right job at the right time for the right compensation can definitely take a long time.

As these companies retention rate is more than 96%, employees are really asset to them as they increase both productivity and profits. A good retention policy will also focus on getting the new employee into the position and making certain that the employee is productive and assisting to attain the company’s strategic aims.

Employers should invest more effort in retaining their employees as they spend in recruiting. The recruitment effort not only requires selling the job and organisation but also requires attention to detail and determination and retention.

Some of the prospective HR retention policy includes the following:

• Determining strategic goals and explaining corporate goals for the whole of the employees
• Hiring and employing the apt individuals to help in achieving the corporate aims.
• Designing the benefit pay package that offers work-life balance and financial stability.
• Establishing and maintaining constructive and positive corporate morale and culture.
• Introducing rewards and recognition schemes
• Motivating employees to assist to attain job satisfaction and a high performance culture.
• Supporting and maintaining a diverse workforce.
• Offering development and training opportunities
• Using mentoring and strengthening leaders to engage a thriving workforce

A company’s HR retention strategy is to take care of their employees and managing its HR functions by focusing attention on what is happening in the industry, designing on their own professional development and making certain that they are good HR professionals.

Methods of improving Staff Retention at Capital One through the use of improved HR Policies.

Capital One had high employee turnover in 1998. Capital one knows employees are the assets of the company and they are essential to maintain 40 billion accounts. In 1998 and in 2002, 2008 it faced high employee turnover or attrition.

The following are some of the noteworthy staff retention policy pursued by Capital One to retain talented and to reduce the attrition by using an enhanced HR policies.

In the year 1998, due to frequent employee turnover issue, CO started to initiate an employer of choice efforts to control attrition and to magnetise talented associates. It earmarked about $30 million for the construction of 121,000 square-foot amenities centre. By employing its IBS (Information –Based Strategy), Capital one assessed the centre to decide, which, if any, other Capital One sites could construct the same amenities centres.

By employing a distinctive approach, CO gathered information from security badges of its associates which were scanned voluntarily when an associate enjoyed an amenity. The effect of amenity centre is to minimise the attrition, enhance attendance and to improve the performance of associates. By appending dollars to these advantages and interlinking this information with estimated usage by site and costs, CO was able to make a well –informed decision on the location of other facilities for amenities centres and the design for particular amenities.

For any organisation, employee turnover can be a major overhead. Whenever the employee turnover is historically high, it would be arduous to manage the turnover costs. Capital One was not an exception to this prolonging issue. Non-exempt call centre associates forms the lion’s share of CO’s workforce. In general, Call Centres have tendency to have high employee turnover as associates incline to move form one job to another or leave simply due to job burnout.

For instance, before 1997, CO was ranked as one of the lowest employee turnover rates in any credit card companies as turnover was within 25%.However, attrition started to increase, averaging about 35% in the year 1998. Though, this 35% is still well below the industry standard, this poignant increase mingled together with lower satisfaction rankings indicated in half-yearly All Associates Survey , indicated a cultural issue that required to be redressed.

To solve the employee high turnover issue, CO started an employer of preference so as to forestall the increasing attrition rate and to enhance the culture at Capital One. As one of the measure to retain associates, it started the initiative of establishing amenities centre as explained above. The amenities centre will have the following facilities like a fitness centre, a gymnasium, two full-sized basketball courts, an aerobic room and a racquetball court. It also has an internet café, full-service bank, a learning centre, a cafeteria, a nail saloon, a company store and a multi purpose room.

The amenities centre was designed in such a way that it occupied the middle floor whereas the HR department occupied other floors. Each candidate for the employment came through the amenities centre on their way to testing and interviews.

HR department footed their appraisal of the cost and benefit for the amenities centre on its overall effect on attendance, performance and retention. The overall benefits were then estimated for other sites, producing a compelling case for or against constructing an amenities centre in each site.

For arriving at cost –benefit analysis, HR analysis team explored the many ways to capture such information on usage and merge it with the other types of information. CO uses survey as one of the way to collect information.

CO observed that many of its key employees have relinquished their service before completing their first anniversary with CO. In exit interviews, they referred that lack of support in switching to their new position as a poignant reason for the resignation from CO.

To obviate this difficulty, CO has come up with a new three-tire on boarding process namely “the New Leader Assimilation Program” (NLAP) with the sole aim of enabling new leaders to start returning business results within their first 3 months on the job.

Thus, when a new recruit has joined the CO, he will be given a detailed company profile on the first day at the office. This corporate profile will usher them whatever they need to know about the company, the job, corporate culture and instead it offers them a great picture.

Later at the week end, the new recruit will meet his boss to get explained about goals, to elucidate expectations and to foster developmental action strategies for delivering outcomes during the first quarter immediately after their appointment. The boss will employ the information what he gathered about the new recruit , analyses mainly its intriguing perspectives and to propose such as executive coaching or study lessons from internal sources that could be most beneficial to the new recruit.

It is to be observed that according to Korn /Ferry international survey, less than one third of executives are contented with their organisational on boarding process. However, an astounding 33% consider it below average or poor.

Further, CO witnessed a brisk growth since 1995; the company has been in the atmosphere of constant flux. Management of CO is under the impression that due to the introduction of new structures processes and performance benchmarks, employees were subject to suffer from high stress levels and hence there was a large employee turnout.

Further, the annual survey conducted in the year 2002 disclosed that employee’s confidence has fallen to drastic low levels. There had been also a distressing increase in employee turnover and sickness leaves both long and short duration. This had caused a financial stress on the company’s financials in the immediate preceding 12 months and management thought that was to be addressed on warfront efforts.

Managing the stress level among the CO employees is given top priority. CO management has given the job of stress reduction to an UK based consulting agency namely Ceridian. Ceridian found that a mixture of management support and employee ownership would constitute the foundation of a thriving stress reduction process.

