10 key employee retention metrics to track
A 2022 UKG report found that 64% of professionals would switch jobs right now if they could. (1) Plus, according to Gallup, 48% of Americans were watching for or actively seeking a new job by the end of 2023. (2) So we don’t have to tell you how difficult employee retention can be — but we can emphasize the importance of tracking retention metrics.
To ensure your best people stay with your organization, you need to understand:
- How long employees tend to work with you
- What your retention and turnover rates are
- How satisfied staff generally is
- How much it costs to lose a member of your team
Measure these ten employee retention metrics to get a better look at the state of your company and dig deeper into why employees choose to stay or leave.
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How do you measure employee retention?
Think of measuring employee retention rate as the opposite of measuring turnover. While the latter measures the rate at which staff members leave, retention measures the percentage that sticks around. It’s usually calculated on an annual basis.
Take a closer look at what employee retention metrics are and which you should be monitoring.
What are the key employee retention metrics?
Metrics for employee retention provide insight into your team’s retention rate and likeliness to stay with the company. They measure things like employee satisfaction, voluntary vs. involuntary turnover, and average length of employment.
We’ll discuss these in more detail in our comprehensive list below. But first, here’s an overview of the ten key employee retention metrics to track:
- Overall retention rate — This provides insights into the general stability of your workforce and can highlight the overall effectiveness of your employee engagement strategies.
- Retention rate per category — Analyzing specific groups helps you identify unique challenges or successes within different segments of your workforce.
- Employee satisfaction rate — This gives you a sense of how content your employees are, indicating how likely they are to stay as well as their overall engagement levels.
- New employee satisfaction rate — It’s important to specifically check the satisfaction of recently hired employees, as this gives you valuable information on your onboarding process and early employee experience.
- Average employee tenure — This metric sheds light on the long-term commitment of your workforce and the health of your company culture and career development opportunities.
- Overall turnover rate — Understanding the rate at which employees are leaving can point you to potential issues with job satisfaction, workplace environment, or other factors.
- Voluntary turnover rate — This shows you the proportion of employees who are choosing to leave, which may signal a need to improve different aspects of workplace culture or role responsibilities.
- Involuntary turnover rate — This is a starting point for assessing whether your hiring process is working; you can then dig deeper to learn whether terminations are occurring due to performance, fit, or other factors.
- Cost of employee turnover — Calculating this cost gives you a concrete measure of the financial impact of turnover and can be used to justify investments in retention strategies.
- Absence rate — A high absence rate can be a sign of employee disengagement or dissatisfaction, affecting overall productivity and team dynamics.
What are the benefits of employee retention?
Retaining employees is hugely important for building a strong, cohesive, and effective workforce. When employees stay with a company for longer periods, it brings numerous benefits that contribute to the overall success and stability of your business.
Here’s why focusing on employee retention is crucial:
- Reduced turnover costs — Lowering turnover saves on the significant costs involved in recruiting, hiring, and training new employees.
- Improved continuity and expertise — Long-term employees develop deep knowledge about your company, its culture, and its processes. In client-facing roles, this can translate to better customer service and even increased sales. Retaining employees ensures that critical institutional knowledge and skills remain within the company.
- Enhanced employee morale — Having stable teams lets employees get to know one another, bolsters morale, and creates a positive work environment.
- Positive company reputation — Low turnover rates generally mean people are happy working at your company, which can boost your reputation and help you attract top talent. On the other hand, a company with low retention rates and unhappy employees is likely to suffer reputational damage, especially as more and more job seekers check for reviews of potential employers on sites like Glassdoor.
- Enhanced team dynamics — Long-term employees tend to have better working relationships, leading to more effective collaboration.
What is a good retention rate?
In 2023, the annual employee turnover rate in the US was 17.3% according to Mercer, which falls roughly in line with the accepted average retention rate between 80-90%. But don’t settle for meeting national averages.
Shri Ganeshram, who you’ll find on the Forbes 30 Under 30 list, speaks to where you want your retention rate to be:
“A good employee retention rate varies depending on the company’s industry, size, and culture. Generally speaking, a retention rate of 80% or higher is considered good. But retention rate alone doesn’t tell the whole story, and it’s important to look at other metrics as well.”
— Shri Ganeshram, CEO and founder of Awning
So, keep in mind that there’s no one-size-fits-all approach to setting goals related to employee retention — every industry, business model, and role has its own set of complexities that can impact the retention rate.
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10 metrics for employee retention, turnover, and attrition
If you aren’t tracking the right engagement metrics, you won’t be able to predict how long employees will stick around and how often they’re likely to churn.
Use these ten metrics to dig deep into staff satisfaction, turnover rate, attrition, average tenure, and absence rate. This will give you a better idea of how to improve your employee retention policy.
