10 Employee Retention Metrics You Should Be Tracking

A recent survey by Lattice concluded that approximately 52% of employees who have been with their companies for three months or fewer are actively looking for new opportunities, and that number jumps to 60% for employees with 3 – 6 month tenure. It’s not just new employees either; Joblist’s Q3 2021 United States Job Market Report suggests that 73% of employed Americans are actively thinking about quitting.

Somehow, between the moment when someone accepts a job offer and the time when they decide to turn that job into a career, the passion dries up and they start brainstorming an exit strategy. The fact remains that nearly three-fourths of the entire US workforce is ready to bolt. And unless you want your best people right in the middle of that stampede, you need to be focusing on tracking employee retention metrics.

What Is Employee Retention?

Employee retention is something of an umbrella term, encompassing all of the goals, strategies, processes, and solutions designed to reduce employee turnover rates and keep your employees in your employment. A high retention rate means that you are not losing employees unexpectedly (if you fire them then that’s on you). High retention rates also indicate high levels of employee satisfaction.

The goal is to retain productive, engaged talent and reduce the costs associated with hiring, onboarding, and outfitting new employees — which SHRM says costs on average about $4,700, but hints that the actual cost may be three to four times the position’s annual salary. Ouch.

Why Is Employee Retention Important?

Employee retention is important because it helps save your organization money on recruiting, hiring, and onboarding, while ensuring that you have higher-skilled employees on hand. Keeping a pulse on employee retention metrics can also help you identify employees who may be considering leaving.

Your employees are the people that keep your company running and they are the primary touchpoints for the customers you depend so heavily on; it makes sense to want to keep them around. Replacing them is expensive, and not to mention, it can impact employee morale. Because without reliable, engaged employees, your business isn’t a business at all. 

If you want to cut down on turnover, you first need to understand and track the most relevant metrics for employee retention.

10 Essential Employee Retention Metrics 

It can be difficult to get a clear picture of how well your company stacks up in employee retention. Most companies choose to measure the overall employee retention rate as a ratio that shows the number of employees who stayed with the company over a certain period of time, generally 1 year. You can even drill down further and measure employee retention on a team-by-team basis.

There are other important metrics that can help you determine the effectiveness of your employee retention strategies. Here, we identify 10 retention metrics worth keeping an eye on:

1. Overall Retention Rate

Your overall retention rate is a measurement of the percentage of retained employees over a specific time period. Want an equation? Good, because in this section we’re going to be equating pretty hard.

Employee Retention = (Number of employees who stayed during a specific time period / Total number of employees at the beginning of the time period) x 100 

You do the math on that and you’re left with a percentage representing your overall retention rate. 

2. Overall Turnover Rate

On the flip side of the retention coin is the overall turnover rate. This measures how many employees are leaving (either voluntarily or otherwise) over a specific time period. 

Overall Employee Turnover = (Number of employees who left during a specific time period / Average number of employees during that time period) x 100

3. Voluntary Turnover Rate

Now we’re dialing in on it. The voluntary turnover rate ignores those employees who were “let go to pursue other exciting opportunities” (i.e. fired) and instead focuses on the employees that you wanted to keep on the payroll. If this number ends up unnaturally high, then that should signal that there may be issues within your company that need to be resolved. 

Voluntary Employee Turnover = (Number of employees who voluntarily left during a specific time period / Average number of employees during that time period) x 100 

4. Involuntary Turnover Rate

Well, yeah. Firing employees can certainly hurt your overall retention. Still, calculating the involuntary turnover rates can give you more insight into some problems you might otherwise overlook (such as those associated with your hiring or onboarding process).

Involuntary Employee Turnover = (Number of employees who involuntarily left during a specific time period / Average number of employees during that time period) x 100 

5. Talent Turnover Rate

It’s one thing to get an idea of how many employees are leaving, but it’s quite another to understand the lost value connected with turnover. This metric assigns greater value to those employees who make bigger waves when they evacuate your ship (metaphorically speaking).

Talent Turnover = Number of employees of high performance or high potential who left during a specific time period / Average number of employees during that time period

But wait, how do you assign value to more experienced employees? That’s up to you, but you’ll need a consistent performance management system in place that takes into account things like experience and relevant skills. 

6. Turnover Costs

If we’re going to be assigning value we might as well go the whole way. This metric shifts focus to the total cost of replacing lost employees, taking into account things like lost productivity, recruiter and HR time spent interviewing and onboarding replacements, costs associated with advertising for open positions, and any fees related to background checks or other pre-employment tests.

Turnover Costs = Total sum of all costs associated with turnover x Total number of separations

7. Employee Satisfaction

Not every dissatisfied employee is going to immediately put in their two-weeks notice; some will valiantly soldier on, coming to work every day and putting in the bare minimum to keep collecting a paycheck. You can measure the overall satisfaction of your current employees using the EmployeeNet Promoter Score (eNPS), a metric for measuring employee engagement and loyalty that categorizes employees as either promoters, passives, or detractors based on how they score across a number of survey questions.
 

