Employee retention rate: formula and calculator.

The employee retention rate formula.

Example: you start the year with 100 people, end with 104 and hired 16 during the year. (104 − 16) ÷ 100 × 100 = 88% retention.

A note on the retention formula.

Exclude people hired during the period from both numerator and denominator.

Employee retention rate: a worked example.

A team starts the year with 40 people. During the year, six leave and ten are hired. Of the original 40, 34 are still there at the end of the year. The retention rate is 34 ÷ 40 × 100 = 85%. The ten new hires do not count, because they were not part of the starting group.

Run the same calculation for each team and for first-year employees. A company rate of 85% can hide one team at 95% and another at 60%, and the second team is where to act.

More employee retention rate examples.

New hires during the period never count in the numerator or denominator. That is why retention and turnover rates do not add up to 100%.

Employee retention rate calculator.

Common mistakes when calculating retention rate.

Counting new hires in the end headcount inflates the rate. Mixing periods, such as comparing a quarterly rate with an annual one, makes trends meaningless. Counting internal transfers as leavers lowers it unfairly. And reporting only the company average hides the teams where people leave fastest. Agree one definition, write it down and apply it the same way every period.

How to calculate retention rate for a quarter or month.

Use the same formula for any period: people employed at the start who are still employed at the end, divided by headcount at the start, times 100. Shorter periods give higher rates, so compare like with like: monthly with monthly, quarterly with quarterly. To compare with an annual figure, follow the same starting group across the full year rather than multiplying a quarterly rate.

What is a good employee retention rate?

There is no universal benchmark, because retention depends heavily on industry, role, country and labor market. Retail and hospitality usually retain fewer people than professional services or the public sector. The most useful comparisons are your own trend over time, the spread between teams, and retention among the people you most want to keep.

What affects a good employee retention rate.

Retention rates vary widely with industry, role and labor market. Hospitality and retail usually have lower retention than public administration or utilities; entry-level roles turn over faster than specialist roles; tight labor markets push retention down. Compare your rate with your own history and with similar roles, rather than with a single universal benchmark.

Within your organization, the most useful comparisons are between teams with similar work. A large gap between two teams doing the same job usually points to management and workload rather than to the job itself.

Employee retention rate vs turnover rate.

Retention looks at the people you started with. Turnover looks at leavers against average headcount, including people hired during the period. The two do not always add up to 100%, so pick one as your main measure and use it consistently.

The CIPD factsheet on employee turnover and retention covers stability and retention measures alongside turnover, and the SHRM toolkit on managing employee retention collects practical retention tools.

Retention rate or turnover rate: which to report?

Report both if you can. Retention rate answers whether the people you started with are still here, which suits questions about stability and onboarding. Turnover rate answers how much of the workforce churned, which suits workforce planning and cost estimates. Pick one as the headline measure, define it clearly and keep the definition stable over time.

Where to look closer.

Cohort retention: tracking hires over time.

A cohort view follows a group of people hired in the same period and shows how many remain after three, six, twelve and twenty-four months. It reveals when people tend to leave, which an annual rate hides.

Figures are illustrative. If one cohort drops sharply at six months, look at what those people experienced: a particular manager, a project, or an onboarding change.

Nine retention metrics to track with the retention rate.

What drives employee retention rates.

Retention rates move with the experience people have at work. The direct manager, opportunities to grow, recognition, fair pay and a workload people can sustain are the usual drivers. Look at retention by team alongside survey results for the same teams to see which drivers matter most in your organization. See employee retention strategies.

Improving the rate.

Start where the rate is lowest. If first-year retention is weak, look at hiring and onboarding: Did the role match what people were told? Did they get the tools and support they needed early? If retention drops in particular teams, look at management, workload and growth in those teams.

Track retention with leading indicators, not only after the fact. Falling energy and recovery, quieter teams and fewer people talking about the future are signals that retention is about to drop. Employee retention strategies covers fifteen ways to respond.

Reviewing employee retention rate regularly.

Review retention by team and cohort every quarter, alongside intention to stay and energy from your latest survey.

Actions to improve employee retention rate.

1. 1
   Measure by team and cohort. Find where retention is lowest.
2. 2
   Improve the first 90 days. Many leavers decide early.
3. 3
   Hold stay interviews. Learn what keeps people before they decide to leave.
4. 4
   Make growth visible. Internal moves and clear next steps.
5. 5
   Develop managers. The daily experience shapes whether people stay.
6. 6
   Protect capacity. Sustainable workload keeps the most committed people.