Employee loyalty pays: How to build a workforce that stays

Walter Orthmanm holds the Guinness World record for employee tenure, working for a Brazilian textile company for an impressive 84 years and nine days.[1] 

While this level of employee loyalty is exceptional, many organizations struggle to retain employees for even a small fraction of that time. However, in today’s market – and with employee loyalty changing – keeping talent long-term is critical. 

In this article, we look at why employee loyalty matters, why employees leave, and what you can do about it. 

Why employee loyalty should be a priority

Employee loyalty – how attached or committed workers feel to their employer – should be a priority for all businesses. Here’s why. 

1. Lowers the cost of employee turnover

The main benefit of employee loyalty is its effect on employee retention. Employees with higher levels of loyalty are less likely to leave your organization to seek other opportunities. 

Every business wants to lower employee turnover. And for good reason. 

First up, high turnover is a massive cost to your business. According to Gallup estimates, replacing an employee costs 0.5 to 2 times their annual salary. This represents a cost of a trillion dollars annually for US businesses. 

This estimate is probably conservative when you consider all the costs involved with losing and replacing an employee, including:

• HR time and resources spent on the exit interview

• Severance pay and accrued benefits like unused personal leave 

• Advertising costs

• Recruitment fees if using an external agency – or HR’s time and resources if managing recruitment in-house

• Onboarding and training the new hire

What does this mean in real terms? Take a tech firm with 60 employees and ten software designers. The firm pays mid-level software designers $110,000 a year. If one designer quits, replacing them could cost between $55,000 and $220,000. If three software engineers leave in a year, the firm must come up with between $165,000 and $660,000 to cover the costs of replacing them. 

2. Reduces brain drain and retains top talent

High employee turnover costs more than money. It also results in a brain drain when you lose people who’ve built up knowledge and skills uniquely relevant to your product or service. You can’t simply hire someone to replace this loss of expertise. Such expertise must be developed over time. 

Losing key employees – who you spent time and money recruiting – can also affect talent management and succession planning. As Gallup says, “When it comes to rare talent, ‘voluntary turnover’ is simply a nice way of saying, ‘You just lost the future.’”

3. Builds your employer brand

Loyal employees become brand ambassadors for you as an employer. They’re more likely to promote your organization to potential candidates and less likely to badmouth it if they eventually leave. 

A strong employer brand is invaluable for attracting top talent and differentiating your organization from competitors. It also has a cyclic relationship with employee loyalty. Loyalty adds to your brand, and strong employer brands enjoy more loyalty. 

4. Improves customer service

The effects of loyalty go beyond just your employees. They extend to the customer experience. 

Employees regularly leaving your organization can interrupt the consistency of your product or service. And for businesses in industries like account management, consulting, and B2C, increasing employee loyalty and retention ensures customers and clients can build long-term relationships with specific employees, improving the customer experience. 

The state of employee loyalty

The bad news for employers? There’s tons of room for improvement when it comes to employee loyalty. 

A Gallup web survey of 19,836 US workers in May 2024 found that just over half of US workers reported keeping an eye out for or actively seeking a new role. 

Employee engagement and satisfaction – two key contributing factors to employee loyalty – are declining. Gallup’s 2024 State of the Global Workforce report – which relied on data from 128,278 workers worldwide – revealed that only 23% of employees overall are engaged globally. 

Pew Research Center, based on data collected from 5,188 US workers, suggests the state of employee satisfaction is better – 51% of employees are extremely or very satisfied with their job overall. Still, there’s room for improvement. 

It’s also worth looking at employee loyalty for younger generations. For example, a recent survey of 1,000 full-time workers by Workproud found that 23% of employees aged 42 years or younger are strongly interested in staying with their employer long-term. For those under 30, this decreased to only 18%. 

The good news? Employers can increase employee loyalty in many ways. 

According to a Gallup survey of 717 US workers who voluntarily quit their jobs within the previous year, 42% say that there was something their employer could have done to stop them from leaving.

When it comes to the younger generations, employee loyalty looks a little different. Often described as the “job-hopping” generation, younger workers are changing jobs more frequently. 

While we believe this doesn’t spell the end of employee loyalty, it requires reframing. You can still use various strategies to support and encourage younger employees to stay as long as possible with your company, even if this won’t be the 5-10 years of previous generations. 

Why employees leave – and what you can do about it

Here are some factors that impact employee loyalty and strategies you can use to address them. 

1. Reason: Compensation

The Achievers Workforce Institute’s 2024 Engagement and Retention Report surveyed 3,800 employees and 1,450 HR professionals across the US, UK, Canada, and Australia. It found that the top reason employees are looking for other jobs is compensation. 

This was a departure from the same survey in previous years, but perhaps it’s not surprising given that employees feel the pressures of co-occurring cost-of-living and housing crises in many countries. Twenty-three percent of respondents said they have trouble paying their monthly bills. 

