Create a culture that means business™
Email address
Without the best talent in your industry, your organization will be stuck playing catch up while its competitors leverage their advantage in manpower and brainpower. Even if your company has developed a great employer brand that helps it attract top-notch employees, it won’t be able to leverage their abilities for long without a high employee retention rate. Retaining team members reduces the significant costs associated with turnover while preserving the valuable institutional knowledge and skills your company relies on. New employees lack the deep understanding of your company’s goals, culture, and processes that make your best team members so effective in their roles.
Calculating and analyzing your organization’s employee retention rate is the first part of any effective employee retention strategy. Let’s explore how you can measure your company’s rate and use it to reduce turnover while building a more resilient and committed workforce.
What is employee retention rate?
Employee retention rate is a metric that tracks the percentage of employees who remain with an organization over a specific period. A high retention rate suggests that employees are happy with your company and engaged with their work, while low retention rates can indicate anything from issues with your organizational culture, to poor management practices, to a lack of recognition. Monitoring employee retention rate — along with the factors that impact it — helps your company understand whether it is retaining enough of its workforce, while providing insights into the effectiveness of your HR practices and management strategies.
A high employee retention rate brings numerous advantages to any organization, starting with cost savings. Hiring and training new employees is expensive and time-consuming. When a company maintains a high retention rate, it reduces recruitment costs and onboarding expenses. Moreover, it decreases the loss of productivity associated with filling vacant positions, as employees typically become more efficient and skilled in their roles as time goes on. Retaining experienced employees keeps their valuable institutional knowledge, insights, and expertise within your company.
A high retention rate also fosters a positive organizational culture. When employees stay with a company for an extended period, they build strong relationships and develop a sense of camaraderie with their colleagues. A reputation for keeping your employees happy and engaged makes your organization more attractive to both new talent and new customers as well. A dedicated, knowledgeable workforce helps build trust with customers, so they’re comfortable doing business with your company.
Employee retention rate vs. turnover rate
Turnover rate is the inverse of your company’s employee retention rate. While employee retention rate measures the percentage of employees who remain with your organization over a certain timeframe, turnover rate calculates the percentage of employees who leave. A high turnover rate points to the same issues as a low employee retention rate. Keeping both metrics to hand gives your leaders an at-a-glance way to assess the effectiveness of your company’s employee retention strategies.
Calculating your employee retention rate
Calculating your employee retention rate is relatively straightforward once you have two key pieces of information: the number of employees at both the start and end of the period you’re measuring. You can then plug that data into the following formula to get the percentage you’re looking for:
(Ending number of employees / Starting number of employees) × 100
As an example, if your company started the year with 150 employees and 120 were still employed a year later, your retention rate for that period would be (120/150) × 100, resulting in an 80% retention rate.
You can get a more detailed picture of employee retention rates by measuring them for specific teams, departments, or job roles, and by tracking rates over different time frames, like monthly, quarterly, or annually. Monitoring your retention rate on a frequent basis can help reveal patterns or fluctuations that coincide with specific events or changes within the organization. A sudden drop in retention might correlate with a significant policy change, organizational restructuring, or the introduction of a new management team. Identifying these trends helps you take quick action measures to address potential issues and stop your employee retention rate from sliding.
Once you’ve calculated your employee retention rate, you can start analyzing it by comparing it to industry benchmarks.
What is a good employee retention rate?
A good annual retention rate is often defined as 90% or higher. But in most cases, whether your organization’s employee retention rate is high or low is a relative assessment that depends heavily on factors like your industry, company size, and the job roles included when measuring your rate. That’s why you should benchmark your company’s retention rate against industry standards to get an accurate assessment. Sectors like retail and hospitality can expect higher turnover due to the nature of the work and the prevalence of part-time or seasonal employment.
6 best practices for improving your employee retention rate
By implementing strategies that focus on keeping employees happy and engaged, your company can keep its retention rate high and its workforce productive. Here are six best practices for improving your organization’s employee retention rate.