Overall stress during the employment was said to be one of the key factor for quick employee turnover in CO. Stressors for each individual are alike and their response also vary and hence any remedial measure is to be flexible and include stress management programmes and bespoke training for different employees.

Ceridian was successfully minimised the number of employees ailing from stress and also it taught employees to search for efficient means of bidding goodbye to stress and assist managers to identify and forbid probable stressors for their team.

Employees were also participated in a survey which searched in to means to enhance their own work structure and forwarded recommendations to the board of directors.

Ceridian found that an efficient stress management process is one which must forbid stressors even before they have a negative effect on employee performance and health levels.

Further, to keep employee morale high and to make them more binding to the organisation, CO has implemented the following welfare schemes and employee benefits.

CO is employing an “associate performing administration procedure “that stresses fulfilling business targets while making sure compliance, integrity and health business management organising capabilities. CO has incurred $221 million by way of rewards program to its employees on reported basis and on managed basis, CO incurred about $ 709 million as of 31 December 2008. CO’s cost associated with rewards program in the year was around $183 million on a reported basis and about $602 million on a managed basis.

CO has paid to its associates $ 30 million by way of dividends on the equity shares held by associates during the year 2008 and 2007.

Stock Purchase Plan

To retain employees, CO is offering an associate stock purchase plan. This plan is a compensatory scheme under SFAS 123 R. Thus, CO has recognised $ 4.3 million, $5.2 million and $ 4.8 million during 2008, 2007 and 2006 respectively. Thus an associate of CO can opt for obtaining of yet to be issued treasury or common stock of the corporate through salary deductions scheme on monthly basis with a maximum of fifteen percent and with a minimum of one percent of their base pay payable on monthly basis.

ESOP (“Employee Stock Ownership Plan”)

CO is maintaining an “internally supplemented employee stock ownership plan” (ESOP) in which major all erstwhile employees of Hiberrnia, which was acquired by it earlier has participated. In tune with the merger agreement entered with Hiberrnia, the assets of ESOP trust was reserved exclusively for the advantage of employees of Hiberrnia and its subsidiaries.

A sum of $ 4.4 million and $ 6.2 million was recorded as compensation expenses for the year 2008 and 2007 respectively by CO.

Defined Contribution Plan As Retirement Plan

CO subsidises a “contributory Associate Savings Plan “in which major full -time, permanent and part-time employees are entitled to take part. CO offers contributions to each entitled associate’s payment by equalling a share of contribution by an associate and also some discretionary contribution based on some metrics. Thus, CO has contributed to this scheme totalled to $ 110 m, $74 m and $71 m during the year 2008, 2007 and 2006 respectively.

Severance Benefits

During the middle of 2007, CO has announced wide efforts to minimise expenses and to enhance cost position of the company. Due to continued economic deterioration, CO has expected to incur about $30 million for the severance benefits to employees who have been laid off. Employee termination benefits paid both the executives and associates was $ 86 million and $ 67 million for the year 2008 and 2007 respectively. (Form 10-k 2009:125).

Entrepreneur Grant

CO is extending stock option scheme to its senior management employees. Further, it also offers annual cash incentives, Senior Executive Retirement Program and annual option grant.

CO excellent pay structures contributed to the low employee turnover rates. As we have already seen through its amenity centre, it offers recreational facilities like fitness centre, basket ball court, a subsidised food court, a generous employee retirement scheme and an employee share purchase scheme. Though, CO is paying an average salary, the total compensation package for its employee falls in the top 10% in the industry. CO is also paying a bonus scheme which is directly linked to the individual’s performance.

In the initial period, the attrition level was around 40%. Later, it was brought down to the level of 10% which is the average in the industry. In the study conducted by the HR department of CO, it was revealed that amenities was in fact reduced the chances for an average worker leaving the company by 1.07%. Taking into the cost estimation of attrition, the employee turnover savings caused by amenities centre had in fact offered a saving of $ 530,000 or $ 200 savings per associates. As of December 2008, CO employee’s strength was around 25,800. Hence, as of December 2008, CO was able to save $516,000 in employee attrition.

Further, the associates who utilised the amenities centre availed less sick leave and family care time which resulted in an annual savings of $ 579,000 or $230 per associate.

Impact of reduced attrition.

Impact of Enhanced Attendance on leave used.

Before opening of the amenities centre, associates had been abusing the attendance program which resulted in sickness absenteeism and this was totally reduced when amenities centre was opened.

Effect of improved attendance on productivity.

The research by HR department of CO also found that when the amenities centre is ‘apt sized’ for the population to reap maximum advantages of the amenities centre, the yearly net benefit would be around $ 107,000.

The research also clearly establishes that amenities centre had larger effect in transforming the culture than any single amenity.

To retain employees, CO is offering the best training and development schemes to its employees. It has won for the second consecutive year “Training Top 100 awards” of the Training magazine for one of the best companies in USA. It also pledged its commitment to employee volunteer programs that cater strategic business aims and redresses serious social issues.

One of the strategies perused by CO in employee recruitment is that it recruits workforce from varied backgrounds, work experiences, belief, and life and communication styles.

Using latest technology for training

Currently companies are espousing wireless technologies in various aspects of their business. Training departments have started to employ this model to deliver training to employees. The dawn of wireless and mobile devices connotes that Internet-based functionality and applications can be delivered to PDAs, smart phones and mobile phones producing an almost unending list of hypotheses for delivering the training. (Hartley 2006)

Two distinctive translations of multi-media delivery comprise the “pod-cast” using the iPod or other digital media players and the mobile or kiosk replica which has pre-audio learning outcomes in mobile instruments that can be communicated with. Capital One is an illustration of a large business organisation that has adopted this design. They deliver Apple iPods as standard instrument for any employee admitted in a training session.

