Do You Know Your Company’s Employee Retention Rate?

In any business, there’s a natural cycle of people joining and leaving. However, losing good people can hurt your business, especially when it happens with increasing frequency and your organization begins to resemble a revolving door. 

Do You Know Your Company’s Employee Retention Rate?

October 25, 2021

In any business, there’s a natural cycle of people joining and leaving. However, losing good people can hurt your business, especially when it happens with increasing frequency and your organization begins to resemble a revolving door. 


Without taking proactive action to keep your employees, your retention rate can fall to dangerously low levels. But what is your employee retention rate, actually? And how do you know when it’s too low?

What is Your Employee Retention Rate and Why Should You Track It?

Employee retention is a simple measure of the number of employees who stayed with your organization compared to your starting headcount in a given period. You can calculate your retention rate using the following formula: 


(# of remaining employees in the time period ÷ # of employees you started with in the time period) x 100


For example, if you have a current headcount of 475 employees, but started the year with 500, your retention rate for the year would be calculated as follows: (475 ÷ 500) x 100 = 95% retention rate. In general, any retention rate over 90 percent is considered positive, but the rate can vary across types of positions and industries. 


Measuring your retention rate over time is critical to the success of your business because it can impact the continuity of business operations as well as your talent management and hiring costs. Each time you lose a good employee, you not only lose their future contributions to your business, but you must also spend time and money hiring and training a replacement, which can cost as much as 213 percent of the employee’s salary

Do You Have an Employee Retention Problem?

The most telling sign of a retention problem is the obvious one: a low retention rate. But it’s a look-back figure—it tells you there’s a problem after employees have left your organization. Your retention rate can also fluctuate over time as a result of internal and external factors such as restructuring, geographic expansion, and even pandemic-related job reductions. 


Thankfully, there are other signs of a retention problem in your organization. In addition to regular monitoring of your retention figures, you can also look for other possible causes of a falling retention rate, including the following:

  • Employee surveys reflect lower employee engagement and job satisfaction
  • Employees may be calling in sick more and complaining of burnout
  • The rumor mill is busy with talk of possible departures
  • Employees are leaving negative online reviews

How to Improve Your Employee Retention Rate

Losing great people is always a concern, but it hurts your organization even more in a tight labor market where good talent is hard to find. These days, when an estimated one in four employees is considering leaving their job, you’ll need to take targeted action to keep your people and maintain a healthy retention rate.


Take the following steps to build and maintain a positive employee retention rate in your organization:

  • Equip managers: Train managers to recognize and address the signs of low morale and engagement, which can often cause employees to resign.
  • Build an employee recognition program: Recognize employees for a job well done. Several studies show that employees who receive recognition are less likely to look for a new position and more likely to stay with an organization.
  • Boost career development: Offer development and growth opportunities that keep employees challenged.
  • Listen to employee feedback: Read online reviews and take action on exit interview feedback.
  • Combat employee burnout: Offer flexible working options that can help employees find a better work-life balance and reduce the chances of burnout.

Get Better Control Over Employee Retention

In today’s competitive job market, it’s more critical than ever to do what you can to keep good employees. Working with a trusted HR services partner can help you take the actions required to prevent regretted turnover and maintain a healthy retention rate, including employee surveys and workforce reporting. To learn about these and other available services through MarvelHR, contact us for a consultation.

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