Leadership plays a crucial role in employee retention, especially in small and medium enterprises (SMEs), where turnover rates can reach 20-30% annually, leading to productivity losses and increased hiring costs. In Canada, SMEs employ approximately 88% of the workforce, making retention strategies essential for business sustainability. This study is a systematic review of the literature exploring how leadership styles influence employee retention in Canadian SMEs through key databases including Google Scholar, ProQuest, and Business Source Complete. A systematic review synthesizes existing research to understand this issue comprehensively and key themes uncovered included transformational and transactional leadership, employee engagement, job satisfaction, and organizational commitment. These themes provide valuable insights as strong leadership fosters a positive work environment, reducing turnover and enhancing business stability. The findings emphasize the importance of leadership development programs in SMEs and future research can include quantitative correlation studies to measure leadership effectiveness on retention rates and qualitative ethnographic case studies to explore employee experiences with different leadership styles.
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