Since CO management is of the opinion that their associates may not have time during the average workday to attend to a training session, they have developed an audio based course that facilitates associates to take the training on their own timetable. “Audio learning facilitates the user to move at their own speed, and if there is material they fail to understand or want to assess, it’s as simple as just hitting the “reverse” key and listening again.” Despite of the fact that results are yet to be empirical assessed, Capital One is of the opinion that since its associates are able to augment their productivity by not neglecting their “regular” work for training, CO is “making more turnover and income with lesser associates.” Thus, portable technology like Apple iPods acts as an incentive to the associates to add more value to the job and has reduced the attrition. (Sussman 2005)

Employee turnover is a significant indicator signifying the over all health of an establishment or any industry in terms of industrial relations, wages, other welfare facilities and working conditions offered by the employee to the employee. Higher rate of employee turnover, the larger will be lack of stability in the work force, which in turn, may not be regarded to be favourable to the efficiency of the employee. To attain higher productivity of employee, it is necessary that work force remains committed over a long phase of time. Employee turnover assesses the degree of change in the work place due to new appointment (total strength of employees added to employment) or departure (severance of employment at the will of employers or workers) during a specific period of time.

To solve the employee high turnover issue, CO started an employer of preference so as to forestall the increasing attrition rate and to enhance the culture at Capital One. To obviate this difficulty, CO has come up with a new three-tire on boarding process namely “the New Leader Assimilation Program” (NLAP) with the sole aim of enabling new leaders to start returning business results within their first 3 months on the job.

Managing the stress level among the CO employees is given top priority. CO management has given the job of stress reduction to an UK based consulting agency namely Ceridian. Ceridian found that a mixture of management support and employee ownership would constitute the foundation of a thriving stress reduction process. To retain the talented employees, CO has introduced reward program, stock options, attractive retirement benefits and liberal medical insurances. In stock options, the real benefit is achieved when the stock prices climbs up since CO has crafted a company of owners.

Further, Co is offering three weeks leave in the first year of employment in Capital One and makes survey with the employees biannually mainly to understand the grievances and mentality of its employee’s.Co is also offering benefits to employees up to 9 percent as company’s contribution to their 401 (k) scheme. To retain employees, CO is offering the best training and development schemes to its employees. It has won for the second consecutive year “Training Top 100 awards” of the Training magazine for one of the best companies in USA. It also pledged its commitment to employee volunteer programs that cater strategic business aims and redresses serious social issues.

One of the strategies perused by CO in employee recruitment is that it recruits workforce from varied backgrounds, work experiences, belief, and life and communication styles. CO believes culture and people that are basis of lasting competitive benefit. CO also shun away from hierarchical corporate systems and various signoffs that hinders its efforts in achieving new things.

Further, CO witnessed a brisk growth since 1995, the company has been in the atmosphere of constant flux. Management of CO is under the impression that due to the introduction of new structures processes and performance benchmarks, employees were subject to suffer from high stress levels and hence there was a large employee turnout.

Ceridian has recommended the following stress reduction strategy. They can be classified as primary, secondary and territory.

A primary intervention search into the basic causes of stress among employees and will introduce procedures and policies to assist to eradicate them. They search into the following:

• Internal Communication strategy
• Strategies followed during recruitment process
• The functions of IT systems
• Heavy workloads
• Analysis of performance management
• Designing and introducing a stress policy

Secondary strategies are those which assist employees the best means to manage with their own personal stressors and they include the following:

• Courses on stress and anger management
• Improvement of communication skills
• Programmes for stress resilience
• Techniques of relaxation

Tertiary strategies are one which contrived for those employees who are already suffering from indications of stress and managers who need to help them who are under stress and pressure. These contain the following measures:

• Counselling at on-site.
• Recommendation to EAP
• Evaluation of sickness processes and policies.
• Initiating action strategies for long term absentees through “return to work” program.

By mixing the above three strategies , Ceridian was successfully minimised the number of employees ailing from stress and also it taught employees to search for efficient means of bidding goodbye to stress and assist managers to identify and forbid probable stressors for their team.

It is to be remembered that professionals always evaluate the cash compensation offered by an employer as a basis of yardstick between ranks in competitive business organisations. It is important that cash component can be regarded as a total package with a number of constituents like cash element, non-cash fringe benefits and performance or incentive based compensation. If an organisation is having low cash compensation, then to obviate attrition it should concentrate on to establish a best recruiting and retention strategy that stresses the cash value of non-cash advantages like educational assistance, vacation and retirement etc and this provides an opportunity for incentive compensation to equalise into that equation.

For certain designations in certain organisations, the nature of position either it may part-time or flexible or the nature of work either mission-focused and creative and the nature of the reporting structure either decision making or autonomous might improve the value to the employees. Co should develop for enhancing its recruitment and retention strategies by analysing its fundamental data like turnover rate, vacancy rate, employee retention strategies and contrasting its compensation to ‘market rates.’

Further, studies have proved that employee respect corporate that have family-friendly values. One study reveals that a company preserved about $ 70 million per annum due to low turnover which is due to their perquisites like health care facilities, on-site subsidised child care centres, a swimming pool and a fitness centre. Corporate that creates a family-friendly work atmosphere which helped them for retention of employees. Some studies reveal that there will be high employee turnover if there is high burnout and high stress which may result from an inability to cope with both the professional and personal life.

For instance, to attract women with children to job market, an employer has to offer many family support schemes. One of the ways to assist employees to have balance over their family needs and work is by offering either flexible or part-time work.