This is especially an issue for younger workers. The Workproud survey found that only 11% of employees aged 30 or under would stay with an employer if they were offered better compensation by a competitor for the same role. 

Strategy: Review your compensation packages

You can’t put a price on employee loyalty – but you can ensure you’re compensating employees fairly, attractively, and competitively. 

If you haven’t already done so, review your compensation packages. Compensation refers to the wages employees receive and other paid and unpaid benefits such as leave, flexible work arrangements, annual pay increases, and health insurance. 

We’re not talking about buying employee loyalty or needing endless funds to pay huge salaries. Instead, reflect critically on the needs and wants of your employees and whether the compensation and benefits you offer answer these. 

When reviewing compensation, consider:

• Whether it’s competitive compared with what other employers are paying for similar roles.

• Employees’ expectations. For example, according to a survey of hourly workers by Shiftboard, 75% of respondents flagged work-life balance as necessary for job satisfaction. You can cater to this by offering flexible scheduling for hourly employees or hybrid work options. 

• Offering long-term incentives, like stock options and retention bonuses, to encourage workers to stay with the company. 

• Including out-of-the-box benefits in your packages, such as caregiving support or unlimited vacation leave. 

Compensation can be an especially useful tool for overcoming some of the career advice younger generations now receive. For instance, professionals are warning them against staying in the same job for too long because it harms their earning potential.  

A well-structured compensation strategy that rewards employees for their loyalty can help counter this narrative and persuade these employees to stay with your organization for longer. 

However, remember that compensation is only one part of the employee loyalty puzzle. Paying employees well won’t overcome other issues like a toxic workplace or lack of career progression opportunities.  

2. Reason: Lack of communication and engagement from leadership

According to a Gallup survey of 717 US workers who voluntarily quit their jobs within the previous year, 45% said that neither a manager nor another leader spoke to them about their job satisfaction, performance, or professional future within the three months before they left. 

This lack of communication directly impacts employee retention. It leads to employees feeling unseen or underappreciated, undermining their sense of belonging in the workplace. 

Strategy: Have proactive discussions with your employees

Engaging with employees should be a top priority for management and HR. Ranging from more personalized one-to-ones with managers to employee pulse surveys you send out to your entire workforce, there are various strategies you can use. 

These interactions enable you to understand your employees’ wants and needs better and identify any issues that could lead to employees leaving. Ask employees about their job satisfaction and performance and what support they want from you when they’re doing their jobs and professional development. 

You can also be more direct and ask them about their attitudes toward leaving the organization.  What do they like and dislike about their work? What would they be looking for in a new role if they decided to leave? This encourages open communication and shows your employees your willingness to hear and address their concerns. 

3. Reason: Employees don’t feel valued or supported

Despite compensation playing a key role in workers’ decisions to leave an employer, employer loyalty may trump it in certain situations. According to the Achievers Workforce Institute survey, 72% of workers are more likely to stay in a role where they feel valued, supported, or cared for than a job where they don’t feel like this but are paid 30% more.

Strategy: Show your employees loyalty and support

As American businessman Harvey MacKay says, “Employee loyalty begins with employer loyalty.”

So, what does this look like? Make sure mutual trust exists between management and employees. Create a culture of collaboration where everyone feels heard and contributions are valued equally. 

To do this, Bill Fotsch, founder of Economic Engagement, recommends considering your employees as partners rather than subordinates. “In companies that prioritize their employees as partners, loyalty is reciprocated. Employees respond with, ‘I am loyal to my company because my company is loyal to me.,” he writes for Inc.com.

In contrast, micromanaging employees or monitoring their every move can undermine trust and should be avoided. 

That said, not enough managerial support is a thing, too – it can leave employees feeling unable to do their jobs well or resentful when they’re called out for issues in work they didn’t receive adequate support for. 

So have a good support structure in place – including support roles (like direct managers), resources (like training materials), and systems (such as regular feedback). Ensure your employees in support roles are open and responsive to your other employees’ needs and questions. 

Finally, prioritize their well-being through tailored support. For instance, you might provide an employee assistance program where employees can access confidential counseling.

4. Reason: A lack of professional development opportunities

Employees demand professional development and career progression opportunities. If employers don’t offer these, workers are prepared to look elsewhere. 

According to the Achievers Workforce Institute’s 2024 Engagement and Retention Report, a lack of career progression was the second most common reason employees leave their organizations. With a lack of growth opportunities predicted to be the biggest issue influencing turnover in 2025, according to research by mentorship software Together, this issue will become more relevant in the coming years.

LinkedIn’s 2024 Workplace Learning Report highlights the equal importance of learning and development. The platform surveyed 1,636 HR and L&D professionals worldwide: Seven in ten respondents said that learning increases their sense of connection to their employer. 