1. Practice frequent, widespread employee recognition
Employees who feel unappreciated are likely to move on when another opportunity comes along. That’s why supporting employee recognition is one of the best ways to boost retention. Most leaders and other team members offer the occasional words of appreciation to others. But without an employee recognition platform that they can leverage to quickly and easily show thanks whenever the thought strikes them, many opportunities for recognition will pass by unnoticed — and some messages of appreciation will only be sent long after the actions they relate to, so the recipient may not feel the recognition is genuine.
The key is to make employee recognition a consistent practice and a core part of your company culture with a formal recognition program backed by the latest technology. Look for a platform that provides a centralized place for all employees — whether in-office, hybrid, or fully remote — to connect and recognize each others’ wins, both big and small. Ensure it has a combination of social recognition features and a points-based reward system that lets every team member back up their words with reward points that recipients can redeem for merchandise and experiences that they actually want. The best solutions even include built-in rewards marketplaces with millions of reward options.
2. Offer competitive incentives
An attractive suite of employee incentives is an essential part of retaining employees in today’s job market. Beyond regularly reviewing and adjusting employee salaries to ensure they remain competitive within your industry, your company should craft a benefits package that strongly appeals to your unique workforce. In addition to standard incentives like health insurance and retirement benefits, offer benefits like remote and hybrid work options, a great talent development program, and employee wellness initiatives. An incentives package that actually excites employees is a compelling reason for them to stay with your company — and to tell others to consider joining it.
3. Understand what drives employee engagement
A motivated workforce is the foundation of any successful employee retention strategy, but what engages employees at one organization can easily fail to make an impact at another. Managers must have a detailed, real-time understanding of what employees are looking for, together with guidance on how to address the issues team members raise. Employee engagement platforms address both needs by providing leaders with a stream of employee feedback — using tools like pulse surveys and AI-powered HR chatbots — and helping them quickly move to tackle employee needs with analytics features and a wide variety of action plans. Team members will appreciate having a real voice in key team and organizational matters, and your company will gain unparalleled insight into the factors that drive both engagement and retention.
4. Foster a positive work environment
Every employee wants to work somewhere with an exceptional organizational culture — a workplace where they feel like they belong and where they can be their authentic selves. Strong company cultures are built organically over time through practices like transparent communication, a coaching approach to management, and prioritizing respect and inclusion. But there are plenty of initiatives your organization can put into place to safeguard the winning aspects of its culture while changing those that might be holding your company back. Build credibility with your workforce by ensuring that leadership is consistently honest and direct, offer a variety of voluntary team-building activities to strengthen employee relationships, and empower team members with the resources and managerial support they need to thrive.
5. Offer professional development opportunities
Employees want to stay with a company that invests in their professional growth and defines enticing career paths for every role. Organizations can start by offering a mix of in-house training programs, online learning opportunities, and mentorship initiatives that meet current business needs while aligning with employee goals and interests. Managers should also encourage employees to set professional goals and support them as they strive to achieve their aspirations. Explore ways to customize career advancement tracks to thread the needle of meeting organizational needs while aligning with employee interests.
6. Promote work-life balance
Burnout and low employee wellness are two things that will make your employee retention rate rapidly nosedive. While many companies pay lip service to a healthy work-life balance, finding an organization that actually takes tangible steps to support it is much less common — and employees know it. Show employees that your company practices what it preaches by offering flexible working hours, generous paid time off, and mental health resources. Encourage employees to take breaks and actually use their PTO, and ensure that they’re able to disconnect from work at the end of every day by establishing and enforcing policies that limit work-related communication to certain hours.
Start prioritizing your employee retention rate today
Improving employee retention should be a top priority for any organization looking for a sustainable competitive edge. With the Achievers Employee Experience Platform, your company will have all the tools and insights it needs to boost its retention rate and keep it high. Achievers Recognize is the best way to jumpstart a culture of recognition at your organization, connecting all your team members with positive messages and tangible rewards. Achievers Listen includes real-time feedback channels that equip your people leaders with comprehensive data on what’s holding your retention rate back and how to take effective action. And Achievers Connect builds bridges between your workforce through organic social interaction, fighting against the sense of disconnection that’s become pervasive in today’s increasingly remote workplaces.
See how the Achievers Employee Experience Platform can improve your company’s employee retention rate with a free demo.
In this article:
