Employee retention part 2: How to calculate your company’s employee retention rate?

A business’s employee retention rate is an important metric that can often tell if a company is on a positive course or not. It shows how much of your employees choose to stay in the company and technically, with the way you manage it as well.

Calculating your employee retention rate gives you insights on whether your retention efforts are effective or you might need a different kind of approach. When an employee or a staff leaves it often brings a negative effect to the company such as:

• a decrease in productivity
• high recruitment costs
• time consuming for training new hires
• lowers down employee morale

Not having an idea on your company’s employee retention rate risks you losing your top talents. So to avoid this, read on and find out how to calculate employee retention rate. 

And if you happen to know a little less about this topic be sure to read the first part of this blog series: Employee retention rate: things you need to know

How to calculate employee retention rate?

Calculating employee retention rate is really simple and the formula is pretty straightforward.

1. Find a timeline on which you wish to calculate employee retention
2. Count the initial number of employees from the beginning to end of your timeline
3. Find out the number of employees who stayed within the company on that given timeline and divide it to the initial number
4. Multiply the result to 100

Here are some examples:

Quarterly retention rate

Let’s say you have 75 employees on January 1st 2022 and it went down to just 60 at the end of March.

Using the formula, you have:

(60/75) x 100 = 80% employee retention rate in Q1

Yearly retention rate

Let’s say you have 125 employees on January 1st 2022 and it went down to 102 at the end of the year.

Using the formula, you have:

(102/125) x 100 = 81.6% yearly employee retention rate

Evaluating your employee retention rate

Evaluating your employee retention rate is just as important as calculating it. As mentioned above, a low retention rate of employees risks the chance of losing your best talents that could lead to negative effects for your company.

If your current employee retention rate seems to be falling or already low, here are some questions to ask yourself:

Does your staff find happiness in their jobs?

The happiness of an employee on their job is one of the biggest factors (if not the biggest) that makes them stay. Doing a survey on an interview on each of your staff may help you answer this question. 

Hearing their insights and needs may help improve their current level of happiness.

What management-improvements can you add/improve?

Following up on the above, knowing what your employees’ needs are (in general) can help you figure out what other improvements you add or improve. It could be adding more benefits/incentives or even just adding more team-building activities will do.

What are the reasons why an employee leaves?

This is pretty straightforward – if you can find out the reasons on why your staff leaves the team, you can improve your retention rate. Doing an exit interview for each employee and asking them the reason for quitting is one effective way to do it.

Every company or organization that struggles to maintain their workforce and wants to keep their top talents with them should pay attention to calculating and evaluating their retention rate.

A good staff retention rate may be simple but still one of the most important business factors and something that should not be ignored.