Retention Rate
Retention rate is the percentage of employees who remain with an organization over a specific period, the inverse of turnover rate.
hr-metrics
Category
beginner
Difficulty
4 min read
Read time
2025-01-15
Updated
Definition
Short definition
Retention rate is the percentage of employees who remain with an organization over a specific period, the inverse of turnover rate.
Detailed explanation
Retention rate measures an organization's ability to keep employees over time. It is calculated as the percentage of employees at the start of a period who are still employed at the end.
High retention rates generally indicate a positive work environment, competitive compensation, and good management practices. However, some turnover is healthy and natural.
Retention is often more meaningful when analyzed by segment - high performers, specific roles, or tenure bands - rather than as an overall figure.
Practical guidance
How it works
Count employees at period start. At period end, count how many of those original employees remain. Calculate percentage.
Best practices
Segment by role and performance
Track alongside engagement scores
Identify retention drivers
Calculation details
Formula
Retention Rate = (Remaining Employees / Starting Employees) × 100
Variables
R: Remaining Employees
S: Starting Employees
Worked example
(135 / 150) × 100 = 90%
Result: Annual Retention Rate: 90%
Frequently asked questions
Is 100% retention rate good?
Not necessarily. Some turnover is healthy - poor performers should leave, and new perspectives benefit organizations. Aim for high retention of top performers specifically.
Related glossary terms
Turnover Rate
Turnover rate is the percentage of employees who leave an organization during a specific period, typically measured annually.
Employee Engagement
Employee engagement is the emotional commitment and connection employees have to their organization and its goals, measured through surveys and behavioral indicators.