Thus , part-time or flex time employment helps to reduce high turnover and absenteeism and permit people who cannot devote their time to full-time employment due to family and professional tension. It is to be noted that about 70 percent of organisations employ part-time employees who were once employed as full-employees by the company. According to survey made by Catalyst revealed that those employees who switched from full-time to part-time employment reported in increase in morale, productivity, commitment to the company and retention. (Phillips & Connell 2002:175).

Reasons For Frequent Employee Turnover

A high level of employee turnover could be happen by many factors and some of the important factors are listed below:

• Poor wage levels compelling the employees to switch loyalties to competitors
• Low levels of motivation and poor morale within the employees
• Enrolling and training the wrong employees in the first place helping them to leave to seek more prosperous employment at the cost of company expenses.
• An upbeat local employee market contributing more and perhaps more striking opportunities to employees.
• Uninteresting and unchallenging positions
• Employees insight of poor supervision
• Employee is having gut feeling like there is no promotion opportunity in the organisation
• Compensation is not in tune with the job requirements
• Elsewhere there exists an opportunity for higher compensation

Capital One to retain the talented and to avoid frequent employee turnover has to learn from the fellow corporate and try to follow their footsteps in extending non-fringe benefits that will go a long way for Capital One to retain the talented with it.

For instance, the software development company namely SAS Institute of Cary, North Carolina had been adjudged as the hundred paramount companies to work for in U.S.A by the Fortune magazine. This company stands as a replica how a giving philosophy can return considerable yield a high return –on-investment. To become a best employer of choice, it is giving out the following to its employees. This not only avoids high turnover but also increases the loyalty and bond of the employees with the company.

SAS offers the following fringe benefits to its employees to motivate their morale.

• On daily basis, the workout clothes are laundered.
• Providing an “A” class on-site child care centre in the state.
• Games pavilion like volley ball , ping pong and billiards
• Dance classes, tai chi, tennis and golf.
• Cafeteria with the background of piano music.
• Health clinic
• No restriction on sick holidays
• A coordinator for elder care
• Company gates close promptly at 6 p.m and won’t open until 7 A.M in the morning. Hence, there won’t be late sitting or overtime.

Critics may name it as “tree huggery”. Some others may name it as “employee utopia”. Some may feel that SAS is spending too much to retain their key employees beyond the company’s financial acumen. For SAS, it is not a wasteful expenditure but a right kind of investment for attracting talented people to its workforce for accomplishing its business strategy.

However , SAS is not offering any stock options scheme and offers salary structure that is equivalent to its competitors offering , the company has able to achieve a turnover of 3.7 percent which is well below the 20 percent of industry average.

The Kansas City –based Hereford House restaurant also realises the generosity of giving before getting. It well aware that its experience bearers will fetch by average $1 per table than inexperienced bearers and hence it offers fringe benefits like tuition fees up to $1200 per annum per experienced bearer and insurance who has completed at least one year of service.

Some of the fringe benefits offered by the companies that have been designated as ‘Best companies to work for in America” by the Fortune’s annual list are enumerated below:

Though CO is offering stock purchase plan , ESOP , retirements benefits , severance benefits and entrepreneur grant to top executives, it has to offer more liberal fringe benefits all of the above or any mixture of the above to attract more talented to its workforce and to retain the existing workforce without any attrition.

Capital One has to identify proper solutions to the stress issues faced by the Nottingham call centre employees and to apply the same to all other employees working in US and Canada if it wants to retain its talented work force with it. If uncontrolled, stress among employee may end up in high employee turnover and low employee morale.

CO on investigation realised that one of the main reasons for employee attrition was stress. It asked its employees in Nottingham in UK to maintain stress diaries. The employee diaries not only exposed the specific reasons for the stress, but also indicated a strong binding between employee turnover and stress. It took appropriate steps to push out stressors and combated employee turnover. The same principle should also be applied to its other centres in U.S.A and in Canada. (Robert et al 2006: 138).

Branham Leigh. (2001). Keeping the People who keep You in Business. New York: AMACOM.

Cumming Susan (2004). HR Networking . Chicaco: CCH Incorporated.

Hays, Scott, (1999). Capital One is Renowned for Innovative Recruiting Strategies. Workforce. Vol.78. (4) 92.

Jardine, Edith and Amig, Stacey. (2001). Managing human Capital. Behavioral Health Management .Vol.21 p22 CCH Incorporated.

Kearns Paul (2003). HR Strategy: Business Focused, Individually Centered. Butterworth-Heinemann.

Keith R, Wertz & Bryant James J (2001). Managing Workers’ Compensation. London:CRC Press.

Philips Jack J & Adele O Connell.( 2002). Managing Employee Retention: Impact, Analysis, Solutions and ROI. Butterworth: Heinemann.

Robert P, Gandossy, Tucker Elissa & Verma Nidhi. (2006 ). Workforce wake-up call. London: John Wiley and Sons.

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IvyPanda. (2022, July 10). Employee Turnover and Retention Strategies. https://ivypanda.com/essays/employee-turnover-and-retention-strategies/

"Employee Turnover and Retention Strategies." IvyPanda , 10 July 2022, ivypanda.com/essays/employee-turnover-and-retention-strategies/.

IvyPanda . (2022) 'Employee Turnover and Retention Strategies'. 10 July.

IvyPanda . 2022. "Employee Turnover and Retention Strategies." July 10, 2022. https://ivypanda.com/essays/employee-turnover-and-retention-strategies/.

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IvyPanda . "Employee Turnover and Retention Strategies." July 10, 2022. https://ivypanda.com/essays/employee-turnover-and-retention-strategies/.

