Your employee retention rate is a critical business metric. It highlights how many employees choose to stay at your organization. It also gives valuable insight into whether your engagement and retention initiatives are working or not.
If you don’t have a pulse on employee retention, you risk losing your top performers. And when these employees leave, you can experience low productivity levels, reduced company expertise, poor employee morale, and high recruitment and onboarding costs.
This article will help you calculate your employee retention rate to uncover the significance of your turnover problems and drive company growth.
Your employee retention rate is a telling metric, giving insight into the employee experience. In short, it’s the percentage of employees that stay at your organization during a given time period.
But your employee retention rate is so much more than a simple calculation. It helps you understand whether you are succeeding—or not—in creating a positive employee experience that engages and motivates your talent. By comparing retention rates over a given time period, you can understand what’s lacking or improving in the employee experience to make adjustments.
Employee retention rate is defined as the percentage of your workforce that stays at your organization. Employee turnover rate is the percentage of employees that leave your organization. Leaders should strive for a high retention rate and a low turnover rate to drive optimal results.
The formula to calculate your unique retention rates is simple and straightforward. Divide the number of employees who have stayed throughout a given time period by the initial amount of employees in said time period, and multiply by 100:
(Remaining headcount during set period/ Starting headcount during set period) x 100
When calculating your employee retention rate, it’s important to outline a time frame that you would like to measure, typically on a yearly or quarterly basis. You also need to have the headcount of employees at the start and end of that time frame.
By dividing the end amount of employees during your set period by the beginning amount, and multiplying by 100, you can determine your turnover rate.
You may want to separate your calculations by voluntary and involuntary turnover. This allows you to calculate the percentage of employees who were laid off vs those who left your organization by choice.
Let’s say you had 475 employees on January 1st 2021 and 440 employees on December 31st 2021. To calculate your yearly retention rate, divide 440 by 475 and multiply by 100.
(440 / 475) x 100= 92.6% yearly retention rate.
You have 33 employees on July 1st and 28 employees on September 30th. To calculate your retention rate in this time period, divide 28 by 33 and multiply by 100.
(28 / 33) x 100= 84.8% retention rate in July through September.
Your organization has 1,455 employees at the beginning of Q2 2021 and 1,375 at the end of Q2. To calculate your retention rate in Q2, divide 1,375 by 1,455 and multiply by 100.
(1,375 / 1,455) x 100= 94.5 % retention rate in Q2.
Your talent is your organization’s most valuable asset. They drive the initiatives that keep your organization successful. Without your talent, you have no means to achieve business goals. That’s why adopting effective retention strategies is important. When these strategies are in place, you can experience:
To boost your retention rates, uncover possible reasons your employees might leave with our ebook, The Top 5 Predictors of Employee Turnover.