How to Improve Employee Retention: 5 Key Strategies

Quick look: Retaining top talent is essential for business success. This article explores five proven employee retention strategies and how a professional employer organization (PEO) can help small and medium-sized companies build a workplace that supports, engages, and keeps staff long-term.

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People are the foundation of every business, and retaining them can lead to higher profitability, greater institutional knowledge, and a stronger company culture.

Conversely, turnover is costly; hiring someone new can cost nearly $5,000, and it takes an average of 44 and 60 days to fill non-executive and executive positives, respectively.

As workplace expectations shift, keeping talent requires a mix of measuring staff satisfaction, adapting to changing preferences, and delivering a positive employee experience.

Here, we dive into today’s most effective employee retention strategies, how a PEO can help you put them into action, and why there’s never been a better time to invest in a workplace where employees want to stay.

The time is now to prioritize employee retention

Turnover rates are lower than in recent years, with the current sustained period of low attrition referred to as “the Big Stay.” Per the Bureau of Labor Statistics (BLS), in April 2025, the national quit rate was 2.1%, while just over a year prior, it reached 3.4%.

Despite fewer employees departing, it’s an ideal time for employers to hone their staff retention strategies and prepare for the eventual uptick in resignations. Deloitte’s 2025 Gen Z and Millennial Survey found that 31% of Gen Z workers, one of the largest workforce segments, plan to leave their employers in the next two years.

5 employee retention strategies for SMBs

Staff retention is important for businesses of all sizes, but high turnover can have an even greater impact on small and medium-sized businesses (SMBs) trying to maximize their resources.

While some turnover is natural, a comprehensive, data-driven approach to employee retention strengthens your position as an employer and minimizes the unnecessary loss of talent.

For a deeper dive, please download the free Employee Retention Playbook >>

1. Identify benchmarks and set goals

The first step toward better retaining staff is measuring where you are and using that benchmark to establish goals. Key metrics to consider include:

• Employee retention: The percentage of employees retained over a specific time period.
  • How to calculate: (Total Employees at Start of Period – Employees Who Left During Period) / Total Employees at Start of Period x 100
• New hire retention: How many new employees stay after their first 30, 90, or 180 days.
  • How to calculate: (New Hires Retained After a Specific Period / Total New Hires) x 100
• Turnover rate: The percentage of workers who leave a business within a specific time period.
  • How to calculate: (Number of Separations / Average Headcount) x 100
• New hire turnover: The percentage of new employees who leave a company within their first year (or other specific time range).
  • How to calculate: (Number of Employees Who Leave After Less than 1 Year / Total Number of Separations During the Same Period) x 100
• Employee net promoter score (eNPS): Determines employee engagement by using employee survey results and subtracting the number of detractors (unsatisfied workers) from the percentage of promoters (satisfied workers).
  • How to calculate: % Promoters – % Detractors

2. Optimize employee benefits

Today’s top talent is looking for more from their employee benefits, and that’s a great opportunity for SMBs to stand out. While traditional health insurance is still important, offering personalized, comprehensive benefits makes workers want to stay.

To better understand what your team values most, consider the following steps:

• Conduct employee surveys to understand workers’ needs.
• Compare your benefits package with industry standards and those of top competitors.
• Keep up with the latest employee benefit trends by monitoring industry news and reports.

3. Focus on career development

According to the University of Phoenix’s 2025 Career Optimism Index, 86% of employees want to expand their skillsets. Further, the report states that workers who are unsatisfied with the speed of their career progression are over 50% more likely to be burnt out. This can cause reduced productivity and employee engagement and potentially lead to resignations.

Fostering a culture of professional development involves a three-part approach:

• Growth opportunities: Help staff understand their progress and envision their future at your company by creating career roadmaps and regularly administering performance reviews.
• Learning and development initiatives: Encourage continuous growth by reimbursing workers’ educational expenses if possible, and using an internal learning and development (L&D) platform with interactive on-demand courses.
• Mentorship and coaching programs: Implementing a mentorship program and providing coaching for managers and leadership offers enrichment to every level of your workforce.

4. Establish a healthy work-life balance

Flexibility is consistently ranked as one of the most sought-after workplace perks; Pew Research found that nearly half of workers would consider leaving their jobs if they lost their flexible schedule.

Business leaders can maximize employee satisfaction and retention by providing adaptable work arrangements for eligible roles. Additionally, SMBs can promote work-life balance with competitive paid time off (PTO) policies, including a competitive number of vacation days, volunteer time off (VTO), school activity time off, and more.

5. Cultivate a strong culture

A healthy organizational culture is essential for retaining top talent. And while culture develops organically, employers can actively nurture it by:

• Creating an employee recognition program: Showing genuine appreciation for staff’s efforts is associated with reduced turnover, increased employee engagement, and more.
• Encouraging open communication: Ensure workers feel heard by asking for feedback via employee satisfaction surveys, providing an anonymous suggestion box, and encouraging managers to have regular one-on-one meetings with their direct reports.
• Participating in corporate social responsibility (CSR) initiatives: From donating to local charities to using eco-friendly office supplies, CSR efforts contribute to a stronger employer brand, better employee attraction and retention, elevated market performance, etc.
• Forming employee resource groups (ERGs): ERGs can increase workers’ cultural awareness, enable employees to share concerns, identify potential leaders, and more.
• Implementing a comprehensive onboarding program: First impressions matter, and an onboarding process that begins before day one and continues for at least 90 days can boost employee retention, job satisfaction, and productivity.

How PEOs help SMBs retain top talent

Creating a workplace where employees want to stay takes more than good intentions, it requires expertise across employee benefits, organizational culture, learning and development, HR analytics, and more.

For SMBs who may have limited time and resources, partnering with a PEO can be beneficial. PEOs bring the tools, experience, and support needed to help build a workplace where employees are motivated to stay for the long haul.

At ExtensisHR, we offer many services designed to help SMBs succeed:

• Dedicated HR expertise: Our SHRM-Certified HR Managers collaborate with customers to develop customized policies and people strategies.
• Employee benefits, administration, and management: Access to Fortune 500-level plans at competitive rates.
• Complimentary recruiting: Because hiring the right people increases the chance they will stay.
• Access to 15Five: A robust employee engagement tool that facilitates employee surveys, performance reviews, one-on-one meetings, and more.
• A learning and development platform: Featuring immersive, on-demand courses.
• Unparalleled customer service: A team of HR experts who answer the phone in 10 seconds or less and boast a 95% same-day case resolution rate.

Employee retention is more than just keeping staff, it’s about creating a stable, motivated, and high-performing team that drives your business forward. And with the right PEO partner, holding onto top talent becomes a strategic advantage.

Want to boost your employee retention rate? Download our free Retention Playbook to access more strategies and downloadable templates, or contact ExtensisHR to learn more about our PEO solution.