Mastering Employee Retention: Strategies to Keep Your Best Talent

By Stephen Nalley

Stephen Nalley

Over my 30-year career, I have witnessed firsthand the challenges and rewards of employee retention. Retaining top talent is more than just a competitive advantage — it’s essential for sustaining growth, fostering innovation, and maintaining a positive work culture. Here, I share insights from my experience on why employee retention is critical and how to achieve it effectively.

Understanding the Importance of Employee Retention

Employee retention is the ability of an organization to keep its employees from leaving. High retention rates signal a healthy work environment, while high turnover rates can be costly and disruptive. The cost of turnover includes recruitment, training, and the lost productivity that occurs while new employees get up to speed. According to the Society for Human Resource Management (SHRM), replacing an employee can cost six to nine months of their salary.

From my experience, the following strategies are vital for retaining top talent:

1. Competitive Compensation and Benefits

For instance, at one company where I worked, we introduced a comprehensive benefits package that included not just health and retirement benefits, but also wellness programs and professional development opportunities. This significantly boosted our retention rates.

2. Career Development Opportunities

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In one of my roles, we implemented a mentorship program where senior employees mentored junior staff. This not only helped in skill development but also fostered a sense of belonging and commitment to the organization.

3. Positive Work Environment

A positive work environment is crucial for employee satisfaction and loyalty. This includes creating a culture of respect, recognition and inclusion. Encouraging open communication, promoting work-life balance and addressing workplace conflicts promptly are essential elements of a healthy work environment.

At a previous company, we conducted regular employee satisfaction surveys and took immediate action on feedback. This proactive approach helped create a supportive and engaging workplace culture.

4. Employee Engagement

I remember leading a team where we held quarterly town hall meetings to discuss the company’s direction and gather employee input. This transparency and inclusion significantly boosted morale and engagement.

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11 big struggles these entrepreneurs faced (and how they overcame them), the best ai headshot generators of 2024, 5. recognition and rewards.

Regularly recognizing and rewarding employees for their contributions can significantly enhance retention. This can be achieved through formal programs like Employee of the Month awards, bonuses and informal methods such as verbal praise and public acknowledgment. Recognition helps employees feel valued and appreciated, boosting morale and loyalty.

In my experience, even small gestures of appreciation, like a handwritten thank-you note, can make a big difference in how employees feel about their work and their employer.

6. Flexible Work Arrangements

Offering flexible work arrangements such as remote work, flexible hours and compressed workweeks can improve retention. Flexibility allows employees to better manage their work-life balance, reducing burnout and increasing job satisfaction. A study by Owl Labs found that companies offering remote work options had a 25% lower turnover rate than those that did not.

During the pandemic, my team transitioned to remote work. Not only did this ensure continuity, but it also showed our employees that we trusted them to manage their work independently, which was greatly appreciated and led to increased loyalty.

7. Strong Leadership

Effective leadership is crucial for employee retention. Managers should be trained to lead with empathy, provide constructive feedback and support their team’s professional growth. A good manager can inspire loyalty and motivate employees to perform at their best. Conversely, poor management is one of the top reasons employees leave their jobs.

9. Clear Communication

Transparent and frequent communication helps build trust and align employees with the organization’s goals and values. Regular meetings, updates on company performance and clear communication of expectations are vital. Employees who feel informed and included are more likely to stay committed to the organization.

In my previous roles, I made it a point to hold regular team meetings and send out weekly updates. This openness helped build a strong sense of community and trust within the team.

10. Exit Interviews

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In my experience, exit interviews have been a goldmine of information. They have helped us identify patterns and implement changes that improved overall employee satisfaction and retention.

Employee retention is a multifaceted challenge that requires a proactive and holistic approach. By implementing competitive compensation packages, fostering a positive work environment, offering career development opportunities and recognizing employee contributions, organizations can create a loyal and motivated workforce. In the long run, these efforts will lead to a more stable, productive and successful organization.

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RT-Oh No —

Return-to-office mandates hurt employee retention, productivity, survey says, survey of 4,400 us employees who are at least 18 years old..

Scharon Harding - Aug 6, 2024 4:43 pm UTC

US workers who work remotely are 27 percent more likely to look forward to doing their job, according to a survey of over 4,400 employees aged 18 and older.

The survey from Great Place to Work took place in July 2023, which was "the third year of an ongoing market study of US workplaces," according to the report entitled "Return-to-Office Mandates and the Future of Work" ( PDF ). Of the participants, 51 percent were female, 49 percent were male, and less than 1 percent were "non-binary or other gender," according to Great Place to Work. In terms of roles, half were "individual contributors," 25 percent were "frontline managers," 20 percent were mid-level managers, and 5 percent were executives. Eighty-eight percent were full-time workers versus part-time.

The survey also found that remote workers were 23 percent more likely to say they have "a psychologically and emotionally healthy workplace," 19 percent were more likely to cite "high levels of cooperation," and 18 percent were more likely to say that people avoid office politics and backstabbing.

Notably, however, survey respondents were unevenly on-site (65 percent) versus people who work remote all the time (16 percent) or sometimes (20 percent). When Ars Technica asked about this, a Great Place to Work spokesperson said that the report uses a confidence interval of 95 percent. They added: "Because of the overall size of our sample with 4,400 responses, we are still able to have statistically significant findings that illustrate the different needs of these two groups."

The report says:

One explanation for the gap between remote and on-site workers: Employees of color reported finding a reprieve from unconscious bias and code switching when working remotely. That doesn’t mean that companies must embrace fully remote work to be inclusive. Instead, great workplaces are finding ways to meet the needs of their employees and provide support to all workers regardless of where they work.

A theme of the report is highlighting the benefits of workplaces working with employees to understand their views on remote work and whether remote work options fit specific needs within the company. It's also important to consider why people want to work remotely; if it's due to factors like a toxic work environment, there are other ways to address worker concerns besides remote work, the authors said.

