Employee Retention Rate | Meaning

Define Employee Retention Rate.

It is the measure that calculates the percentage of the number of employees who continued with their jobs over a fixed period. 

Calculation of the Employee Retention Rate.

There is a formula to calculate the Employee Retention Rate, which is as follows: 

[Number of individuals employed during a specific period] / [Number of individuals employed at the beginning of the period] *100


The formula should only consist of the individuals who remained employed during the entire period and excludes all of the individuals hired during the said period.

The retention rate is an important parameter for HR leaders as it helps them devise effective strategies to increase the retention rate.

Why is Employee Retention Rate important?

The Company Retention Rate goes hand in hand with the employee engagement with the work. Retaining existing employees helps reduce the company costs, multiplying productivity, implementing workforce strategies efficiently, and addressing the relevant issues while recruiting new personnel. The calculation of this rate equips the department leaders with the data to ensure better employee engagement.

How can the Employee Retention Rate be used beneficially?

Increasing the retention rate requires certain retention strategies.

  • Calculation of the retention rate of each department allows the HR leaders to focus on the areas requiring adjustment.
  • The employee retention status can be determined by simultaneously analyzing the retention rate and turnover rate. The time period and the position at which an employee leaves the job offer insights to the employer, which can help devise an approach to increase retention, engagement, and motivation.
  • Analyzing the data can benefit the HR leaders to develop techniques of retention, the scope for adjustment in the weak areas, and other efficient and important practices and trends.
  • A low retention rate is an issue that requires the supervisors to determine the root cause. This can help build a better interview process, company onboarding methods, and other programs.
  • It is a metric by which the leaders rectify the problem to ensure better employee engagement, motivation, satisfaction, and positive contribution to the company. 
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