Retention Rate

The retention rate, also called employee retention rate or turnover rate, is one of the key human resources metrics that expresses the percentage of employees who stay within an organization for a certain period, usually a year. Employee retention rate is computed by dividing the number of employees who stay with the organization by the total number of employees at the start of the period and multiplying by 100. A high retention rate means that the organization is able to retain its valuable employees, while a low retention rate may indicate that problems associated with dissatisfaction, turnover, and attrition are present.

Example of Retention Rate

A software development company determines its annual retention rate to measure employee churn and retention trends in the organization. At the beginning of the year the company had 200 employees under its payroll. During the year, 180 people stayed with the firm and 20 employees voluntarily or involuntarily left the company.

Retention Rate = (Number of retained employees / Total number of employees) x 100
Retention Rate = (180 / 200) * 100 = 90%

The software development company's retention rate for the year showed that 90% of employees who started the year with the company remained with it to the end of the year. This is viewed by the company as a positive indicator, demonstrating that the workforce is stable and committed and that the retention strategies are effective.