Employee Retention Rate

TL;DR: Employee retention rate is the percentage of employees from your starting workforce who stayed through a defined period: (employees who stayed for the full period ÷ employees at the start of the period) × 100. New hires made during the period don’t count as retained because they weren’t part of the starting group.

The calculation itself is simple. The counting rules are where teams tend to get tripped up.

If one team includes new hires, another excludes transfers, and a third changes the measurement window from quarter to quarter, the resulting percentages won’t be meaningfully comparable.

Here’s how to calculate employee retention rate, clean up your inputs, and use the metric without asking it to explain more than it can.

What Employee Retention Rate Means

Employee retention rate tells you how well your organization is holding on to its people over time. More specifically, it measures the percentage of employees who were with you at the start of a given period and are still there at the end.

It’s an important metric to track. But before you start crunching the numbers, there are a few things you'll want to define:

• Starting employees: Employees who were active on the first day of the measurement period.
• Employees who stayed: People from the starting group who remained through the full period.
• New hires: Employees hired after the period began. Don’t include them in the retained group.
• Exits: Anyone from the starting group who left before the period ended.
• Transfers and leaves: Internal moves, leaves of absence, and status changes that must be handled consistently.
• Policy choices: Documented rules that ensure every team calculates the metric the same way.

How to Calculate Employee Retention Rate

With those definitions settled, the calculation itself is quick. Follow these steps:

1. Choose a time window. Select the month, quarter, year, or other period you want to measure.
2. Record starting headcount. Count the employees who were active on the first day.
3. Identify who stayed. From that starting group, count the employees who were still active on the final day.
4. Divide retained employees by starting employees.
5. Multiply by 100 to convert the result to a percentage.

Employee Retention Rate Formula

Employee retention rate = (Employees who stayed through the full period ÷ Employees at the start of the period) × 100

Employee Retention Rate Worksheet

Measurement period: [Start date] to [End date]

Starting headcount: [Starting headcount]

Employees from the starting group who stayed: [Employees who stayed]

Formula: ([Employees who stayed] ÷ [Starting headcount]) × 100

Employee retention rate: [Rate]%

Example

Suppose an organization starts the year with 200 employees. By the end of the year, 180 of those same employees remain.

Starting headcount: 200

Employees from the starting group who stayed: 180

Formula: (180 ÷ 200) × 100

Employee retention rate: 90%

For a quick accuracy check, review the “employees who stayed” group. If it contains anyone hired after the start date, recalculate the rate.

Clean Your Inputs Before Trusting the Number

The math behind employee retention rate is pretty simple. Figuring out exactly who to include? That's where things can get a little tricky.

For example, what happens when someone moves to another department? Or leaves the company and comes back a few months later? Those details can make a difference in your final number.

Before calculating your retention rate, make sure everyone is working from the same set of rules:

• Period boundaries: Confirm the exact start and end dates. A term such as “Q2” should refer to the same dates for everyone.
• Employee status changes: Decide how to count people who moved from contractor to employee, part-time to full-time, or inactive to active.
• Rehires: Determine whether rehires are counted according to their status at the beginning of the period or their later return date.
• Internal moves: Decide whether transfers between departments count as retained at the company level, team level, or both.
• Leaves of absence: Document whether employees on leave are active, excluded, or reported separately.
• Part-time and full-time employees: Decide whether both groups are included or reported separately.
• Repeatable definitions: Verify that the same rules were used in previous periods and across the teams being compared.

The goal is to make sure you're comparing apples to apples. Because even when the math is right, inconsistent definitions can give you a misleading picture of how well your organization is retaining employees.

Employee Retention Rate vs. Turnover Rate

Retention and turnover are two sides of the same coin. Both tell you something about how people are moving through your organization, but they look at that movement from different angles.

Retention focuses on the employees who stay, while turnover looks at those who leave. And while they might sound like opposites, the way they're calculated means they don't always add up quite the way you'd expect.

Understanding the difference can help you get a clearer picture of what's happening across your workforce and where you might need to take a closer look.

Consider what you’re trying to understand:

• Who stayed? Start with retention rate.
• Who left? Start with turnover rate.
• How many backfills might you need? Review turnover alongside retention.
• Could hiring quality be contributing to exits? Pair workforce metrics with recruiting and onboarding data.

