What is employee retention rate?

Employee retention rate is a metric that measures the percentage of employees who remain employed over a specific period.

How to calculate employee retention rate?

The formula to calculate employee retention rate is:

(number of people employed during the entire period)/(number of people employed at the start of the period) x 100 = Retention Rate

This formula should only include employees who worked during the entire period, from the beginning date to the end date, and not those who were hired in the middle. 

Retention rate serves as a compass for HR leaders, pointing HR professionals in the right direction to assess the effectiveness of their retention strategies.

Why should HR leaders care about employee retention rates?

A high employee retention rate reveals a noteworthy level of employee engagement. This metric can help HR leaders:

  • Reduce company costs   
  • Increase employee productivity 
  • Improve employee engagement
  • Strategize workforce tactics
  • Address recruiting issues

Calculating the number of employees who stay at a company provides HR and other department leaders with concrete data to navigate through rough waters towards better employee engagement.

What can HR leaders do to use employee retention rate beneficially?

Retention rate data is the key to unlocking strategic retention methods. HR leaders can apply the following practices to use employee retention rates effectively:

  • Choose specific areas of measurement. HR leaders should determine the specific time-span and job titles they plan to analyze. Additionally, calculating the retention for each department, as well as the company as a whole, enables HR leaders to discover certain weak areas in need of adjustment. 
  • Analyze turnover rates. Calculating the turnover rate, and analyzing this data in combination with retention rate data, can provide a comprehensive picture of the overall employee retention status. Examining when and why employees choose to leave their jobs helps HR leaders understand what changes they should make to enhance motivation, engagement, and retention. 
  • Interpret the data. The results can provide valuable insight for HR leaders.  Analyzing retention and turnover rate calculations can shed light on important trends, inefficient practices, strategies that need adjustment, or successful methods that they can further develop.  
  • Implement the changes. HR leaders can collaborate with supervisors to craft and implement an improvement plan that addresses the root causes of low retention rates. Perhaps, for instance, the plan will revamp company onboarding methods, the interview process, or improve upon a sparse employee development program. 

How can calculating employee retention rate improve company culture? 

Retention rate is a practical tool that helps HR professionals pinpoint, address, and reinforce weak areas. Applying this metric can help improve the employee experience and build a workforce of engaged and motivated employees, with greater job satisfaction, who positively contribute to healthy company culture.