Employee Satisfaction = Percentage of eNPS promoters – Percentage of eNPS detractors

8. New Employee Satisfaction

Tracking this metric follows a similar process to the employee satisfaction metric above, but with one crucial difference: You limit the survey to employees who have only been with your company for a specified time duration. 

New Employee Satisfaction = Percentage of new employee eNPS promoters – Percentage of new employee NPS detractors

The first few months of new employment are often the most difficult, so gauging the satisfaction levels of your new hires is essential to combating what may be your highest turnover rates.

9. Absence Rate

Unhappy, disengaged employees tend to take more sick days and personal time off (along with simply not showing up when expected). Calculating the employee absence rate will tell you how prevalent absenteeism is within your company. 

Employee Absence Rate = (Number of unexpected absences in days during a specific time period / Total number of workdays within that time period) x 100

High rates of absenteeism suggest that employees don’t want to be in the office, and could be related to many different issues. 

10. Retention Rate per Manager

It’s been said that people don’t quit jobs; they quit bosses. And while that may not be true in every circumstance, it certainly is true in a lot of them. A recent Gallup report found that managers or team leaders account for ~70% of issues related to team engagement, and GoodHire says that 82% of US workers would consider quitting their job to get away from a bad manager. Want to see if one of the bosses is to blame? The retention rate per manager metric is the one for you!

Retention Rate per Manager = (Number of employees per manager – Number of employees who have left per manager /  Total number of employees per manager) x 100  

What Is A Good Employee Retention Rate?

Now you know some ways to measure employee retention, but w hat is considered a good employee retention rate? Well, the US Bureau of Labor Statistics says that the average total retention rate in 2021 was 47.2%, so you could say that anything above that is “good.” But, come on; that’s a pretty low bar to set. That’s why most business leaders say that 90% retention is a better benchmark, with anything above that number denoting a “good” retention rate.

How to Improve Employee Retention

Now that you have an idea of how to measure employee retention, you can start improving it! The good news is that there are a lot of ways to make your workplace better suited to improved employee satisfaction.

• Build an effective onboarding process: New hires are the most likely to leave, so make sure that they have the right support and resources to learn their responsibilities well during their onboarding process, and get them past those awkward first few months.
• Train your leaders: If management is the problem, then it is management that needs the solution. Focus your training efforts on potentially problematic bosses to improve their soft skills and leadership competencies to ensure better leadership. And if that doesn’t work, well, some bosses may need to become part of the involuntary turnover rate.
• Create a value-based culture: Organizational culture develops naturally in any business, but it can also be coaxed in a positive direction by making company values a major consideration. A culture based on trust, flexibility, and integrity helps ensure that everyone knows what’s expected of them, has what they need to succeed, and can be trusted to manage their time effectively.
• Offer valuable perks: A paycheck will only keep employees loyal for so long. Including additional perks and unique benefits in your overall compensation strategy helps round out an enticing employee package and may mean the difference between an actively engaged workforce, and one that already has a foot out the door.
• Prioritize health and wellness: Show your employees that you care enough about their wellbeing to invest in it by creating a healthy workplace. Wellhub offers employee access to the world’s largest network of gyms, studios, trainers, and wellness services — in one membership.
• Communicate effectively: Silence stifles engagement and ensures high turnover. Get the lines of communication open and actively discuss with your employees to identify any issues that could end up hurting retention.
• Provide professional development opportunities: Most humans have a natural drive to better themselves, and this is particularly true for top talent. You can either provide those valuable employees with professional development opportunities, or you can wait for them to start looking elsewhere.
• Be flexible with scheduling and remote work: Most adults can be trusted to plan their own schedules and choose their optimal work environment, so why do so many organizations try to dictate how and when employees have to be on the clock? Offer flexibility, and your employees will want to hold on to that advantage for as long as possible.
• Encourage and support work-life wellness: Work-life wellness is an attainable state of wellbeing where life’s experiences in and outside of work interact to the benefit of happiness, health, and performance. Make work-life wellness a guiding principle in your company, and watch as productive, engaged employees start putting down roots.

Conclusion

Employees have their own lives to live, and sometimes that means parting ways with your company. It’s natural. It’s beautiful. And there’s no sense getting worked up about it because it’s going to happen either way. But employee turnover should be the exception rather than the rule. Become familiar with the above metrics and start tracking employee retention in your business, and you may discover certain areas where a little improvement could go a long way to retaining and supporting your most valuable internal resource. 

Want to learn more about how to make employee success a reality? Visit Wellhub for more insights into employee wellbeing, and talk to a Wellbeing Specialist today!

References:

• https://lattice.com/library/lattice-research-reveals-great-resignation-trends
• https://www.joblist.com/jobs-reports/q3-2021-united-states-job-market-report
• https://blog.gympass.com/en/employee-retention-guide/ 
• https://www.shrm.org/resourcesandtools/hr-topics/talent-acquisition/pages/the-real-costs-of-recruitment.aspx
• https://www.bls.gov/news.release/jolts.t16.htm 
• https://www.cnbc.com/2022/08/12/job-unhappiness-is-at-a-staggering-all-time-high-according-to-gallup.html
• https://www.goodhire.com/resources/articles/horrible-bosses-survey/
• https://site.gympass.com/us/companies