Find out the formula for calculating the employee retention rate as well as its definition.

Employee retention definition, formula classified by authors

Employee retention can be defined in various words. However, the best employee retention definition by authors outlines it as the capability of an organization to retain its best talents and therefore, maintaining a low staff turnover. For the companies to achieve this, they must develop and implement relevant retention programs. The employee retention is determined through the use of a math formula, which shows how the company is doing as far as retaining best employees is concerned, and it informs it about areas of improvement.


Employee retention formula

Calculating the employee retention rate is important for employers. It can be done quarterly or biannually. With all the resources a company invests in their staff through training and development, it would be a loss if they left the company before they expend the skills gained in the running of the company. Besides, if you have a small business or a start-up, losing even a single employee can translate to a significant knowledge gap. How do you calculate your employee retention rate?

The standard formula for calculating employee retention rate entails calculating the number of employees who have remained after the calculation period, which is the period in months, year within which you are conducting your assessment. The number you get should be divided by the number of employees that you had at the starting of your calculation period and then multiplied by 100. This will give you a percentage, which is the employee retention rate.

Example:

If you had 50 employees, at the starting of the calculation period (take for example 3 months) and you have lost 10 employees at the end of the period. Here is how to determine your retention rate:

No. of employees at the starting of the calculation period (3 months) =50

No. of employees at the end of the calculation period (3 months) =40

Employee retention rate: 50-10= No. of employees who have remained during the period 40/50*100= 80%

In this case, the employee retention rate is 80%. While this indicates the capability of the organization to maintain their best employees, it can be confusing. For instance, it does not take into consideration any employees that were hired during the calculation period and they might have left as well. Hence, experts argue that it would be best to calculate the turnover rate as well, to establish the number of employees that have left. Nonetheless, calculating this rate can help you to assess the effectiveness of your employee retention programs. You can plan what to do to improve on employees’ retention initiatives.