1. Overall retention rate
No surprise here: Retention rate is an essential employee retention metric to track. A low retention rate also indicates a high level of turnover, and understanding how long staff stays with your company overall gives you insight into whether you have a desirable work environment where people can thrive.
When you look at your retention rate, you see the percentage of employees that remained with you over a given period.
To calculate your overall retention rate, use this equation:
Employee retention rate = (Total number of employees - Number of employees who left) ÷ Total number of employees
As mentioned earlier, HR professionals typically calculate retention rate on an annual basis, but you can calculate it more frequently or as necessary.
As a general rule, the higher the retention rate, the better. But understand that there are circumstances — many of them out of your control — that can cause employee retention rates to fluctuate over time, which is completely normal.
For example, financial difficulties may mean letting a few employees go, which would certainly impact your retention rate. Or, perhaps one year, there’s more demand and stronger recruiting efforts for product managers, which could result in staff pursuing interesting opportunities elsewhere.
2. Retention rate per category
There’s a lot more to overall retention rates than meets the eye. Calculate retention rates in different categories to analyze why your people may be leaving.
You can narrow your retention rate down to managers, departments, teams, age groups, identification with an underrepresented group, or any other relevant category.
To calculate retention rate per category, follow this formula:
Employee retention rate per category = (Total number of employees in category - Number of employees who left in category) ÷ Total number of employees in category
If you find the retention rate for one team is much lower than you’d expect based on your overall retention rate, for example, it may be time to have a conversation with the responsible manager to investigate why their reports are resigning in larger numbers.
Or, if you retain a lower percentage of people who identify with an underrepresented group, you may want to take a closer look at your company culture and diversity, equity, and inclusion (DEI) initiatives to ensure that all team members feel welcome and respected.
And just to be clear — correlation doesn’t imply causation. But comparing your general retention rate with more granular retention rates can help identify specific issues in your organization that might be causing people to quit.
3. Employee satisfaction rate
Employee satisfaction rate is one of the top retention metrics, and for a good reason. Your employee net promoter score (eNPS) can tell you a lot about your organization’s current landscape, how satisfied people feel with your company, and what percentage of staff may be at risk of leaving — contributing to high rates of turnover and attrition.
eNPS surveys focus on one question that employees anonymously rank on a scale of 0 to 10: “How likely are you to recommend us as a place to work?”
There are three types of respondents:
- Promoters (who score 9-10)
- Passives (who score 7-8)
- Detractors (who score 0-6)
To calculate your organization’s eNPS, use the following formula:
Employee satisfaction rate = % of promoters - % of detractors
It’s also essential to talk to your people regularly and investigate how they feel about their professional lives — send both eNPS and general retention surveys out at least once a quarter to keep your finger on the pulse of how employees are doing.
In more general employee retention surveys, you can ask questions like:
- Do you feel supported by your manager?
- Do you get enough feedback to excel in your role?
- Do you feel your feedback is taken into consideration?
- Do you see a future at this company?
- Do you feel you have a reasonable workload?
4. New employee satisfaction rate
Seasoned staff members might feel more comfortable sharing their opinions and experiences with you, but the same may not be true for people who are new to the team. That’s why monitoring your eNPS score for new employees is important.
To track this metric, you’ll need to know how many satisfied new employees your organization has — meaning they scored between 9 and 10 and were identified as promoters in an eNPS survey.
Since eNPS surveys are anonymous, add a question like “How long have you been with the company?” with a selection of four or five answers to make calculating this metric possible.
To calculate your eNPS score for new employees, use this equation:
New employee satisfaction rate = (Number of satisfied new employees ÷ Total number of new employees) x 100
So, if only two of your ten new team members were promoters in an eNPS survey, your new employee satisfaction rate would be 20%. And if you compare that figure to your overall employee satisfaction rate and see that it’s much lower, you’ll uncover whether newer hires are less satisfied than existing staff.
By looking into why new team members may feel less satisfied, you’ll also identify important opportunities for improvement in your onboarding process. This will help you ensure people have a good experience at your company from the get-go.
5. Average employee tenure
While retention rate tells you the percentage of staff that sticks around, average employee tenure reveals how long people tend to work for you before attrition.
You’d likely want to calculate employee tenure for your current employees, but you can also measure this key performance indicator (KPI) during a range of time or throughout the entire company life cycle.
What makes the most sense for your business is up to your people ops team, but calculating both current and all-time average tenure can help you compare where your company is currently to where it’s been. And at a minimum, track this metric annually.
