How to calculate the employee retention rate?
The employee retention rate is usually calculated over a calendar or accounting year.
To calculate the retention rate, divide the total number of employees working for a company at the end of the selected period by the sum of the number of employees at the beginning of the period and the number of hires. The result is then multiplied by 100 to obtain a percentage.
Total number of employees at the end of the given period ÷ (Number of employees at the start of the given period + new hires) X 100
For example, at the beginning of a reporting year, a company had 78 employees. 15 people were hired during the year and the company had a total of 88 employees at the end of the year. The company's employee retention rate is therefore 94.6% (88 ÷ (78 + 15) X 100 = 94.6%).
What is a good employee retention rate?
The employee retention rate of a company varies greatly depending on the industry and the economic context. Thus, there is no single answer when it comes to identifying a good employee retention rate.
Generally, an employee retention rate around 80% can be considered good. Still, industries such as food and catering, retail shops, and tourism can have much lower employee retention rates.
Why calculate the employee retention rate?
Companies should calculate their employee retention rate to add it to their HR dashboards. This data allows managers to see if their practices have improved or deteriorated in recent years.
Staff retention rate is an indicator that allows managers to validate the success of their HR strategy.
How to improve the employee retention rate?
Companies seeking to improve their employee retention rate can use several strategies, such as:
- Increase the salaries of employees
- Improve working conditions
- Improve the onboarding process for new employees
- Change staff management methods
- Conduct exit interviews
- Improve the hiring process
- Improve the work atmosphere
- Offer more flexible hours
What factors can influence the employee retention rate?
The factors that can influence the employee retention rate include:
- The working conditions
- The leadership style of the management team
- The industry
- The work atmosphere
- The economic context
What is the difference between the employee retention rate and employee turnover rate?
The employee retention rate refers to employees who still work for an employer. On the other hand, the employee turnover rate refers to employees who have left a company.
The employee turnover rate is therefore the contrary of the employee retention rate. The higher the employee turnover rate, the lower the retention rate, and vice-versa.