Employee retention rate is the percentage of employees who remain with a company over a specific period of time. It can reflect workforce stability and help gauge employee satisfaction at an organization.
To calculate employee retention rate, divide the number of remaining employees at the end of the time period by the number of original employees at the start of the time period, then multiply by 100.
Employee Retention Rate Definition
Employee retention rate is the percentage of employees who remain with a company over a certain period of time. While this number varies across companies and industries, 90 percent and above is considered a good employee retention rate.
In today’s job market, recruiting great candidates can be tough, which makes retaining the top performers you do have all the more vital. Your employee retention rate provides invaluable insight regarding your ability to keep great people around.
Below we’ll discuss what employee retention rate is and how to calculate it, as well as share some proven tactics to improve retention in your organization.
What Is Employee Retention Rate?
Employee retention rate refers to an organization’s ability to keep individuals in its workforce over a period of time. Internally, it also refers to the organization’s efforts to engage and retain its team members. Perks and benefits, types of organizational culture and work-life balance are a few of the many contributing factors to an employee’s decision to stay at a company.
Your employee retention rate offers insight into your company’s success and may help you understand the elements of your retention strategy and employee value proposition (EVP) that resonate with your team members.
Retention rate and turnover rate go hand-in-hand and offer a holistic view of your current workforce’s stability. The rate of turnover at a company refers to the percentage of employees who leave over a given period of time. While retention and turnover are related, turnover is not always the inverse of retention.
For example, when multiple separations within the same position occur over a set period of time, your rate of turnover will increase while your retention rate will remain the same. Still, in addition to tracking your retention rate, monitor your turnover rate to spot weaknesses before they become problems.
Use our template to seamlessly calculate your own employee retention rate.
Why Is Tracking Employee Retention Rate Important?
Tracking your employee retention rate helps measure the success of new initiatives, as well as employee engagement tools and ideas. Additionally, it can help you gauge employee quality-of-hire — 31 percent of new hires leave within their first six months on the job, and a quick turnover has more to do with the shortcomings of your recruitment efforts than your long-term retention strategy.
Keep in mind that turnover is an unavoidable part of any business, but it’s how you respond to unnecessary turnover and try to mitigate it that matters. Your retention strategy should focus on retaining top performers and engaged employees, the individuals who enhance your culture and drive the business forward.
Employee Retention Rate Statistics
To further prove the importance of having a retention strategy, check out these employee retention rate statistics:
Employee Exits Cost Employers 40 to 200 Percent of the Individual’s Salary
Losing an employee typically costs between 40 percent to 200 percent of their salary, depending on their role. On top of losing a skilled worker, companies have to spend resources searching for and training a replacement. These financial costs can take a toll. Use our cost-of-vacancy calculator to find out how much attrition and open positions are costing you.
Top Performers Generate 2.6 Times the Sale ROI of Average Employees
Top performers deliver value that goes far beyond their job descriptions, exhibiting elite levels of engagement and production. For this reason, they would make for excellent candidates if they decide to reenter the job market. Businesses may have to invest extra resources to keep top performers, but it’s well worth the long-term impact they can have on a company’s health.
86 Percent of Employees Believe Empathetic Leadership Boosts Employee Morale
Modeling positive behaviors and demonstrating empathy are important parts of a successful retention strategy.
For instance, 86 percent of employees believe empathetic leadership boosts morale, and 87 percent of employees say empathy is essential to fostering an inclusive environment.
If leaders promote empathetic traits like fairness and compassion, they can cultivate a positive work environment that attracts top employees. Strengthening this sense of connection can be a powerful factor in convincing employees to stay.
32 Percent of Employees Quit Due to a Toxic Work Environment
Maintaining a positive company culture and work environment — and ensuring it supports employee well-being — remains one of the top priorities for employees. In fact, according to a 2024 survey, the main reason employees chose to leave a job was due to being in a toxic or negative work environment. Additionally, 83 percent of employees said they were more likely to stay with an organization if it provided a positive work environment.
How to Calculate Employee Retention Rate
Retention rate is calculated by dividing the number of employees on the last day of a given time period by the number of employees on the first day. The formula is:
((Total number of employees at end of time period - new hires) / total number of employees at start of time period) x 100
Below, we’ve outlined the process of calculating your employee retention rate step-by-step.
Employee Retention Rate Formula
- Pick a start date and an end date.
- Record how many employees you had on the start date.
- Record how many employees you have by the end date.
- Subtract any new hires between the start date and end date from the amount of total employees on the end date — this gives you how many employees stayed.
- Divide the number in step 4 by the total number of employees on the start date, then multiply by 100 to get your retention rate.
We’ll use the following example to explain how to calculate your employee retention rate:
XYZ Tech had 125 employees on January 1, 2025. By the end of Q1, there were 130 employees, 10 of which were new hires. 25 more people were hired over Q2 to Q4. There were a total of 150 employees on January 1, 2026.
1. Define the Period of Time
Employee (EE) retention rate is often calculated on an annual basis. If you want to track your retention rate more regularly, simply define shorter time period parameters. For the purpose of this example, we’ll calculate XYZ Tech’s rate of retention for the entire year.
