How to hold the young employees, reduce attrition rate?

Perhaps giving them flexibility will do some good. But this too does not gaurantee that the employee will stay. When you pay less be sure you would not be able to keep the hold of people.

Thanks for the referral, Diya. You guessed right that I would be interested in this topic. Over the years, it has grown to be one of my favourite topics.

First off, I'd like to thank the esteemed persons who have made their posts here, for having helped me validate my own empirical observations and subsequent analysis. I have received a boost of confidence for another reason - the fact that there are some true leaders (as opposed to managers) around such as yourselves - leaders who are interested in things other than just the bottomline. It is this confidence that is enabling me to write further in the hope that you might consider my views. You might say "Don't teach your grandmother to suck eggs". If that is indeed the case, please do forgive me.

We, humans, have an innate sense of variation which causes us to be unique not just genetically but mentally and behaviourally as well. Thus, it stands to reason that there are going to be many reasons for attrition too. It is well known to you, that from the point of view of the organization, the following could be the broad headings under which most of the reasons could be grouped: Training & Mentoring, Rewards & Recognition, Career Path & Income Graph, and Leaves & Holidays. 

1. Training & Mentoring - When a person is not guided and trained on how to perform a job successfully as defined by the company's officers (implicitly or explicitly), many recruits lose interest in the job because it is difficult for them to taste success. They usually change fields after leaving the organization. On the other hand, if the training is properly done with enough (for the job) approximation of the real world process, the success rate of the recruits goes high. However, the full potential of this training is very rarely achieved because of a pre-existing problem - the education system. 

Most organisations get out of this problem by looking for talented and motivated individuals who obtained their skills elsewhere. The cost is higher and of course, after some time, sometimes very soon, these individuals move to another job, thus forcing the company to re-hire for the backfill.

Instead, if an organisation engenders closer relationships with local colleges by conducting talent examinations for the students and rewarding the desired candidates with an apprenticeship or extra training at the organisation - during their undergraduate years itself - they will have a set of candidates who would be thoroughly trained in the systems and expectations of the organisation. No separate hiring practice would be necessary and thus all those funds could be diverted to this channel. To safeguard the interests of the organisation, there could be a bond/contract between the organisation and the parents of the candidate with a bank in between as has been done by quite a few. 

Over the years, the organisation will be closely knit with the student community - ensuring a steady flow of quality candidates.

2. Rewards & Recognition - This is the easy part. No need of anything special. Cash works extremely well. A tiny bonus - even Rs.500/- will go quite a way to making an employee happy. Works even better if there is a poster with a photo pinned to the notice board for the first week of the month. The more transparent the process, the better everyone will attempt to get that bonus - for the prestige and for the cash treat.

Young employees are always eager to contribute and in turn expect recognition. They want to tell the world that they matter. An organisation by giving them opportunity to contribute is making them feel at home and important. Quality of position and people one works with are the criteria one considers while sticking to or leaving a job. Compensation comes second.