Implementing a solid employee retention strategy is critical for any company. Having the right mix of employees, especially since the world of work is transforming and the economic landscape keeps changing with it, helps keep your business afloat and growing. Let’s have a look at employee retention metrics that help improve employee retention at your organization.
In today’s competitive talent landscape, employee retention is a critical priority for HR leaders. Losing top performers can significantly impact productivity, institutional knowledge, and your employer brand. That’s why tracking the right retention metrics is essential to understand turnover risks and guide effective retention strategies.
While there are many possible metrics related to retention, not all provide meaningful insights. You need to identify the key metrics that reveal how well your organization is engaging, developing, and retaining both current and new employees.
Here are 8 employee retention metrics that every HR team should monitor on an ongoing basis
1. Overall Retention Rate
The overall retention rate tells you the percentage of employees that remain employed at your company over a set time period, typically on a yearly basis. For example, if you had 100 employees at the start of 2022 and 90 remain at the end of the year, your retention rate is 90%.
A higher overall retention rate signals greater workforce stability and less turnover Benchmark your rate against industry standards to assess how you stack up Declining retention over time indicates a need for renewed retention efforts,
2. Retention Rate Per Category
While overall retention provides a broad view, calculating retention rates for specific employee categories offers more targeted insights. Relevant categories can include:
- Department/team
- Location
- Seniority level
- High performers
- Tenure
Look for any categories with significantly lower retention. This reveals where you may have engagement or career growth issues to address. For example, consistently high turnover in a certain office location could indicate issues with local management.
3. Employee Satisfaction Rate
This metric looks at the percentage of employees who respond positively about their job satisfaction during engagement surveys. Satisfaction is tied directly to retention risk. Employees who aren’t satisfied are much more likely to leave.
If your satisfaction rate declines or is lower among certain employee segments, investigate the root causes through additional surveys, focus groups, or interviews. Then prioritize actions to address problem areas.
4. New Employee Satisfaction Rate
Looking specifically at satisfaction among newer hires within their first 6-12 months provides an early warning about retention risk even before turnover happens.
New employees who have a negative onboarding experience or don’t feel engaged are more prone to quick exits. Measuring their satisfaction levels right out of the gate allows you to course correct and reduce early turnover.
5. Average Employee Tenure
Average employee tenure reflects workforce stability by showing how long employees remain with your company on average. It’s calculated by dividing total tenure by the number of employees.
Higher tenure indicates you have an experienced, engaged workforce. Declining tenure over time can be a retention red flag and brain drain risk as valued, long-term employees leave.
6. Overall Turnover Rate
While retention looks at employees staying, turnover rate measures the percentage that leave in a given period. Calculate it by dividing total separations by average employee headcount.
High turnover indicates potential issues with your talentbrand, company culture, compensation, career development or management. Analyze why people are leaving through exit interviews.
7. Voluntary Turnover Rate
This metric looks specifically at turnover initiated by employees voluntarily leaving. It excludes involuntary turnover from layoffs, performance terminations, etc.
A spike in voluntary turnover is a clear warning sign that you risk losing top talent. Use exit interview data to understand causes like burnout, lack of growth path, dissatisfaction with leadership, etc.
8. Involuntary Turnover Rate
Involuntary turnover includes performance dismissals, restructuring, etc. While some level is expected, an excessive rate can point to problems with hiring practices, manager capabilities, or poor culture fit.
High involuntary turnover also hurts team morale and continuity. Look for trends among termination reasons that may indicate systemic issues to address.
Monitoring Trends and Setting Goals
While point-in-time retention metrics are helpful, the most critical insights come from analyzing trends over time. Track retention metrics continuously to spot changes that may reflect larger issues.
You can also establish retention rate goals to drive improvement. For example, increasing overall retention by 3% year-over-year. This provides a quantitative target for your retention programs.
Measuring and optimizing employee retention needs to be an ongoing priority. Relying solely on exit interviews or anecdotal feedback results in a reactive approach. Consistently monitoring key retention metrics empowers you to take proactive steps to nurture engagement and loyalty among talent.
With real-time data and trend visibility across critical retention rates, you can quickly identify areas of concern and risk. This enables you to diagnose root causes, whether limited career paths, ineffective leaders, pay inequities, or other drivers. Then you can develop focused initiatives to move the needle on retention.
Make monitoring and sharing retention metrics a consistent practice across your HR team. Empower managers with retention insights about their own teams. When you have your finger on the pulse of turnover risk, you stay one step ahead in the fight to keep your best and brightest employees.
Employee satisfaction rate
Satisfied employees are likely to stay longer in their jobs than unhappy employees. A happier employee is one that feels challenged by their work, valued by their organization, and feels they are fairly compensated. An HR department should focus on ambitious goals that drive the employee satisfaction rates higher each year. The most common employee satisfaction metric used is eNPs (employee Net Promoter Score).
