Why Happiness Alone Won't Solve Employee Retention

Employees’ emotional needs are going unmet – and the impact is affecting both business performance and the workforce.

As a consequence, a widening gap has emerged between what organisations provide and what genuinely drives employee happiness and engagement.

That’s the headline from The Happiness Index’s newly released Global Workplace Happiness Report, which captures feedback from more than 80,000 employees across 115 countries.

Its analysis draws on over 1.9 million individual data points and nearly 90,000 written comments, offering a robust, globally representative view of sentiment.

What are the key drivers of happiness in the workplace?

The strongest driver of overall workplace happiness is whether employees feel inspired and experience a genuine sense of belonging. These are emotional, cultural dynamics that shape how people perceive their organisation and their place within it.

Despite their importance, employees ranked inspiration near the bottom of all measured dimensions – highlighting a significant execution gap between what matters most and what organisations are delivering.

Location also exerts the most consistent influence on happiness and engagement, compared to other variables in the study.

The study states: “Remote workers report the highest scores across nearly every dimension, with hybrid workers close behind. Field-based employees score lowest, particularly on belonging and work-life balance, with office workers sitting in between.”

Younger employees are signalling what’s next for the workplace: hybrid models provide career advantages that fully remote setups can't quite match.

While remote work still edges out hybrid on most overall measures, workers aged 19-29 report meaningfully better experiences in two areas that matter most early in a career: learning opportunities and the chance to progress.

In short, hybrid working isn’t viewed as a compromise by young professionals, but as a catalyst for growth. The blend of flexibility and in-person exposure appears to unlock mentorship, visibility and informal learning that remote work alone struggles to replicate.

What are the key drivers for unhappiness in the workplace?

Employees with more than five years’ tenure are less happy than those earlier in their journey, according to the study.

The happiest cohort is in the first two years at a company, with sentiment declining between years five and 10. After the decade mark, scores tend to stabilise or recover modestly.

Older workers express the greatest dissatisfaction with the feedback they receive – and, as a result, are the least likely to advocate for the business.

As the report notes: “The youngest workers are the happiest with the amount of feedback they receive, before scores steadily decline to their lowest point for those between 50-59, with a partial recovery at 60+.” It adds: “Employers aren’t necessarily aware that some older workers want more formal interaction; 50-year-olds are less likely to flag the absence of feedback than younger workers.”

Happiness also dips in the mid-market, following a J-shaped relationship between company size and workplace wellbeing.

Micro-businesses – teams of 10 or fewer – consistently outperform on belonging and collaboration, benefiting from the intimacy and immediacy that small groups naturally create.

At the other end of the spectrum, large organisations with more than 1,000 employees report the strongest scores across almost every dimension, buoyed by mature systems, resources and well-established structures.

Mid-size firms (51-250 employees) are caught between the two: too large to maintain the closeness of a small team, but not yet equipped with the organisational scaffolding of a large enterprise.

Offering his concluding advice, Matt Phelan, Co-Founder, The Happiness Index, told HR Magazine: “While systems, processes, and technology are undeniably vital to organisational success, the Global Workplace Happiness Report reveals a deeper truth: employees view employment as a relationship. To get the best from their people, CHROs must begin by viewing employment through a relationship lens.”