8 Employee Retention Metrics You Need to Measure

When valuable talent is in short supply, employee retention needs to be a top priority for businesses.

There are some compelling reasons why it's important to maintain a low level of staff turnover and keep your most productive employees onboard:

• Hiring new employees to replace leavers is expensive, with the costs of recruitment, training and potential lapses in productivity all having to be considered.
• Key members of staff leaving can create disruption for your customers and stress for other workers who are affected by the departure.
• Onboarding, integrating and supporting new employees eats up a lot of valuable time and resources for the HR department.

If improving employee retention is one of your key goals at the moment, you need to have a clear understanding of how you're already performing, and for that you need the right metrics.

What is employee retention and why is it important?

Employee retention refers to the rate at which employees remain with a company and the strategies implemented to prevent turnover. It's a crucial indicator of employee satisfaction and directly reflects the success of a company's management, hiring and training processes, but also its employees' performance, productivity and stability.

High employee retention rates can benefit a business by reducing recruitment and onboarding costs, avoiding loss of productivity and saving time on training and hiring new talent. Additionally, good retention can indirectly enhance workplace relationships, nurture company culture, enhance employee experience and improve a company's ability to perform its core functions. This, in turn, can make your business more appealing to potential employees during the hiring process.

Moreover, higher retention rates can preserve a company's reputation, as high employee turnover can often signal instability and poor management, deterring potential clients and future talent. 

8 employee retention metrics you have to measure

Here are some key metrics that you may consider tracking to keep your employee turnover rates low.

1. Retention

Starting with the fundamentals, it's vital to have an accurate, data-driven idea of your retention rate. This is relatively simple to calculate; divide the number of employees that have stayed for the whole time period by the number of employees at the start of that time period, then multiply by 100 to convert it to a percentage.

Average retention rates vary across industries and job types (the retail and restaurant sectors tend to have low retention, for example), so it's worth doing some research into what would be an acceptable figure for your organization.

Your ideal retention rates will also be defined by factors that are specific to your business, such as the company's past track record in these areas and your internal promotion rate.

2. Retention rate per manager

Measuring retention rate per manager can give you a more specific picture that supports and informs your efforts to reduce staff churn across the business as a whole.

If you find that certain managers have a particularly high retention rate, you can be fairly confident the way those individuals work and engage with their teams is helping to keep people onboard.

Conversely, low retention rates could be a warning sign that these leaders are struggling to build strong relationships with their employees. By comparing the working styles of managers with high retention rates to those who are falling short, you can draw conclusions about which methods are resonating with employees and helping to keep turnover down.

3. Turnover (voluntary and involuntary)

Turnover is calculated by dividing the number of people who leave during a given period by the average number of total employees and multiplying by 100.

It's important to analyze your turnover for a more accurate idea of what's going on, and one way to do this is by tracking both involuntary and voluntary turnover rates.

A high rate of voluntary turnover means that an unsustainable number of people are choosing to leave the company, which you can take as a sign that some elements of the experience you're offering as an employer - this could be anything from pay and benefits to workplace atmosphere and culture - need to improve. Conducting exit interviews and asking people why they chose to leave can help you identify common problems.

If you have a high rate of involuntary turnover - in other words you often have to fire people or lay them off - it could be a sign that your recruitment practices aren't up to standard and you're hiring people that aren't the right fit.

4. Talent turnover rate

Another way to get a more nuanced view of turnover in your organization is by looking at talent turnover. This refers to the proportion of your high-performing, high-potential employees (in other words the ones you really want to keep) who are leaving.

This could be one of the most important retention metrics of all because it helps you make a data-based judgment on something that could be a major problem for the organization. No business can succeed and grow if it's unable to retain its most competent and productive employees.

You want to keep your talent turnover rate to an absolute minimum, so if it starts to creep up, it's time to think about talent retention strategies that will encourage your most valuable employees to stay with you.

5. Employee satisfaction rate

Measuring employee satisfaction is a go-to metric, since engaged and happy employees are much more likely to not only stay with you, but be motivated to do their best for the company and help it grow.

You need to decide how you will measure workforce satisfaction. Two of the most common approaches include conducting staff surveys and collecting net promoter scores, which give an indication of how likely your employees are to recommend you to others.

It's a good idea to start measuring satisfaction levels as early as possible. Surveying new recruits will help you judge how effectively you're integrating people into the workforce and how quickly new arrivals settle in.

By being proactive where employee satisfaction is concerned, you can identify and resolve issues that could otherwise grow into major problems.

6. Absence rate

Absenteeism refers to the inexplicable time employees take off work for different reasons such as sickness, transportation issues or other emergencies. Absence rate is the percentage of these employees that take unplanned leave off work for no anticipated reason. You can track absentee rates either on an individual basis or on a team or company basis. This can be calculated by dividing the number of unexpected absences in days in a certain time period by the total number of work days in that period and multiplying the result by a hundred.

For example, there are 251 workdays in 2023 (excluding weekends and vacations). So if one of your employees misses 15 days of work in that year, the absence rate would be around 6%.

7. Cost of turnover

To understand the impact of employee retention, it's important for businesses to assess the cost of turnover. This includes expenses related to hiring, training and overtime. It may also be beneficial to consider non-financial costs such as decreased productivity, lost time and the effect on employee morale.

A useful way to determine these costs is by calculating the average expenses of recruiting and hiring a new employee, including hiring managers' salaries. Additionally, factoring in training costs and overtime expenses will provide a more accurate estimate of the overall cost of losing an employee due to turnover.

8. Employee happiness

Employee happiness is a crucial metric that HR teams should measure when it comes to employee retention. Happy employees tend to be more productive, engaged and committed to their job, which in turn results in better business outcomes for the organization.

Measuring employee happiness can be achieved through various ways, such as surveys, feedback sessions and one-on-one meetings. This can help HR teams understand employee satisfaction levels, identify problem areas and take appropriate actions to improve employee wellbeing.

What's more, employee happiness can also be a key differentiator when it comes to attracting and retaining top talent. Job seekers are more likely to join and stay with organizations that prioritize their employees' happiness and wellbeing.