Earlier this year, another survey pointed to return-to-office (RTO) mandates hurting company morale. The survey of some companies on the S&P 500 list by University of Pittsburgh researchers found that RTO policies hurt employee satisfaction while failing to boost company value.

RTO mandates hurt employee retention

Great Place to Work's report encourages companies to ensure that workers without remote work options "find special meaning in their work." Companies should talk with in-person workers "about how their efforts are delivering on your brand mission" and hold valued in-person activities, the report said. Cisco, which the report notes doesn't have an RTO mandate, tries to lure people to the office with things like hackathons, career coaching, and team gatherings, for example.

The report also says RTO mandates can hurt employee retention:

When employees have a say in where they work, retention improves. Employees who report being able to decide where they work are more likely to stay with their company long-term.

More specifically, the report's authors concluded that employees who are allowed to choose between in-person, remote, or hybrid work are three times more likely to want to stay at their company. They also found that workers who aren't facing RTO mandates are 14 times less likely to "quit and stay."

This isn't the first survey we've seen suggesting that RTO mandates have driven workers away. In May, a study published by University of Chicago and University of Michigan researchers examining a reported 260 million résumés from People Data Labs reported that mandates requiring workers to return to the office either full or part-time led to a higher rate of employees, particularly of a senior level, leaving Apple, Microsoft, and SpaceX . (In 2022, numerous prominent Apple staff publicly resigned over RTO mandates.) A March survey of 1,504 full-time employees, including 504 HR workers, found that some firms have issued RTO mandates in the hopes of making people quit .

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Intuit quickbooks and allstate health solutions survey reveals employee benefits as key factor in job satisfaction and retention.

“With the historically low unemployment rates in the US, businesses can’t afford to lose employees in today’s competitive market,” Sellier says. “Our research shows that employees are placing higher value on health benefits when it comes to their job satisfaction, but many are finding it difficult to manage benefits costs in today’s economic climate. For that reason, maintaining competitive benefits packages at an affordable price is vital to employee retention.”

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Kickstart Your New Hire’s Success by Connecting them to the Right People

• Julia Phelan

Three tips to help an employee identify who knows what and how everyone fits together.

As a manager, onboarding a new hire isn’t just about providing manuals and login information, it’s about setting the employee up to operate autonomously in their role and feel comfortable within the organization. To do this, leaders need to emphasize the importance of developing strategic relationships with colleagues across the company who can share critical knowledge, and help contextualize and speed up their learning. There are three keys ways managers can help employees engage in internal networking, and thus boost their productivity, sense of belonging, engagement, and retention: 1) Create a knowledge map that shows who knows what within the company; 2) Create a prioritized networking list of people they should meet and why; and 3) Initiate relationship building to facilitate connections for your new employee.

A standard operating procedure for onboarding is to front-load new employees with presentations and written resources , such as handbooks, e-learning modules, or manuals. These can be helpful — but only to a point. Learning new processes and navigating new environments is not just about content acquisition. Much of your organization’s important knowledge and expertise resides in people, and   not all companies are tapping into this valuable resource. One study found that 20% of employees reported that their company didn’t do anything to facilitate networking between them and their coworkers.

• JP Julia Phelan , Ph.D. is a learning design consultant and expert in applying learning science principles to create effective learning experiences. She works with organizations to help build a strong workplace learning culture by improving training design, implementation, and outcomes. She is the co-founder of To Eleven , and a former UCLA education research scientist. Connect with her on LinkedIn .

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IRS Says It Has Stopped Nearly $5 Billion In Bogus Employee Retention Credit Claims In Recent Weeks

Despite criticisms that the process is taking too long, the IRS will continue to review Employee Retention Credit (ERC) claims closely, according to IRS Commissioner Danny Werfel.

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The news isn’t all bad for businesses with outstanding ERC claims.

Despite criticisms that the process is taking too long, the IRS will continue to review Employee Retention Credit (ERC) claims closely. That was the message from IRS Commissioner Danny Werfel, who signaled that the agency is comfortable with its stance on the program.

"The IRS is continuing to work denials of improper ERC claims, intensifying audits and pursuing civil and criminal investigations of potential fraud and abuse," Werfel said in a statement. He pointed to findings announced earlier this summer that confirmed concerns about an extremely high rate of improper ERC claims in the IRS' inventory.

Concerns about the potential for improper payments have caused the IRS to move "methodically and deliberately" on disallowances and payments. The IRS notes that this is an effort to "balance the needs of businesses with legitimate claims against the promoter-fueled wave of improper claims that came into the agency."

Disallowances and Payments

According to Werfel, in recent weeks, the IRS has sent out 28,000 disallowance letters to businesses whose claims were considered a "high risk" for being improper. The IRS estimates that these disallowances stopped up to $5 billion in improper payments from being paid out.

Previously, Werfel had noted that the IRS had organized existing claims from "high-risk" to "low-risk." He says the agency continues to do so, issuing denials to those claims that gave the agency "a clear line of sight that this was ineligible."

Addressing claims made by taxpayers and tax professionals that some of the disallowances were improper, Werfel acknowledged that there have been complaints. He suggested that those complaints comprised about 10% of the 28,000 disallowances while maintaining that there have been no complaints from the majority—90%—of businesses with disallowed claims.

While the IRS is still evaluating the results of what it characterized as "this first significant wave of disallowances," the agency claims that "early indications indicate errors are isolated."

Werfel says the IRS will remain in contact with the tax community and monitor the situation. If claims are proven to have been improperly denied, the agency will work with taxpayers to correct the situation.

"The Employee Retention Credit is one of the most complex tax provisions ever administered by the IRS, and the agency continues working hard to balance our work to protect taxpayers from improper claims while also making payments to qualifying businesses," said IRS Commissioner Danny Werfel. "It has been a time-consuming process to separate valid claims from invalid ones. During the past year, we maintained a steady cadence of both ERC approvals and disapprovals."

