In recent years the countries of the Western Balkans region have been facing an exodus of labour, which represents a complex social problem. Given the fact that the largest number of employees is engaged in the service industry, especially in the retail sector where 10% of all working population is employed, it is necessary to define the indicators which impede employee welfare and to recommend a set of measures for their minimization. In this regard, this paper aims to identify variables which impact employee welfare in the retail sector of the Western Balkans with a particular retrospect to the differences between SMEs and retail chains. Empirical research has been conducted on a sample of 325 employees of retail companies. Correlation between employee welfare and socio-organizational variables, such as job contentment, social support, monthly salary, work environment, promotion opportunity, the use of modern technology, business culture, job rotation and job security have been tested. The results of the research have shown a significant correlation between socio-organizational variables and employee welfare. Differences are especially prominent between SMEs and retail chains. Based on the obtained results, a set of measures and procedures which competent institutions and employment policymakers should undertake to neutralize those differences has been proposed. Suggestions for future research are provided.