What are the most effective ways to measure employee retention?

1 Turnover rate

One of the simplest and most widely used metrics to measure employee retention is the turnover rate. This is the percentage of employees who leave the organization during a given period, usually a year. To calculate the turnover rate, you divide the number of employees who left by the average number of employees during the period. For example, if you had 100 employees at the start of the year, 120 at the end of the year, and 15 employees who left during the year, your turnover rate would be 15 / [(100 + 120) / 2] = 12.5%. A low turnover rate indicates high employee retention, while a high turnover rate suggests low retention.

3 Survival rate

The survival rate is another metric that measures employee retention over time. It is the percentage of employees who remain with the organization after a certain duration, such as a month, a quarter, or a year. To calculate the survival rate, you divide the number of employees who stayed by the number of employees who started at the beginning of the duration. For example, if you hired 50 employees in January and 40 of them were still working for you in December, your survival rate for the year would be 40 / 50 = 80%. A high survival rate indicates high employee retention, while a low survival rate suggests low retention.

4 Tenure distribution

The tenure distribution is a metric that measures the diversity of employee retention across different lengths of service. It is the proportion of employees who have worked for the organization for a specific range of time, such as less than a year, one to three years, four to six years, and so on. To calculate the tenure distribution, you divide the number of employees in each range by the total number of employees. For example, if you have 200 employees, 50 of them have worked for less than a year, 100 of them have worked for one to three years, and 50 of them have worked for more than three years, your tenure distribution would be 25%, 50%, and 25%, respectively. A balanced tenure distribution indicates a healthy mix of employee retention, while a skewed tenure distribution may indicate retention issues or opportunities.

5 Voluntary vs. involuntary turnover

Voluntary vs. involuntary turnover is a metric that measures the reason why employees leave the organization. Voluntary turnover is when employees quit or resign on their own accord, while involuntary turnover is when employees are fired, laid off, or terminated by the organization. To calculate the voluntary vs. involuntary turnover, you divide the number of employees who left voluntarily or involuntarily by the total number of employees who left. For example, if you had 20 employees who left during the year, 15 of them voluntarily and 5 of them involuntarily, your voluntary vs. involuntary turnover would be 75% and 25%, respectively. A high voluntary turnover may indicate low employee satisfaction, engagement, or loyalty, while a high involuntary turnover may indicate poor performance, misconduct, or restructuring.

6 Employee satisfaction and engagement surveys

Employee satisfaction and engagement surveys are qualitative methods to measure employee retention. They are questionnaires that ask employees about their feelings, opinions, and attitudes towards their work, their colleagues, their managers, and their organization. They can help you understand the factors that influence employee retention, such as motivation, recognition, feedback, communication, culture, and values. To conduct employee satisfaction and engagement surveys, you need to design relevant and reliable questions, distribute them to a representative sample or the entire population of employees, collect and analyze the responses, and report and act on the findings. A high level of employee satisfaction and engagement indicates high employee retention, while a low level of employee satisfaction and engagement implies low retention.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?