Employee Retention
Employee retention is an organisation's ability to keep its employees over time. It is tracked as retention rate: the percentage of employees who were on the payroll at the start of a period and are still there at the end. Retention is the flip side of attrition, but it is measured on a fixed starting group, so new hires do not inflate it.
Also known as: retention rate, employee retention rate, talent retention, staff retention
Reviewed
Key takeaways
- Retention is the share of employees who stay over a period.
- Formula: (employees at end − new hires) ÷ employees at start × 100.
- High retention is not always good if it keeps the wrong people; focus on keeping the right ones.
- The biggest levers are manager quality, growth, fair pay, and meaningful work.
At a glance
- Formula
- (End headcount − new hires) ÷ start × 100
- Good range
- Varies by industry; track your own trend
- Measured
- Annually, and by cohort
- Related
- Attrition, turnover, eNPS
Why does employee retention matter?
Replacing people is slow and expensive. Retention also protects the less visible things: customer relationships, team knowledge, and the trust that makes teams fast.
How do you calculate employee retention?
Retention rate = ((employees at end − new hires during the period) ÷ employees at start) × 100
Worked example
You start the year with 200 employees. You hire 30 during the year and end with 210.
Retained from the original group = 210 − 30 = 180. Retention rate = 180 ÷ 200 × 100 = 90%.
What drives employee retention?
Exit and stay interviews tend to point to the same few drivers: the relationship with the direct manager, growth and career progression, fair pay, flexibility, and recognition.
Frequently asked questions
- Retention rate vs attrition rate?
- Retention measures who stayed from a starting group. Attrition measures who left as a share of average headcount. They are related but not exact mirror images.
- What is a stay interview?
- A conversation with a current employee about why they stay and what might make them leave. It is an exit interview held while you can still act.
- What is a good employee retention rate?
- It varies widely by sector and role. Compare against your own trend and industry benchmarks, and watch retention of your strongest performers specifically.
- How do you calculate retention rate?
- (Employees at the end of the period minus new hires) ÷ employees at the start × 100. Of 200 starters, 180 of the original staying is 90%.
- How do you improve employee retention?
- Invest in manager quality, offer clear growth, pay fairly against the market, and act on stay-interview and engagement signals before people leave.
- What is regrettable turnover?
- The departure of people you wanted to keep. It is the number that matters most, more than the headline rate.
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