This is an important metric that you can measure by asking the question “On a scale from 1-10, how likely are you to recommend this organization as a place to work?” or “Based on your experience, how likely are you to recommend our organization to a friend or colleague?”
Based on the responses, you can break it down into detractors, passives, and promoters:
- Promoters – Employees that respond either 9 or 10, which is an indication that an employee is satisfied.
- Passives – A score between 7 and 8 indicates the employee is neither happy nor unhappy but feels neutral. They won’t recommend the company to a friend, but they won’t bad-mouth them either.
- Detractors – Any employee that gives a score below 6, which indicates that the employee is not satisfied.
To calculate eNPS, the formula is:
Any score above 0 is considered satisfactory. Scores between 10 and 30 are good and anything over 50 is great.
You can also focus on new hire satisfaction rate to make sure that you can retain your new employees.
Retention rate per category
Next to your overall employee retention rate, you can calculate retention rates across different categories.
You can look into how each manager is doing in terms of retaining employees. A high retention rate of a particular manager reflects well on their leadership skills and can provide learnings to others. To calculate:
Retention rate per manager = ((Total number of employees per manager – number of employees who have left per manager) / total number of employees per manager) x 100
You might also want to know how well you’re retaining employees at the manager level. A poor retention rate amongst managers could indicate that they might be overstretched with management responsibilities or have not been provided with the tools to be effective managers. If many managers are leaving the organization, this will have a knock-on effect on employees.
If a particular department has a low retention rate, you need to thoroughly analyze the cause. Understanding the retention rate per department can also lead to learning from other departments with a higher retention rate.
An employee’s willingness to leave an organization might be loosely related to their age group. Understanding the reasons for leaving for various age groups can assist with timely interventions.
Understanding ethnicity/race retention rates is key to monitoring your DEI&B goals. If a particular group has a noticeably poor retention rate, then it can be an indicator of various factors that contribute to a non-inclusive work environment.
Again, if you’re retaining employees of one gender at a lower rate compared to other groups, you might want to dive deeper into the reasons why.
It’s important to understand if you’re losing your high performers vs. low performers.
An in-depth analysis usually uses two or three of these particular categories to understand retention rates. So, for example, you might want to measure retention rates among 18–30-year-olds in the finance department. Or the retention rates of women in managerial roles.
To measure retention rates per category, use the employee retention rate formula with the appropriate category:
As an example, let’s say an organization has 2,500 female employees. At the end of the year, they have 2,200 female employees.
Female Employee Retention Rate = Total # of female employees (2,500) – Total # of female employees who left (300) / Total # of female employees (2,500)= 88%.
You can then compare this percentage to other categories and their retention rates within the organization. That enables you to understand if there is a need for concern and then implement any initiatives to address them.
Voluntary turnover is the percentage of employees that leave their job. The word voluntary indicates that the employee chose to leave the employer. There are various reasons for voluntary departures from an organization, such as finding a new job, joining a more desirable brand, or relocation.
Understanding your voluntary turnover and the reasons for turnover is essential, as it will create the basis for the components an employer needs to work on to retain their team members.
To calculate voluntary turnover over a year, use this formula:
As an example, let’s say an organization has 1,000 employees. During the year, 75 employees leave voluntarily. The voluntary employee turnover rate would be 75 / 1,000 = 7,5%
As a best practice, an employer’s voluntary turnover rate should be 10% or less.
Involuntary turnover is the percentage of employees who have been dismissed or laid off by the company in a given period. A high involuntary turnover indicates poor workforce planning or a lack of initiative to develop employees.
To calculate involuntary turnover rate, you can use the same formula as the voluntary turnover rate but use the correct data of involuntary leavers (dismissal or staff members that have been laid off).
13 HR Metrics You Need to Know
What Employee Retention metrics can your business track?
These are some employee retention metrics your business can track to improve retention and decrease turnover: 1. Overall retention rate This is a basic measurement of the percentage of employees that a company retains over a given period. This can be an important metric to determine before exploring the causes of turnover.
How do you measure employee retention?
To measure, set a timeframe for which you want to monitor retention. For example, let’s say a one-year period. Then, you will divide the number of employees who remained with your company within that time period by the total number of employees). Finally, multiply the number by 100 to produce a percentage value.
How can metric analysis improve employee retention?
Metrics can be used to monitor employee retention, identify at-risk employees and look at trends for what you might expect in the future. This analysis can help companies and their human resources departments improve their employee retention strategies and minimize attrition costs.
Should you track employee retention?
Tracking retention allows you to take a temperature check on the status of your workforce and understand what’s driving talent to leave the organization. The only thing more important than tracking metrics is what you do with them, so be sure to always follow up your findings with actions that are geared towards improving results. .