This is especially true for younger workers. Amazon and Workplace Intelligence surveyed 3,000 workers, with 74% of Millennial and Gen Z employees saying they’ll likely leave their employer next year due to a lack of skills development opportunities. 

The need for employees to develop themselves and their careers is emphasized in modern career advice, too. Some advice tells employees that staying too long with one organization can signal to potential employers that they’re too “comfortable with the status quo” and not adaptable – unless they can show they’ve moved around within the company and acquired varied experiences. 

Solution: Invest in employees’ professional development

Consider how you can support employees’ professional development and progression to increase employee loyalty. 

As a starting point, managers should sit down with employees to create individual professional development plans. Part of this process should include identifying potential career paths within the organization. This approach helps employees envisage their long-term future with the organization and see how their employer supports them. With personalized plans, training and development strategies can be tailored to the individual, ensuring their needs are addressed. 

Skills-based assessments are another way to identify skill gaps and target your training and development efforts towards these. They can also help you with internal hiring and promotions, identifying high-potential employees ready to move up or into different roles. 

Also, consider setting up a formal employee coaching program and pairing junior employees with more experienced ones. Not only can more experienced employees help others gain more skills and expertise – they’re often models of potential career pathways for employees who stay with the organization for a long time.

5. Reason: Employees feel unnoticed and undervalued

Employees who feel unappreciated might be tempted to find other employers who acknowledge and value their efforts.

Employee engagement and satisfaction levels – two key factors impacting loyalty – are influenced by how often employees are recognized by their employers. 

According to the Achievers Workforce Institute survey, employees who work for employers who don't recognize their employees are 42% less likely to be engaged. 

Similarly, a two-year study by employee recognition platform Nectar involving 1,800 US workers found that:

• 87% of employees said that meaningful recognition positively impacts their satisfaction 

• 81.9% said it improves their engagement

• Only around 49% receive feedback daily or weekly – meaning there are tons of employees who don’t receive regular recognition

Strategy: Celebrate your employees often

Consider how you can recognize and reward good work regularly. Nectar’s survey found that employee recognition should be authentic, timely, and personalized for it to be meaningful. Keep these priorities in mind when developing employee recognition strategies for your workforce. 

Some strategies you can use include:

• Sharing employee achievements in your company’s newsletter

• Creating a formal recognition program, like an “Employee of the Month” 

• Using employee recognition software so employees can receive shoutouts or points they can redeem for rewards of their choice

• Encouraging management to acknowledge staff efforts in meetings regularly

The key? Recognition must be regular. According to the Achievers Workforce Institute survey, employees who receive recognition at least monthly are the most likely to think rarely about finding another job (35%) compared with those who are recognized quarterly (23%) or annually (18%). 

Recognition doesn’t always have to be large-scale or formal to be effective. Work on creating a culture of recognition within your organization so that acknowledging and expressing gratitude for other’s efforts is second nature to all employees. 

A final word: Hiring for retention and “rethinking” employer loyalty

The strategies we’ve discussed focus on what to do once you’ve hired someone. However, there’s a useful strategy you can use when hiring people to find those who will stay longer term with your organization. 

Skills-based hiring – prioritizing candidates’ skills over formal qualifications, previous roles, or personal characteristics – is a great tool for building a loyal workforce. This approach helps you find candidates who have the skills, motivation, and more that your roles demand – so they’re more likely to be engaged in their roles if hired.

Our 2024 State of Skills-based Hiring report confirms this. We spoke to over 1,000 employers, and 91% have seen improved retention by adopting a skills-based approach to hiring. Plus, 88% agree that skills-based hires stay longer in their roles. 

It’s also important to keep in mind that an employee’s decision to leave isn’t always a failure of loyalty. Workers can quit due to factors outside your control. These include changing careers, starting their own businesses, accommodating changes in their personal lives, or retirement. 

The strategies we’ve discussed still have an important effect on these employees, who often remain loyal even after they’ve left – for example, by contributing to your positive employer brand or even returning later as a boomerang employee. This is also why you should support your employees even through their departures. 

Investing in loyalty benefits employees and employers

Even with the changing state of employee loyalty, it should be a priority for all employers. After all, building employee loyalty helps reduce turnover costs, retain top employees, and build a strong employer brand and customer relationships. 

You can use plenty of strategies to do this. Adopt a skills-first approach to hiring, review your compensation packages, provide individualized professional development, treat your employees as partners, and build a culture of recognition. 

By working on your employee loyalty today, you can build a workforce that stays. 

[1] Shabazz, Sa'iyda, “100-year-old man has worked at the same company for 84 years, taking dedication to a new level,” Upworthy.  https://www.upworthy.com/this-100-year-old-man-has-worked-at-the-same-company-for-84-years.