THE INFLUENCE OF HUMAN RESOURCE MANAGEMENT PRACTICES ON EMPLOYEE RETENTION: A STRUCTURAL EQUATION MODELING APPROACH

Author: Indonesia, China & Iraq

Abstract

Employee retention has emerged as one of the most pressing strategic concerns for contemporary organizations operating in increasingly competitive labor markets. This study examines the influence of four core Human Resource Management (HRM) practices compensation and rewards, training and development, career development, and work environment on employee retention. Grounded in Social Exchange Theory and the Resource-Based View of the firm, the research employs a quantitative, cross-sectional design using a structured survey administered to 350 full-time employees drawn from medium and large service-sector organizations. A two-step Structural Equation Modeling (SEM) procedure was performed using IBM SPSS AMOS 26, beginning with Confirmatory Factor Analysis (CFA) to assess the measurement model and proceeding to the structural model to test the hypothesized relationships. Reliability and validity were established through Composite Reliability (CR > 0.70) and Average Variance Extracted (AVE > 0.50), and discriminant validity was confirmed using the Fornell–Larcker criterion. Model fit indices (CMIN/df = 2.41, GFI = 0.92, CFI = 0.95, TLI = 0.94, RMSEA = 0.058) indicated an acceptable fit. The results revealed that all four HRM practices significantly and positively influenced employee retention, with compensation and rewards (β = 0.32, p < .001) emerging as the strongest predictor, followed by work environment (β = 0.29, p < .001), training and development (β = 0.27, p < .001), and career development (β = 0.21, p < .01). Together, these constructs explained 61% of the variance in employee retention. The findings provide empirical support for an integrated HRM-retention model and offer practical guidance for HR managers seeking evidence-based strategies to reduce voluntary turnover.