Employee engagement

Why You Need to Calculate Employee Retention Rates

Josh Miner
August 27, 2020
Table of Contents
Free Trial! No credit card required.
Get started with a Free Trial to see how effective & engaging our platform is. You'll get the full Bonusly experience like any paid user would. Invite teammates, & start recognizing & rewarding today!

When it comes to employee retention strategies, HR departments need to track specific measurables. By tracking statistics such as employee retention rate and turnover cost, you have a way to measure the effectiveness of new HR initiatives such as a formal onboarding program or starting to offer health benefits.

This article provides an overview of how to calculate your employee retention rate, why employee retention strategies matter, and a best practices checklist for employee retention.

How to calculate employee retention rate

Employee retention rate is a helpful statistic for an employer to calculate – both as a benchmark and as a periodic exercise to see where you stand (typically quarterly or biannually). The formula is simple: divide the number of employees at the beginning of a period by the total number of employees at the end of a period to get the percentage.


Employees at the beginning of Q4: 24
Employees terminated during Q4: 4


Number of employees at the end of the period: 24-4 = 20
Beginning of the period headcount/End of period headcount = 20/24 = .83 = 83%

Standard employee retention rates are anywhere from 70% - 85% but vary greatly by industry and calculation method. For example, you can measure your retention rate based solely on voluntary turnover to assess company culture or include all terminated employees for a high-level view of overall performance.

How much could your organization save on employee turnover each year? Use our Cost of Turnover Calculator to find out. 

Why employee retention matters for a small business

Employee turnover costs small businesses time and money.

  • Turnover disrupts the flow of a functioning workforce. When an employee leaves, they can leave behind a significant knowledge gap, creating more work as the remaining team members pick up the pieces.
  • Recruiting and training a new employee requires staff time and money. Every time a business replaces a salaried employee, it costs between one-half to two times their salary.

While some turnover is inevitable, having a defined employee retention strategy in place mitigates turnover and associated costs.

Employee Retention – Best Practices Checklist

We outlined key strategies for employee retention in our eBook. If you don’t have time to read the whole thing, here's a summary of those tips:

  • Hire right the first time
  • Benchmark and track your employee retention rate
  • Benchmark the cost of employee turnover
  • Identify the perks your employees want
  • Evaluate health benefits - consider both traditional health plans and health reimbursement arrangements (HRAs)
  • Provide different benefits for different employees
  • Set clear employee goals and expectations
  • Offer a clear career path
  • Invest in your managers
  • Create a positive company culture
  • Recognize employee contributions

See related articles on employee recruiting and retention:

Download the PeopleKeep and Bonusly employee retention eBook to learn how to keep your employees without breaking your budget.


This article originally appeared on PeopleKeep

About PeopleKeep

PeopleKeep is the industry expert in health reimbursement arrangements (HRAs). We help small and medium-sized organizations offer hassle-free health benefits that make employees happy and keep budgets in check.

We provide an easy-to-use software platform that enables small and medium-sized organizations to provide employees a quality health benefit they can manage in minutes each month. Our HRA experts help employers design their ideal health benefit, while our award-winning support team verifies expenses to maintain compliance and answers questions knowledgeably.

Share this article