Example
We’re looking to calculate XYZ Tech’s retention rate for the year of 2025.
Period of time = January 1, 2025 to January 1, 2026
2. Determine the Number of Employees on the First Day of the Period
How many people were in your employment on day one of the time period you’ve defined? This information should be easy to acquire — simply check your payroll to determine the number of individuals in your employment on the given date.
Example
In the case of XYZ Tech, there were 125 employees on January 1, 2025.
Total number of employees on the first day of the time period = 125
3. Determine the Number of Retained Employees
This seems obvious, but you cannot count any employees hired during the period. The goal is to track retention — the percentage of people who remained in your employment from the first day of the period until the last. Including new hires within your calculations will interfere with the results.
To determine the number of employees you retained, subtract the number of employees hired over the time period from the total number of employees on the last day of the period.
- (Total number of employees on last day) - (Number of new hires) = Number of employees retained
Example
XYZ Tech ended 2025 with 150 employees. 10 employees were hired in Q1, and 25 were hired during the remainder of the year. That means 35 of the 150 employees were not employed on the first day of the year and should not be included in the calculations.
150 - 35 = 115 employees retained
4. Calculate Your Employee Retention Rate
To calculate your employee retention rate, divide the number of employees on the last day of the given period by the number of employees on the first day. Then, multiply that number by 100 to convert it to a percentage.
- (Total number of retained employees on last day of set period / Total number of employees on first day of set period) x 100 = employee retention rate
Example
XYZ Tech ended 2025 having retained 115 of the 125 employees they started with on January 1, 2025, which translates to a 92 percent employee retention rate for 2025.
115 / 125 = 0.92
0.92 x 100 = 92 percent
Following the steps above, test your knowledge by calculating the employee retention rate for XYZ Tech in Q1 2025.
5. Compare Your Retention Rate to Industry Standards
Before making assumptions about your employee retention rate, take stock of how your performance stacks up against industry competitors. While the ideal employee retention rate is around 90 percent, retention rates vary greatly by industry. Plus, it’s important to remember you cannot fully understand the health of your organization by tracking just your employee retention rate or turnover rate.
Furthermore, turnover rate may not always be the inverse of retention rate. Why? Because retention rate accounts for only separations involving original employees, whereas turnover rate accounts for all separations occurring within a given period and uses the average headcount.
For example, while you may retain nine members of your 10-person staff over the period of a quarter (retention rate = 90 percent), you could turnover a single position three times during that quarter, giving you a turnover rate of approximately 30 percent, which is not the inverse of 90 percent.
How to Improve Employee Retention Rate
Now that you know how to calculate your employee retention rate, you can regularly track your performance and use the data to modify your retention strategy. Company culture, employee engagement and work-life balance, as well as leadership and management behaviors all influence an employee’s decision to stay at a job.
Implement the following four tactics into your retention strategy to keep your top performers around.
1. Take Intentional Steps to Build and Maintain Your Culture
Company culture plays a huge role in job satisfaction and whether employees decide to stay or leave. To improve your company culture, revisit your core values and ensure your guiding principles are still relevant to your team. Then, talk with some of your most-tenured employees to get their sense of how the culture has evolved over the years, and where they still see room for growth as you take steps to shift your company culture.
2. Create Two-Way Communication
Delivering and receiving feedback enhances your company culture. Encouraging upward feedback through means like employee engagement surveys can help employees feel comfortable sharing their ideas and concerns. Teams that reference this data to inform their retention strategies also appear more genuine and make employees feel appreciated.
In the same way employees want to feel like their voices are heard, they also want to receive constructive feedback from their direct supervisors. Meaningful performance reviews and frequent check-ins can build an employee’s confidence in their role while creating an environment of trust and transparency.
3. Implement an Employee Recognition Program
In addition to providing constructive feedback, recognize your team members for their accomplishments. According to Gallup, well-recognized employees are 45 percent less likely to change organizations after two years. Create a platform for managers to recognize their reports and for employees to celebrate their peers. This can be done during an all-hands meeting or via a company-wide communication platform like Slack.
4. Invest in Professional Development for Your Employees
One way to boost employee retention is to invest in professional development. A lack of career development opportunities is the number one reason for employee turnover. Encourage conversations between managers and their direct reports, and ask your team members what kind of opportunities they’re interested in. Helping your employees grow professionally creates mutual respect and saves you from having to spend money on new employees with relevant skill sets.
Frequently Asked Questions
What is employee retention rate?
Employee retention rate is the percentage of employees who stay with a company over a specific period of time. It shows how well a company keeps its staff and can reflect employee satisfaction and company stability.
What is a good retention rate for employees?
A good employee retention rate varies by industry, but most organizations aim for around 85 to 90 percent or higher. A higher employee retention rate usually means employees are satisfied and the workplace is stable.
How do you calculate employee retention rate?
To calculate employee retention rate:
- Choose a start date and an end date.
- Record how many employees you had at the start.
- Subtract the number of new hires between the start and end date from the number of employees you have at the end.
- Divide that number by how many employees you had at the start, then multiply by 100.
Employee Retention Rate = ((Employees at End Date − New Hires Between Start and End Date) / Employees at Start Date) x 100
