Highlights

1. Retention rate measures how many employees stay during a specific time, like a quarter or year.
2. Tracking retention helps identify workforce stability and areas needing improvement in employee experience.
3. Retention rate calculation: (Employees who stayed ÷ Starting employees) × 100.
4. High turnover increases costs, reduces productivity, and lowers work quality.
5. Boost retention by hiring right, investing in leaders, fair pay, culture, and work-life balance.

Keeping your top employees happy and engaged is essential for building a strong, lasting company. A great way to measure this is by calculating your employee retention rate, which shows the percentage of employees who stay with your company over a specific period.

Tracking your retention rate means gathering data, analyzing numbers, and reflecting on your actions to keep employees satisfied or what might need improvement. So, in this blog will walk you through how to calculate employee retention rate, why it’s so important, and practical tips to boost it.

What is the Employee Retention Rate?

Employee retention rate tracks the percentage of staff who remain with your company during a set period. It offers a broader perspective on calculating workforce stability when paired with turnover or churn rate.

Tracking this helps you see how well your company keeps its employees, providing insights into their experience and revealing areas to improve.

Why Measuring Staff Retention Rates is Important?

Measuring and boosting your employee retention rate helps your organization run more efficiently and enhances overall performance. It’s a crucial metric for staying competitive in today’s business landscape.

Moreover, your retention rate matters as it helps you evaluate your company's effectiveness in training and keeping talented employees. High turnover can be costly; replacing an employee might cost half to twice their yearly salary. Plus, turnover often lowers productivity and work quality. Keeping employees for longer reduces hiring costs and boosts overall company performance.

Employee Turnover vs Retention Rate

Employee retention is a company's ability to keep its talent, directly boosting performance and success. In contrast, turnover measures how many employees leave over a given period.

Let’s discuss these terms in detail:

Employee Turnover

Employee turnover refers to the percentage of employees who leave an organization over a specific period, whether due to resignation, termination, retirement, or other reasons. High turnover rates can be costly, often leading to recruitment and training expenses, decreased productivity, and potential disruptions to workplace morale.

Retention Rate

On the other hand, the retention rate measures the percentage of employees who stay with an organization over a given period. It reflects the company’s ability to maintain its workforce. High retention rates typically indicate a positive work environment, effective management, and employee satisfaction.

How to Calculate Employee Retention Rate?

Here’s the employee retention rate calculation method:

1. Start by finding how many employees stayed during a specific period. Use this employee retention formula:
2. (Total employees at the start) - (Employees who left) = Employees who stayed
3. Next, calculate the retention rate:
4. (Employees who stayed) ÷ (Total employees at the start) = Retention rate (in decimal form)
5. To turn the decimal into a percentage, multiply it by 100 or move the decimal point two places to the right.

For example, if 80 out of 100 employees stayed, the retention rate would be 80 ÷ 100 = 0.8, or 80%.

5 Tips to Boost Employee Retention

Here are five simple ways to help keep your employees happy and improve your company’s retention rate:

1. Hire the Right People

Good employee retention starts with smart hiring. Choose candidates who are the right fit for the role, team, and company. Before interviews, be clear on the job’s responsibilities, required skills, and the type of person you’re looking for.

Take your time during interviews to assess whether candidates align with your company’s values and the team they’ll join. 

Managers play a huge role in retention, so hire carefully. When it’s a great fit for both sides, employees are more likely to stay for the long haul.

2. Invest in Leaders

Managers can make or break retention. Employees are likelier to stick around when they have managers who trust, respect, and support them. Poor management, on the other hand, pushes people away.

Train supervisors to lead effectively, foster professional growth, and support their teams. Monitoring their performance can also ensure a positive environment that encourages retention.

3. Create a Values-Driven Culture

Employees want to feel their work has a purpose. If they don’t connect with your company’s mission, they might look elsewhere. A Gartner survey showed that 68% of employees would consider leaving for an employer with stronger cultural or societal values.

Build a culture centered on clear, meaningful values. For instance, if sustainability is your focus, keep your team updated on your environmental efforts and organize volunteer activities that align with this mission.

When employees feel part of something bigger, they’re more likely to stay and grow with your company.

4. Offer Competitive Pay

Fair pay is essential for retention. Companies that rank high for compensation and benefits tend to lose fewer employees.

Aim to offer salaries at or above market standards. Regularly review industry benchmarks to ensure your pay aligns with expectations and appropriately rewards your team’s contributions.

5. Go Beyond Money

While competitive pay matters, it’s not the only factor. Benefits, growth opportunities, and work-life balance are equally important.

Talk to your employees to understand their needs. For example:

1. If managers aren’t providing enough recognition, train them to give meaningful feedback.
2. If burnout is an issue, consider wellness programs or flexible work policies.

Is your team losing key players? It might be time to take action! With Yulys, you can easily post a job and find the perfect candidates to fill those gaps. Our staffing services are designed to help you quickly find skilled professionals so you can keep your business running smoothly. Whether looking for full-time employees or temporary help, Yulys is the place for reliable hiring solutions. Start posting today and get the talent you need!

Retention Rate Calculation Examples

Here are a few examples of calculating retention rates for different businesses:

Example 1: Tech Startup

A tech startup began the year with 50 employees. By the end of the year, 45 of those original employees were still with the company.

1. Starting number: 50
2. Remaining number: 45

Calculation:

1. Subtract employees who left: 50 – 45 = 5 employees left.
2. Divide remaining employees by the starting number: 45 ÷ 50 = 0.9
3. Convert to a percentage: 0.9 × 100 = 90%

The retention rate for the startup is 90%.

Example 2: Retail Store

A retail store had 30 employees at the start of Q2. By the end of Q2, 27 of those employees remained.

1. Starting number: 30
2. Remaining number: 27

Calculation:

1. Subtract employees who left: 30 – 27 = 3 employees left.
2. Divide remaining employees by the starting number: 27 ÷ 30 = 0.9
3. Convert to a percentage: 0.9 × 100 = 90%

The store's retention rate for Q2 is 90%.

Example 3: Hospitality Business

A hotel began the year with 75 staff members. By year-end, 60 of those staff members were still working there.

1. Starting number: 75
2. Remaining number: 60

Calculation:

1. Subtract employees who left: 75 – 60 = 15 employees left.
2. Divide remaining employees by the starting number: 60 ÷ 75 = 0.8
3. Convert to a percentage: 0.8 × 100 = 80%

The retention rate for the hotel is 80%.

Summary

Knowing how to calculate employee retention rate is a great way to measure how well your company retains its employees. By focusing on fair pay, a positive company culture, and strong leadership, you can improve retention and create a happier, more stable workforce. Putting effort into maintaining a great work environment helps lower costs, boost productivity, and keep employees motivated to stay and grow with your company.