CHAPTER ONE

1.0 INTRODUCTION
1.1 Background of the Study
Employees are an integral part in determining the organization’s success (Armstrong,
2012). It is obvious that this vital resource, employees, play the greatest role in attaining
the organization’s mission (Rasdi & Chen, 2018). Retaining this vital resource or the
ability to gain employees goodwill to stay longer is an essential component of a healthy
organization (Kularathne & Senevirathne, 2022). This ability overarches all other aspects
of human resource functions. It reflects the organization’s willingness and effort in
meeting employees’ expectations (Hassan, Jambulingam, & Narayan, 2021). This effort,
therefore, creates a positive work environment that strengthens employees’ commitment,
sense of belongingness and increases company morale (Thirupathy & Dhayalan, 2016).

Employee retention refers to keeping or encouraging employees to stay with a company

for as long as possible. Employee retention, according to Mita, Aarti, and Ravneeta
(2014), is a strategy used by firms to keep a productive workforce while also meeting
operational needs. Belete (2018) defined it as a procedure in which personnel is urged to
stay with the company for as long as possible or until the project is completed. It involves
taking actions that motivate and tempt employees to stay with the organization for the
maximum period (Lee & Chen, 2018). Employee retention is essentially a process in
which employees are encouraged to stay with the company for as long as possible or until
the project is completed, and it is beneficial to both the company and the employee (Mita
et al., 2014; Belete, 2018; Lee & Chen, 2018).

Organizations spend much of their time and efforts in searching for and hiring competent
employees. However, this effort will be wasted if they are not retained for longer (Halim,
Waqas, Edwin, & Shah, 2020). Likewise, employee retention is by far more efficient than
recruiting, orienting and training a replacement of the same quality. This is because, time and
money are invested to equip the new employees with the necessary skills to bring sthem up to
the existing employees (Khwae & Abdollah, 2021). When they leave after all these efforts,
the organization will be left at complete loss and the organization will be forced to redo the
whole process again (Rakhra, 2018). On top of this, the importance of employee retention is
emphasized with the costs of the departing employees and with the shortage of

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skilled labor around the world (Akunda, Chen, & Gikiri, 2018). This holds true with all positions
regardless of the skill requirement. Especially, when the position involves customer interaction,
employee retention has a positive impact (Khwae & Abdollah, 2021).

Researchers (Rasdi & Chen, 2018; Halim et al., 2020; Khwae & Abdollah, 2021; Rakhra,
2018) agreed on employee retention importance as globalization, high local/international
competition, increase in knowledge work and frequent advancement in technology impose
many challenges to all countries. In such change, employee retention can serve the
organization as a means of preventing loss of talent, knowledge and loyal customers (Akunda
et al., 2018). However, in this fast growing and highly changing environment satisfying the
sensitive issues of retaining best carrier-oriented employee becomes a shared challenge
(Khwae & Abdollah, 2021). Employee retention will be more challenging with the absence
of a valid, up-to-date insight and understanding of the factors that are affecting it (Hassan et
al., 2021; Lee & Chen, 2018).

Retaining an employee for a maximum period takes various measures into consideration
(Srivani, Reddy, & Vidyanath, 2020). This begins with the understanding of the different sort
of reasons that arise from the employee and the job. In this case, organizations have to note
the varying reasons behind their employees’ decision to stay or leave whereas; if they fail to
adopt & cope up in time, they will end up with huge problem (Ibrahim, Melhem, & Ali,
2019). Thus, organizations have to sense the departure of significant number of employees
and alert with the presence of unresolved problem that need to be traced and addressed (Latif
& Saraih, 2016). In line with this, the study intends to identify the factors that affect
employee retention in the private sector in Kenya.

The United Kingdom (UK) average employee turnover rate is approximately 17.5% a year,
although this varies drastically between industries. The highest levels of turnover are found in
private sector organisations in retailing, catering, call centres, construction and media. Turnover
levels also vary from region to region with the highest rates found where unemployment is
lowest, and industries with traditionally low turnover rates include legal, accountancy, education
and the public sector (Chartered Institute of Personnel and Development [CIPD], 2021). In 2021
the combined turnover of all private sector businesses in the UK was 4.77 trillion British pounds,
an increase of over 120 billion pounds when compared with the previous years, and this turnover
of private enterprises in the UK has increased by over 1.64 trillion pounds overall since 2012
(Bureau of Labor Statistics, 2022).

With an average of 16%, Canada ranks among the top countries in terms of employee
turnover (CIPD, 2021). The voluntary turnover rate in the country dropped considerably,
falling to 7% for 2019-20 from 8.9% for 2018-19, 8.1% for 2017-18, 7.1% for 2016-17,
7.8% for 2015-16 and 7.6% for 2014-15. The rate for the private sector is 7.5% compared
with 5% for the public sector, while 44% of organizations report decreased turnover since the
onset of the COVID-19 pandemic, while 45% state it stayed the same, and only 11% noted
an increase (Bureau of Labor Statistics, 2022). The voluntary turnover stands at 5.2% for
those in the trades, service and production level, 3.6% for those in administrative and support
services, and 4.4% for professionals. The number is 2.5% for those in management, and just
1.8% for executives (CIPD, 2021). Involuntary turnover rates are 3.1% for those in the
trades, service and production level, 2% for those in administrative and support services, and
2.6% for professionals. The number is 2.5% for those in management, and just 1.5% for
executives (Bureau of Labor Statistics, 2022).

The African private sector has not been excluded from employee turnover. According to

CIPD (2021) in South Africa, the demand for talented employees has kept on expanding

because of a maturing populace and a growing economy. Al-Suraihi, Samikon, Al-Suraihi,

and Ibrahim (2021) assert that organisations are compelled to be in competition to entice and

retain talented employees in an environment where there is a skills shortage. CIPD (2021)

mentions that some private sector firms in South Africa have been struggling with the issue

of retaining skilled employees. Bangi and Mgeni (2022) argues that majority of employees

are leaving the public service in South Africa for better-paying organisations in the private

sector.
In Kenya, high rates of employee turnover have been witnessed within the private sector
(CIPD, 2021). Retention of employees in the private and public division is among the major
factors affecting the managers of an organization due to employee turnover that is high, the
manpower that is skilled and economic growth (Sija, 2022). Most people in Kenya do not
have alternatives of employment opportunities and not easy to give up their jobs and
employees leave their jobs for various reasons some which include organizational and social
aspects like marriage where an employee leaves to join his or her family (CIPD, 2021). The
work environment, as defined by Bangi & Mgeni (2022), triggers the efficient performance
of job tasks by employees. Reward and compensation trigger action and specific employee
behaviour that affects their retention (Sija 2022). Work-life imbalance as mentioned by Latif
& Saraih (2016) have an impact on employee retention and absenteeism. Effects of existence
of career management including training and development affect employee retention
(Mule,Rintari &Moguche (2020) ). However, despite the fact that there is high rate of
unemployment turnover rates are recorded, where most individual leave formal employment
for self-employment and switching of jobs from one company to another is very high (Al
Mamun & Hasan, 2017).

The Kenya private sector has over the years substantially contributed to the country’s
economic development process. Figures indicate that the sector contributes over 80% of the
Gross Domestic Product (GDP), a substantial percentage of total employment, and the bulk
of export earnings. The major growth sectors are trade, restaurants and hotels; Agriculture,
Manufacturing, Finance, insurance, real estate and business support services; and Transport,
communications and storage (World Bank Group, 2019). There are various challenges that
continue to affect the investment climate for private sector activities, include uncompetitive
infrastructure and utilities, unfriendly legal and regulatory