The news isn't all bad for businesses with outstanding ERC claims. The IRS says it has identified 50,000 valid ERC claims and is moving them into the pipeline for payment processing. The agency noted that these payments are part of a low-risk group of claims. Payments should begin in September, with additional payments going out in subsequent weeks. The IRS anticipates adding another large block of low-risk claims for processing and payment in the fall.

Early versions of the mailings omitted a paragraph highlighting the process for filing an appeal to the IRS or District Court—the agency is taking steps to correct that error. Even without that language, taxpayers have options for appealing, including filing an administrative appeal with the IRS independent Office of Appeals.

According to the IRS, those who have deliberately attempted to siphon money from the program improperly are being punished.

"Thousands of audits are underway," says the agency, and an additional 460 criminal cases have been referred to IRS-Criminal Investigation.

As of July 1, 2024, CI has initiated 460 criminal cases, with potentially fraudulent claims worth nearly $7 billion. In all, 37 investigations have resulted in federal charges, with 17 investigations resulting in convictions and nine sentences, averaging 20 months.

The ERC program was intended to assist eligible employers in keeping the lights on in their businesses. Eligible employers are those that paid qualified wages to some or all employees after March 12, 2020, and before January 1, 2022. Typically, to qualify, you must demonstrate that your business was shut down by a government order due to the pandemic during 2020 or the first three calendar quarters of 2021 or that you experienced a specific decline in gross receipts during the eligibility periods during 2020 or the first three calendar quarters of 2021. Some businesses may also qualify as recovery startup businesses for the third or fourth quarters of 2021.

The credit is 50% of up to $10,000 in wages, meaning it can be as high as $5,000 per employee in 2020 and as high as $21,000 per employee in 2021.

(The IRS created a chart to help businesses or other organizations decide if they qualify for the ERC.)

In September of last year , citing "rising concerns about a flood of improper ERC claims," the IRS announced a moratorium on processing new ERC claims. At the time, the agency said the pause was intended to protect honest small business owners from scams.

Since then, the IRS reported that it was receiving ERC claims at a rate of more than 17,000 a week—that's still the case.

The IRS is now making a shift in the moratorium period on new claims—it will now start processing claims filed between September 14, 2023, and January 31, 2024. As with the current ERC inventory, the IRS will focus on the highest and lowest risk claims at the top and bottom end of the spectrum. This means there will be instances where the agency will start taking action on claims submitted in this period when the agency has seen a sound basis to pay or deny a refund claim.

(That timing isn't coincidental. It lines up with the proposed cut-off date in the tax deal that would have ended the ERC program and expanded the Child Tax Credit (CTC). The bill stalled in the Senate despite passing the House with broad bipartisan support. A procedural vote to advance the bill last week failed , 48-44.)

It's important to note that payments for claims may not hit accounts all at once. Businesses may receive payments for some valid tax periods—by quarter—while the IRS continues to review other periods for eligibility. ERC eligibility can vary from one tax period to another. Additionally, qualified wages may vary due to a forgiven Paycheck Protection Program (PP) loan or because an employer already claimed the maximum amount of qualified wages in an earlier tax period.

Withdrawals

Businesses that have submitted questionable claims may want to consider a withdrawal. Under the withdrawal option, employers who have filed an ERC claim but have not received a refund can withdraw their submission and avoid future repayment, interest, and penalties.

You can participate if all of the following apply:

• You claimed the ERC on an adjusted employment return (Forms 941-X, 943-X, 944-X, CT-1X);
• You filed the adjusted return only to claim the ERC and made no other adjustments;
• You want to withdraw the entire amount of their ERC claim; and
• The IRS has not paid the claim, or the IRS has paid the claim, but you haven't cashed or deposited the refund check.

If you made any other changes to the adjusted employment tax return or only need to reduce your ERC claim and not withdraw it entirely, you can't use the withdrawal process—you need to amend your return. (For more information, check out "Amending a return" (Q1 and Q2) on the ERC frequently asked questions page .)

Taxpayers who received an ERC check but haven't cashed or deposited it can also use this process to withdraw the claim and return the check. The IRS will treat the claim as though the taxpayer never filed it, and no interest or penalties will apply.

To date, more than 7,300 entities have withdrawn $677 million of questionable ERC claims.

Voluntary Disclosure Program

In December of 2023, the IRS announced a voluntary disclosure program (VDP) for businesses that want to pay back the money they received after filing ERC claims in error. The program closed on March 22, 2024, after the IRS received over 2,600 applications with $1.09 billion of improper claims.

As for those suspected abusive tax promoters and preparers who improperly promoted ERC claims? The IRS again confirmed that it has received hundreds of referrals and plans to continue related civil and criminal enforcement efforts to follow up.

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IRS reopens Voluntary Disclosure Program to help businesses with problematic Employee Retention Credit claims; sending up to 30,000 letters to address more than $1 billion in errant claims

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IR-2024-212, Aug. 15, 2024

WASHINGTON —The Internal Revenue Service announced today a limited time reopening of the Voluntary Disclosure Program to help businesses fix incorrect Employee Retention Credit claims as the agency continues compliance work.

The Employee Retention Credit (ERC) Voluntary Disclosure Program (VDP) will run through November 22 and allow businesses a chance to correct improper payments at a 15% discount and avoid future audits, penalties and interest. During the first disclosure program that ended in March, there were more than 2,600 applications from ERC recipients that disclosed $1.09 billion worth of credits.

