How to calculate your employee retention rate

Retaining skilled and experienced workers is crucial for the long-term success of your business. 

Staff with extensive company knowledge don't just contribute to your consistency and efficiency - they’re also more cost-effective. It’s estimated to take between six and nine months to train a new employee. And research by the SHRM estimates the cost of onboarding to be the equivalent of six to nine months’ salary. 

So, it’s unsurprising that a 2025 survey found retaining and engaging existing employees is the second-highest priority for CEOs - just behind increasing market share. 

But to meet this goal, you have to be able to measure it. And this all starts with understanding your employee retention rate.  

In this guide, our employee engagement experts explain how to calculate your employee retention rate, and how to improve it.  

What is an employee retention rate? 

An employee retention rate refers to the percentage of staff who remain employed with your company over a specific period - usually measured across a calendar year.  

Calculating and tracking your staff retention rate is key for informing the impact of your HR initiatives, highlighting trends in workforce stability and even providing a snapshot into employee satisfaction.  

This data helps you to get a better sense of any underlying organisational issues and adjust your strategy to strengthen employee retention. 

What is the difference between retention rate and turnover rate? 

While retention rate refers to staff who remain with a company over a given period of time, a turnover rate represents the proportion of workers who have voluntarily left the company. This is also known as a 'churn rate'.

Our Cost of Losing Talent calculator can help you uncover how much turnover is costing your business.

Retention rates exclude new hires, while turnover rates don't include those who were fired or made redundant.  

Tracking both metrics offers a holistic overview of your organisation’s employee lifecycle.

How do you calculate your employee retention rate? (Including example) 

To calculate your staff retention rate, you’ll need to record the total number of people employed at the start of the period being measured (typically a year). This is then compared against the number of active employees at the end of the defined period. 

This number should exclude new hires, as the data will focus on the number of original employees from the start of the year who are still employed at the end.  

New hires during this period can skew the reality of your retention success, as they may have only recently joined the business. 

What is the employee retention rate formula?

You can calculate your employee retention rate using a simple formula: 

(Total number of employees at the end of the year / total number of employees at the start of the year) x 100 

For example, if you had 200 employees in January, and at the end of the year you had 170 (discounting any new hires), you’d complete the following calculation: 

• 170 / 200 = 0.85 

• 0.85 x 100 = 85 
• Employee retention rate = 85% 

What is a good employee retention rate? 

According to CIPD data, the UK average turnover rate is 34%, which implies an average retention rate of approximately 66%.  

Retention rates can differ significantly depending on your industry, location and company size. And it's worth considering that employees will sometimes pursue new opportunities regardless of how happy or fulfilled they are in their role. 

But even with that in mind, a rate of 90% or higher is generally considered strong. 

If your company’s retention rate consistently falls below this benchmark, it may suggest low employee engagement and satisfaction, limited career opportunities or challenges with workplace culture. 

Improving your retention rate  

Combatting low employee retention rates starts with understanding the reasons why your staff aren’t inspired to stay in their role. 

This might involve using tools such as employee surveys to pinpoint specific issues, and then developing targeted solutions. 

Engaging and retaining talent starts with onboarding. This is your chance to understand how your new joiners prefer to work and any training or support they need. From here, you can build these learnings into your management plan. 

It’s also important to provide access to targeted wellbeing initiatives. This might include volunteering days, gym memberships, onsite wellness classes and other perks designed to create a fulfilling environment. 

Discover our Wellbeing Centre, where employees can gain access to a whole host of resources designed to cater to their mental, physical and financial wellbeing needs.

Can an employee retention rate be over 100%? 

The maximum possible retention rate is 100% - meaning all workers stayed with your company throughout the year.  

Since new hires are not included in the data, the number of employees cannot increase over the defined period. 

Who is responsible for the staff retention rate of a company? 

Fostering a welcoming and rewarding work culture should be a shared responsibility among all employees. 

However, HR professionals and team leaders will play a pivotal role in staff retention, as they are responsible for the initial onboarding process and supporting employee wellbeing. 

They are ultimately responsible for delivering the culture, development and benefits that determine whether employees stay or leave. And low retention rates may suggest these teams need to rethink how they monitor and manage employee fulfilment.  

This may include monitoring employee satisfaction throughout the year to address any key concerns or challenges early, to avoid losing top talent. 

What is the retention bonus law in the UK? 

A retention bonus is a lump sum cash payment offered as a financial incentive to encourage employees to remain with a company - particularly during organisational changes such as mergers or restructuring. 

There is no standardised retention bonus law in the UK. Instead, these bonuses are governed by employee contracts and internal policies. 

Employees are only required to stay for a certain period to receive their retention bonus. 

If you’d like to learn more about different ways to improve your staff retention rate by boosting your employee experience, schedule a free demo and chat with one of our engagement experts today.