How to Calculate HR Employee Retention Rates

December 27, 2013

When it comes to employee retention strategies, it is recommended that HR departments track specific measurables. By tracking statistics such as employee retention rates and turnover cost, you have a way to measure the effectiveness of new HR initiatives such as a formal on-boarding program or starting to offer health benefits.

employee_retention_calculationThis article provides an overview of how to calculate HR employee retention rates, why employee retention strategies matter, and a best practices checklist for employee retention.

How to Calculate HR Employee Retention Rates

Employee retention rate is a helpful statistic for an employer to calculate – both as a benchmark and periodically (ex: quarterly or bi-annually). The formula is simple. Divide the number of employees who left during a period by the total number of employees at the end of a period to get the percentage. 

Sample Inputs

Sample Calculation

Period of Time: Fourth Quarter
Total Employees at Beginning of Q4:24
Total Employees Terminated in Q4: 4

24 – 4 = 20 
20 / 24 = .83
.83 x 100 = 83%

Standard employee retention rates are anywhere from 70% - 85% but vary greatly by industry and calculation method (for example, are you measuring only voluntary turnover or all terminated employees?).

Why Does HR Employee Retention Matter for a Small Business?

Employee turnover costs small businesses time and money.

  • Turnover disrupts the flow of a functioning workforce. When an employee leaves there can be a significant knowledge gap left, creating more work as the remaining team members pick up the pieces. 

  • Recruiting and training a new employee requires staff time and money. Every time a business replaces a salaried employee, it costs on average 6 to 9 months in salary. For a manager making $40,000 a year, that's $20,000 to $30,000 in recruiting and training expenses, along with other intangibles. 

While some turnover is inevitable, having an intentional employee retention strategy in place mitigates the turnover, and these costs, for a small business.

Employee Retention – Best Practices Checklist

Recently, we outlined tips for employee retention. Here's a summary of those tips:

  • Benchmark your employee retention rate

  • Use proven retention strategies, not guesswork

  • Don't assume employees are happy (create a high-feedback environment)

  • Implement a health benefits program such as a traditional health plan or a Health Reimbursement Arrangement (HRA)

  • Provide different benefits for different employees, within legal guidelines

  • Conduct exit interviews to understand which benefits employees value, receive feedback on the culture, and identify areas for improvement

See related articles on HR employee recruiting and retention:

Download our employee retention eBook to learn how to keep your most valued employees without breaking your budget.

How are you calculating your employee retention? What strategies are you implementing for employee retention? Leave a comment below with your ideas.

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