Retention Rate

The retention rate is a crucial metric that measures the percentage of employees who remain with an organization over a specific period of time. High retention rates are generally indicative of strong employee engagement, job satisfaction, and a positive organizational culture. Conversely, low retention rates may signal underlying issues, such as poor job fit, ineffective management, or inadequate compensation. Understanding and improving retention rates is essential for maintaining a stable workforce, reducing recruitment costs, and driving long-term organizational success. How to Calculate Retention Rate The retention rate is typically calculated using the following formula: Retention Rate=(Number of Employees at the End of the Period−Number of New Hires During the PeriodNumber of Employees at the Start of the Period)×100\text{Retention Rate} = \left( \frac{\text{Number of Employees at the End of the Period} – \text{Number of New Hires During the Period}}{\text{Number of Employees at the Start of the Period}} \right) \times 100Retention Rate=(Number of Employees at the Start of the PeriodNumber of Employees at the End of the Period−Number of New Hires During the Period​)×100For example, if a company has 150 employees at the start of the year, hires 20 new employees during the year, and ends the year with 140 employees, the retention rate would be calculated as follows: Retention Rate=(140−20150)×100=(120150)×100=80%\text{Retention Rate} = \left( \frac{140 – 20}{150} \right) \times 100 = \left( \frac{120}{150} \right) \times 100 = 80\%Retention Rate=(150140−20​)×100=(150120​)×100=80%This means the company retained 80% of its employees over the course of the year.