9 Key Employee Retention Metrics To Track

By Indeed Editorial Team

Published September 29, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

A company's employees are often one of its most important assets. Many businesses make a priority of retaining their most valuable employees in order to operate effectively and avoid excess costs. If you have a position in corporate leadership, you may be interested in ways to track and improve your employee retention. In this article, we define employee retention and retention metrics, explain why they're important and provide a list of important metrics that you can use to improve your retention rates.

**Read more: Definition of Employee Retention**

What is employee retention?

Employee retention is the rate at which employees stay with a company. It may also refer to a company's strategies for preventing turnover and retaining staff. Employee retention is an important indicator of employee satisfaction and the success of a company's management, hiring and training processes. High retention can help a business lower its recruiting and onboarding costs and avoid loss of productivity. It can also allow a company to save time on hiring and training new employees.

Good retention in a business can also have other positive indirect effects. Retaining employees for longer can allow staff members to build stronger workplace relationships and improve company culture. It can also improve a company's ability to perform its core functions and may make it more attractive to prospective employees when hiring.

Read more: 10 Benefits of Employee Retention

What are employee retention metrics?

Employee retention metrics are the numbers that businesses measure to determine their effectiveness in keeping employees at their company. Analysts often express these numbers as ratios and compare them to company goals in order to improve retention. They can allow companies to gauge employee satisfaction and monitor the causes of employee turnover.

Tracking employee retention metrics can give businesses definite numbers when tracking their performance. This is often more accurate and useful than estimating retention or surveying employees. These numbers can help business leaders locate areas they can improve and set definite goals for future performance.

Related: 20 Strategies for Employee Retention

Employee retention metrics to track

These are some employee retention metrics your business can track to improve retention and decrease turnover:

1. Overall retention rate

This is a basic measurement of the percentage of employees that a company retains over a given period. This can be an important metric to determine before exploring the causes of turnover. It can give business leaders a grasp of their overall success in keeping employees. In order to determine this percentage, you can choose a period of time, often a year, and divide the number of employees at the end of the year by the total number of staff members present at the beginning of the year, then multiply the result by 100.

For example, if your business began the year with 100 employees and ended the year with 80, you can divide 80 by 100. This gives a result of 0.8, which you can multiply by 100, giving a result of 80. This means that your company has a retention rate of 80% for the year.

2. Voluntary turnover rate

Voluntary turnover is the rate at which staff members leave their company by choice. To find the rate of voluntary turnover, you can divide the number of employees who left voluntarily over a given period by the number of employees the company had during the same period, then multiply the result by 100. For example, if your company lost five employees out of a total of 150 employees in one year, you can divide five by 150, then multiply by 100, which would give you a voluntary turnover rate of 3.3%

A low voluntary turnover rate means employees enjoy certain aspects of their work, such as the company culture, work-life balance or salary. Conducting employee surveys can help you learn which parts of the business are most satisfactory and where you can improve to reduce turnover.

3. Involuntary turnover

Involuntary turnover measures the rate at which employees leave the company involuntarily due to layoffs and terminations. To find your company's rate of involuntary turnover, you can divide the number of employees that your company laid off or terminated over a certain period by the total number of employees in the business during the same time, then multiply the result by 100 to find a percentage. For example, if your company laid off 10 employees over the past year out of a total staff of 160, you can divide 10 by 160, then multiply by 100, which gives you 6.25%.

Determining involuntary turnover is useful for learning more about the effectiveness of your recruiting strategy. A low involuntary turnover rate means you're recruiting the best candidates and providing them with the training and tools they need to succeed.

4. Talent turnover rate

Calculating your talent turnover rate can help you understand the value of the employees who leave your company voluntarily. It may be helpful to monitor the talent and value of each employee who leaves your company and factor that into your turnover calculations. One way to factor in a loss of important talent is to give more weight to valuable employees. This can help companies understand the importance of their losses and develop strategies for retaining their most important employees.

For example, your company has 100 employees and lost five in the last year. After reviewing the productivity rates of the five employees, you find that one of those employees produced the work of two people. Therefore, you count them as two employees, giving them more weight. Instead of five by 100, you instead divide six by 100 to find your talent turnover rate.

5. New employee satisfaction

Measuring the satisfaction of new hires can help you gauge whether they are likely to stay with your company. It can also help you determine the effectiveness of your hiring and training processes and the strength of your company's work environment. You can consider conducting interviews in the first few months of an employee's start date to discuss how they feel about their job. You may also consider using anonymous surveys so that employees can express their concerns with greater confidence.

Once you determine the satisfaction of your employees, you can calculate the rate of happiness as a percentage. You can divide the number of employees who express satisfaction by the total number of new employees, then multiply the result by 100. For example, if your company hired eight new employees in the past six months and five of them express happiness in their new job, you can divide five by eight. This gives you a result of 0.625, which you can then multiply by 100 to find a satisfaction rate of 62.5% among your new employees.

6. Retention per manager or department

If you want to know the causes of your retention rates, it may be helpful to determine what parts of the business experience the most turnover. Consider classifying the number of voluntary or involuntary resignations based on the department or manager. You can then express the number of resignations in a given department as a percentage of total resignations.

For example, if you lost 10 employees in the past year, and five of them were in the same department, you can divide five by 10 and multiply the result by 100. This gives a result of 50%, meaning that one department is responsible for half of all resignations. In order to address this challenge, you can consider changing the management of the department or improving training. If the turnover is involuntary, you can consider changing the hiring manager or recruiting methods for that department.

Related: Business Metrics: Definition, Examples and Formulas

7. Employee satisfaction

This metric can tell business leaders how contented their employees are in their jobs. If it is low, it may be an indicator that the company could experience low retention in the future. This can help business leaders determine strategies for improving employee satisfaction, such as salary increases, bonuses, advancement opportunities and workplace optimization and avoid future hiring costs.

To determine employee satisfaction, you can consider administering interviews or surveys. Once you know how many of your employees feel satisfied in their job, you can divide the number of satisfied employees by the total number of company staff members and multiply the result by 100. For example, if 60 of your 100 employees are satisfied with their job, you can divide 60 by 100 and multiply the result of 0.6 by 100. This gives you a satisfaction rate of 60% in your company.

8. Average employment length

This metric tells companies how long employees stay at the company on average. This can be an important metric for determining employee satisfaction and the effectiveness of a company's HR processes. In order to find the average length of employment at your company, you can first add up the total number of years worked by all your employees. You can then divide this number by the total number of employees who worked at your company during the same period.

For example, if you have 100 employees at your company and they have worked a total of 250 years collectively, you can divide 250 by 100. This gives you a result of 2.5 years per employee as the average length of employment. You and other company leaders can then determine what steps might be useful to extend the average length of time that employees spend at your company.

9. Cost of turnover

It can be helpful for businesses to calculate the cost of turnover in order to determine the effects of retention on their company. Turnover can incur many costs, including hiring expenses, onboarding and training costs and overtime hours. Companies may choose to monitor other non-financial costs such as lost time, decreased productivity and effect on employee morale.

To determine these costs, you can determine the average cost of recruiting and hiring a new employee, including salaries for hiring managers. You can then add average training costs and overtime expenses. Once you add these costs together, the result is the average cost of losing an employee to turnover.

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