To calculate average employee tenure, use this formula:
Average employee tenure = Cumulative employment time for all employees ÷ Total number of employees
If your average employee tenure is shorter than expected, look at ways to reduce attrition. Some ideas include:
- Using incentive compensation to continuously recognize and reward your people
- Having open conversations with staff about their career goals and aspirations
- Establishing straightforward paths for internal growth
- Implementing clear promotion policies and compensation plans
6. Overall turnover rate
Keeping an eye on how many employees stay with you is important, but it’s equally vital to monitor the percentage of people who leave. That’s where the overall turnover rate can help.
Use this equation to discover your overall turnover rate:
Overall turnover rate = Number of employees who left in a given period ÷ Average number of employees during that time
Depending on the specifics of your business, it’s helpful to calculate your overall turnover rate on a monthly, quarterly, or annual basis.
A high turnover rate can negatively impact your organization, from increased hiring expenses to decreased productivity and low team morale.
Ideally, shoot for a turnover rate below 20%, but be aware that circumstances, like your industry, business size, and economic climate, can affect how and when people may move on to other opportunities. If you want to learn how to keep staff churn low, check out our guide to reduced employee turnover.
7. Voluntary turnover rate
While it’s useful to understand the big picture of turnover, it’s essential to zoom into the specifics of why your people are leaving. Your voluntary turnover rate tells you how many employees resigned from their positions on their own accord, which can be a significant factor in long-term attrition.
Examples of voluntary turnover include someone taking a job with another company or a team member quitting because they want to return to school, pursue a private project, or focus on their family.
Calculate your voluntary turnover rate using this formula:
Voluntary turnover rate = Number of employees who left voluntarily in a given period ÷ Number of employees during that time
And when staff members leave, always send out an exit survey so you can understand their reasons.
Ask questions about why they resigned and what they would’ve changed about their experience working for your organization. This will help you better understand what actions you need to take to reduce your voluntary (and overall) turnover rate.
8. Involuntary turnover rate
If you’re going to look into what percentage of employees leave their positions voluntarily, you should also be aware of the reverse situation. Involuntary turnover rate tracks how many people left the company because they were let go or laid off.
Use this equation to measure your involuntary turnover rate:
Involuntary turnover rate = Number of employees who left involuntarily in a given period ÷ Number of employees during that time
Remember, the financial health of your organization will affect your involuntary turnover rate as it factors in layoffs. However, observing this metric can also help you determine your success rate in hiring the right candidates.
By tracking your involuntary turnover rate, you can identify whether there’s an issue with your hiring process. Maybe you aren’t correctly assessing whether applicants align with your values and are a good fit for your team.
9. Cost of employee turnover
The cost of staff turnover isn’t something you should take lightly. According to Gallup, replacing an employee can cost a company half to two times that person’s annual salary.
So, carefully track how much you spend when you set out to replace a team member who left their job, either voluntarily or involuntarily.
💸 When calculating the cost of employee turnover, look at factors like:
- How much money you lose while the position remains open
- Costs related to hiring, including recruitment, advertising and communications, and time spent interviewing
- Costs related to training, onboarding, and development
Also, consider the ‘soft costs’ of losing staff, like lower productivity and morale among their remaining colleagues.
While looking at the true cost of turnover might be shocking, it can act as a motivator to retain your existing top talent.
10. Absence rate
Absence rate monitors the percentage of unplanned employee absences related to sickness, emergencies, or other personal reasons. This figure doesn’t include planned vacations or time off.
To calculate absence rate, use this formula:
Absence rate = Number of absences during a period ÷ Total number of days in that period
It’s a good idea to track absence rate per employee, but you can also track it per team or department and compare your findings. If one department has a significantly higher absence rate than the rest, it’s worth exploring why that may be.
But one individual having a high absence rate isn’t a reason to be alarmed. Instead, have a conversation with them to check in, see how they’re doing, and discuss if there’s anything the organization can do to support them better.
Doing so will ensure the employee feels taken care of rather than blamed for their absences. Sometimes all it takes is a slight schedule accommodation to improve someone’s professional well-being and performance and encourage them to stay in their position.
Using retention tracker tools to track & improve KPIs
To maximize employee retention, use specialized software to monitor these metrics and ensure they’re moving in the right direction. Leapsome enables you to send out anonymous engagement surveys to understand how people really feel about their jobs.
Our platform also lets you track the progress of key performance indicators — like eNPS — and uncover details about the employee experience with sentiment analysis. On top of that, our survey analytics help you draw connections between performance levels and staff turnover, so you can pinpoint which individuals need support and where.
Leapsome AI can help you get to the bottom of these insights faster by summarizing survey feedback and minimizing bias in employee sentiment analysis. That way, you can create a more efficient, engaging, and data-driven work environment.
Using the right tools to track employee retention KPIs can help you improve overall staff satisfaction and retention to build a stronger, more resilient organization.
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