To underscore the importance of participating in the Voluntary Disclosure Program, the IRS also announced it plans to mail up to 30,000 new letters to reverse or recapture potentially more than $1 billion in improper ERC claims. Thousands more mailings on additional questionable payments will be made in the fall.

“The limited reopening of the Voluntary Disclosure Program provides an opportunity for those with improper claims to come in ahead of IRS compliance work and get a discount on repayments,” said IRS Commissioner Danny Werfel. “This is especially important given increasing IRS compliance actions involving bad claims, many of them are the result of aggressive marketing tactics to lure unsuspecting businesses into claiming the complex credit. This provides a final window of opportunity for those misled businesses to make adjustments and avoid future compliance action by the IRS.”

“The push by promoters flooded the IRS with questionable ERC claims, which clogged our systems and slowed work,” Werfel added. “We recognize well-meaning businesses are caught up in this, and we are taking important steps to help them. This includes reopening the Voluntary Disclosure Program as well as getting more payments out to qualifying businesses.”

Last week, the IRS announced it was taking additional steps to move forward with ERC, including updates on the processing moratorium, compliance actions and upcoming payments. In recent weeks, the IRS separately sent out 28,000 disallowance letters to businesses whose pending claims showed a high risk of being incorrect. The IRS estimates that these disallowances will prevent up to $5 billion in improper payments. The IRS has also identified 50,000 valid ERC claims and is quickly moving them into the pipeline for payment processing in coming weeks. These payments are part of a low-risk group of claims.

The ERC program began as an effort to help businesses during the pandemic, but as time went on, the program increasingly became the target of aggressive marketing – and potentially predatory in some cases – well after the pandemic ended. For example, some promoter groups called the credit by another name, such as a grant, business stimulus payment or government relief besides ERC or the Employee Retention Tax Credit (ERTC) to increase claims. The IRS continues compliance work on questionable ERC claims on multiple fronts, with thousands of audits underway and 460 criminal cases initiated.

ERC Voluntary Disclosure Program reopens; special discount available through November 22

Today’s announcement features a special reopening of the ERC Voluntary Disclosure Program (VDP) through November 22 to help businesses that received questionable payments to self-correct and repay the credit they received after filing ERC claims in error. The IRS urged businesses with claims that show warning sign indicators to review eligibility requirements and talk to a trusted tax professional to see if the disclosure program is a good option for them.

As the IRS continues intensifying its compliance work involving improper ERC claims, the disclosure program protects businesses from more costly future compliance action. The second VDP offers a 15% discount for businesses repaying credits for tax periods in 2021, a slightly reduced rate from the first program’s 20% discount that ended in March.

Businesses should act soon to resolve incorrect claims and avoid potential future issues such as audits, full repayment, penalties and interest. Full details are available in IRS Announcement 2024-30 PDF , also released today, with highlights outlined in another IRS news release, IR-2024-213, IRS provides details of second Employee Retention Credit Voluntary Disclosure Program; program for improper claims open through Nov. 22 .

Thousands of new recapture letters going out for improper ERC claims made for Tax Year 2021, some Tax Year 2020

As part of ongoing compliance work, the IRS announced today plans to mail thousands of additional letters reversing or recapturing improperly paid ERC claims. The IRS currently anticipates this round of mailings could reach up to 30,000 letters this fall. These “clawback” notices potentially represent more than $1 billion in claims from Tax Year 2021 and some additional, later-filed Tax Year 2020 claims. These letters notify taxpayers that the IRS is reversing or recapturing their previous credit. Several thousand of the letters have been mailed, with more coming in upcoming weeks and into the fall.

The IRS notes that those who receive these recapture letters will be ineligible to participate in the Voluntary Disclosure Program for the calendar quarter the letter covers.

This is the second round of these letters. Previously, the IRS determined that more than 12,000 entities filed claims that were improper for Tax Year 2020, resulting in $572 million in assessments.

The latest letters generally involve larger claims than earlier letters regarding 2020 because Congress increased the maximum ERC in 2021. Congress increased the maximum ERC from $5,000 per employee per year in 2020 to $7,000 per employee for each quarter of the year in 2021.

When the IRS identifies an employer that has received excessive or erroneous ERC, the agency will reclaim that ERC through normal tax assessment and collection procedures.

"This new round of letters serves as another incentive for businesses that believe they received an erroneous Employee Retention Credit payment to come forward and participate in the disclosure program and resolve the matter on more favorable terms," Werfel said. “The disclosure program provides a limited, unique opportunity to avoid future IRS compliance problems as well as sidestep a significant repayment fee with penalties and interest.”

Separate ERC Claim Withdrawal Program remains available for those with pending claims

The IRS also continues to urge employers with pending, unpaid ERC claims to consider a separate ERC Claim Withdrawal Program that allows them to remove a pending ERC claim – one that the IRS has not processed yet. They can withdraw the claim and pay no interest or penalty. Already, the claim withdrawal process for those with unprocessed ERC claims has led to more than 7,300 entities withdrawing $677 million.

ERC compliance work continues

The IRS continues analyzing ERC claims, intensifying audits and pursing promoter and criminal investigations. Beyond the disallowance letters, current initiatives results include:

• Criminal investigations: As of July 1, 2024, IRS Criminal Investigation has initiated 460 criminal cases, with potentially fraudulent claims worth nearly $7 billion. In all, 37 investigations have resulted in federal charges so far, with 17 investigations resulting in convictions and nine sentencings with an average sentence of 20 months.
• Promoter investigations: The IRS is gathering information about suspected abusive tax promoters and preparers improperly promoting the ability to claim the ERC. The IRS’s Office of Promoter Investigations has received hundreds of referrals from internal and external sources. The IRS will continue civil and criminal enforcement efforts of these unscrupulous promoters and preparers.
• Audits: The IRS has thousands of ERC claims currently under audit.
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