Employee retention rate is a critical Key Performance Indicator (KPI) for any organization. It measures the percentage of employees who remain with a company over a specific period. A high retention rate generally indicates a healthy work environment, effective management, and employee satisfaction, while a low rate can signal underlying issues that need addressing, such as poor management, inadequate compensation, lack of growth opportunities, or a toxic work culture.
How to Calculate Employee Retention Rate
The formula for calculating employee retention rate is straightforward:
Retention Rate = ((Number of Employees at End of Period - Number of New Hires During Period) / Number of Employees at Start of Period) * 100
Alternatively, and often more practically, you can calculate it using the number of employees who left:
Retention Rate = ((Number of Employees at Start of Period - Number of Employees Who Left During Period) / Number of Employees at Start of Period) * 100
This calculator uses the second, more common method.
Example Calculation:
Let's say a company starts the quarter with 100 employees. Over the quarter, 5 employees leave the company. At the end of the quarter, the company has 110 employees (meaning 15 new employees were hired to replace the 5 who left and add 10 more).
Number of Employees at Start of Period: 100
Number of Employees Who Left During Period: 5
Using the formula:
Retention Rate = ((100 - 5) / 100) * 100
Retention Rate = (95 / 100) * 100
Retention Rate = 0.95 * 100 = 95%
This means the company retained 95% of its employees during that quarter.
Why is Employee Retention Important?
Cost Savings: Replacing employees is expensive. Recruitment, onboarding, and training costs can be substantial. High retention reduces these costs.
Productivity: Experienced employees are generally more productive. High turnover can disrupt workflows and reduce overall output.
Morale and Culture: High turnover can negatively impact the morale of remaining employees and dilute the company culture.
Knowledge Retention: When employees leave, they take valuable institutional knowledge with them.
Customer Satisfaction: Consistent staffing can lead to better customer relationships and service quality.
Factors Influencing Retention
Several factors contribute to employee retention, including:
Competitive salary and benefits
Opportunities for career growth and development
Positive work-life balance
Supportive management and positive company culture
Recognition and appreciation for work
Meaningful and engaging work
Regularly monitoring and analyzing your employee retention rate can provide valuable insights into the health of your organization and guide strategic decisions to improve employee satisfaction and loyalty.
function calculateRetentionRate() {
var employeesAtStart = parseFloat(document.getElementById("employeesAtStart").value);
var employeesAtEnd = parseFloat(document.getElementById("employeesAtEnd").value); // Not directly used in the primary formula but good for context
var employeesWhoLeft = parseFloat(document.getElementById("employeesWhoLeft").value);
var errorMessageDiv = document.getElementById("errorMessage");
var retentionRateSpan = document.getElementById("retentionRate");
errorMessageDiv.textContent = ""; // Clear previous errors
retentionRateSpan.textContent = "–"; // Reset result
// Input validation
if (isNaN(employeesAtStart) || employeesAtStart <= 0) {
errorMessageDiv.textContent = "Please enter a valid number of employees at the start (must be greater than 0).";
return;
}
if (isNaN(employeesWhoLeft) || employeesWhoLeft employeesAtStart) {
errorMessageDiv.textContent = "Number of employees who left cannot be greater than the number of employees at the start.";
return;
}
// Optional: Check if employeesAtEnd is consistent, though not strictly needed for the retention rate calculation itself
// if (isNaN(employeesAtEnd) || employeesAtEnd < 0) {
// errorMessageDiv.textContent = "Please enter a valid number of employees at the end.";
// return;
// }
// Calculation
var retainedEmployees = employeesAtStart – employeesWhoLeft;
var retentionRate = (retainedEmployees / employeesAtStart) * 100;
// Display result
retentionRateSpan.textContent = retentionRate.toFixed(2) + "%";
}