How to Measure Employee Retention
Employee retention is no longer a ‘nice to have’. In a competitive labour market, the ability to keep the right people has a direct impact on performance, stability, and long‑term growth.
When experienced employees leave, organisations absorb the cost through lost knowledge, disrupted teams, reduced productivity, and increased recruitment spend. Keeping people, by contrast, protects capability, strengthens culture, and supports consistent delivery.
However, retention cannot be improved without first being measured. Understanding what your data is telling you is the first step towards building a workforce people genuinely want to stay part of.
What Is Employee Retention?
Employee retention refers to an organisation’s ability to keep its employees over a given period of time. In simple terms, it measures how many people stay, rather than how many leave.
Retention is often confused with turnover. While turnover focuses on exits, retention gives a clearer picture of workforce stability and engagement. High turnover can be alarming, but retention shows whether the organisation is successfully holding on to its people.
In practice, good retention does not mean zero movement. Healthy organisations expect some level of change. Strong retention means critical roles are stable, high performers remain engaged, and employees see a future within the organisation.
Why Measuring Employee Retention Matters
Retention has a direct influence on productivity, organisational culture, and employer brand. Stable teams collaborate better, maintain higher service standards, and place less pressure on managers and colleagues.
Accurate retention data also supports effective workforce planning. It helps leaders anticipate hiring needs, identify risk areas, and align people strategy with business goals.
Relying on instinct alone is risky. Without measurement, assumptions take over, problems go unnoticed, and interventions often arrive too late. Data provides clarity and direction.
How to Measure Employee Retention
Understanding how to calculate and interpret retention is essential. A single figure is not enough, but it is the starting point.
The Employee Retention Rate Formula
The standard employee retention rate formula is:
Retention rate = (Number of employees who stayed for the period ÷ Number of employees at the start of the period) × 100
To calculate this step by step:
- Choose your time period.
- Count how many employees were employed at the start.
- Subtract any new starters during that period.
- Divide the number of remaining employees by the original total.
- Multiply by 100 to get a percentage.
For example, if an organisation started the year with 100 employees and 85 of those same people were still employed 12 months later, the employee retention rate would be 85%.
Choosing the Right Time Period
Retention can be measured monthly, quarterly, or annually. Each timeframe serves a different purpose.
Monthly data can highlight immediate issues but may over‑emphasise short‑term fluctuations. Quarterly measurement is useful for tracking trends, while annual retention provides the clearest strategic overview.
The key is consistency. Switching timeframes or focusing on isolated snapshots can create misleading conclusions and distract from long‑term patterns.
Key Employee Retention Metrics to Track
Looking beyond a single headline figure provides deeper insight into workforce retention.
Overall Retention Rate
Overall retention shows how stable the workforce is as a whole. It is useful for board‑level reporting but can mask specific problems within teams, roles, or locations.
Voluntary vs Involuntary Turnover
Separating voluntary and involuntary turnover is critical. Voluntary exits often indicate issues with engagement, development, or leadership, while involuntary turnover may relate to performance management or restructuring.
Understanding why people choose to leave is far more valuable than simply counting departures.
New Starter Retention (First 6–12 Months)
Early attrition is one of the clearest warning signs. If employees leave within their first year, it often points to onboarding effectiveness, unclear expectations, or misaligned hiring decisions.
Strong onboarding programmes and realistic role messaging are key to improving early retention.
High-Performer Retention
Losing top performers has a disproportionate impact on business outcomes. Tracking retention among high‑performing or critical roles helps identify flight risk before it becomes a problem.
This metric is particularly important where skills are scarce or succession options are limited.
Benchmarking Employee Retention
Retention figures are only meaningful when placed in context.
Internal benchmarking allows organisations to track year‑on‑year progress and assess the impact of people initiatives over time.
External benchmarking by sector, role, or location can provide useful reference points, but averages should be treated with caution. What is ‘good’ varies widely depending on organisational structure, labour market conditions, and workforce demographics.
What Your Retention Data Is Really Telling You
Retention data is not just a number. It tells a story about the employee experience.
When Retention Is High
High retention often suggests strong leadership, positive culture, and effective employee engagement. However, it can also hide stagnation if development and progression are limited.
Organisations with high retention should remain alert to complacency and continue investing in growth and performance.
When Retention Is Low
Low retention usually points to deeper issues such as unclear career development opportunities, poor management capability, or misaligned organisational values. Pay can be a factor, but it is rarely the sole reason employees leave.
Understanding the drivers behind exits is essential before attempting solutions.
Patterns to Look For
Retention analysis should explore patterns across roles, managers, and locations. Concentrated churn often highlights specific leadership challenges or structural problems that require targeted action.
Common Mistakes When Measuring Employee Retention
One common mistake is focusing solely on averages, which can hide critical risks.
Ignoring qualitative feedback, such as exit interviews or engagement surveys, also limits insight. Data without context leads to incomplete conclusions.
Finally, treating retention as an HR‑only metric reduces its impact. Retention is a leadership issue that affects every part of the organisation.
Turning Retention Insight into Action
Data only creates value when it informs decisions.
Improving Retention Through Strategy, Not Guesswork
Retention metrics should feed directly into people strategy. This includes aligning employer value proposition, leadership capability, organisational design, and development pathways.
Evidence‑based decisions are more effective than reactive fixes.
When External Support Adds Value
External insight can provide objectivity and challenge internal assumptions. Independent analysis across recruitment and retention helps organisations see the full employee lifecycle and identify opportunities for sustainable improvement.
How Macildowie Helps Organisations Improve Employee Retention
Macildowie supports organisations in turning retention data into clear, actionable people strategy. Rather than viewing retention in isolation, we help employers understand how workforce data connects to the wider employee lifecycle, from attraction and hiring through to development, engagement, and progression.
Our support spans employer value proposition development, organisational design, leadership insight, and onboarding effectiveness. By identifying where retention risks originate, we help organisations address root causes rather than symptoms.
The focus is on long‑term, sustainable retention that strengthens performance, protects organisational culture, and supports future growth, not short‑term fixes that fail to deliver lasting change.
Conclusion
Measuring employee retention only matters if it leads to action. Data provides clarity, but leadership determines outcomes. Organisations that use retention insight well do not simply report the numbers; they ask what those numbers reveal about leadership capability, employee experience, and long‑term workforce health.
The strongest organisations treat retention as a strategic signal. They use data to shape culture, strengthen management, and design roles and career pathways that support both performance and engagement. When people feel valued, developed, and aligned with the organisation’s direction, retention becomes a natural outcome rather than a forced objective.
Ultimately, retention is not about keeping everyone at all costs. It is about keeping the right people engaged, motivated, and committed to the future of the organisation. When retention is measured thoughtfully and acted upon consistently, it becomes a powerful driver of stability, growth, and sustained business success.