If turnover is the immediate concern, learn how to address a high turnover rate.

Neither metric replaces the other. Retention and turnover are most useful when reviewed together, particularly when the reason behind a trend isn’t yet clear.

What Is a Good Employee Retention Rate?

There isn’t a universal “good” employee retention rate for every company, role, industry, and measurement period.

A healthy rate depends on the work employees perform, typical tenure, organizational changes, and labor-market conditions.

Consider the following factors before deciding whether your rate is healthy or concerning:

• Industry: Some industries naturally experience more employee movement than others.
• Role type: Frontline, technical, hourly, seasonal, and leadership roles may have very different retention patterns.
• Tenure mix: A team with many recently hired employees may behave differently from one made up primarily of long-tenured employees.
• Manager changes: Leadership transitions can affect retention in ways that company-wide numbers hide.
• Seasonality: Some teams experience predictable exit patterns during certain parts of the year.
• Hiring cohorts: A decline may be connected to one hiring period, role group, or onboarding experience.
• Internal trends: Compare current retention with your organization’s historical performance.
• External benchmarks: Use current industry data as a reference point rather than a complete assessment.

Start with your own trend. Then use relevant external benchmarks to determine whether the rate is unusual for your industry, market, or workforce mix.

What Retention Rate Can’t Tell You on Its Own

Retention rate is a signal. It can show that something changed, but it can’t explain why employees stayed, why they left, or what you should fix first.

Use follow-up questions to investigate the story behind the rate:

• Where are losses happening? Are exits concentrated within a function, level, location, or manager group?
• When are people leaving? Do departures cluster within the first 30, 60, or 90 days—or later in employees’ tenure?
• Which hiring cohorts look different? Did one group of new hires retain at a lower rate than others?
• Which roles are hardest to keep filled? Are the same positions repeatedly creating hiring and backfill work?
• What do exit themes suggest? Do departing employees mention compensation, manager fit, workload, flexibility, or growth?
• What does engagement data show? Do survey results and manager feedback align with the retention trend?
• Which related metrics should you review? Consider turnover, time to hire, offer acceptance, quality of hire, employee engagement, and new-hire retention.

To turn scorekeeping into action, assign an owner to the review, pair retention with a few relevant metrics, and make sure the discussion ends with a decision rather than another chart.

For more ideas about strengthening the employee experience, explore these employee engagement strategies.

Common Employee Retention Rate Mistakes

Small counting choices can make the number hard to trust. Watch for these common errors:

• Counting new hires as retained: New hires weren’t part of the opening population, so they don’t belong in the standard retention formula.
• Using ending headcount instead of starting headcount: This changes the meaning of the metric.
• Comparing teams that use different rules: If teams handle transfers, leaves, or employment statuses differently, their rates aren’t directly comparable.
• Chasing a universal “good” rate: Context and internal trends are more informative than a single headline benchmark.
• Stopping at the percentage: The rate shows that something changed, not why it changed.

Share the calculation rules alongside the percentage. Clear documentation keeps the conversation focused on decisions rather than spreadsheet disputes.

Frequently Asked Questions

What Is Employee Retention in HR?

Employee retention is an organization’s ability to keep employees over time. It is the broad concept behind efforts that encourage people to stay, including effective management, career growth, compensation, engagement, and hiring alignment.

Employee retention rate is more specific: It is the percentage of employees from a starting workforce who stayed through a defined period.

Can an Employee Retention Rate Be Over 100%?

No. Under the standard formula, the number of retained employees can’t exceed the starting employee population.

If the result is above 100%, the calculation may have included new hires or used ending headcount or workforce growth instead of counting only employees from the starting group who stayed.

Is 20% Employee Turnover High?

It depends on the measurement period, industry, role mix, and your organization’s historical trend. A 20% annual turnover rate tells a different story from 20% turnover in a single quarter.

Review turnover alongside retention to understand both how many employees left and how many from the starting workforce stayed.

What Does an 80% Retention Rate Mean?

An 80% retention rate means 80% of the employees who were present at the beginning of the measurement period remained through its end.

For example, if the organization began the year with 100 employees and 80 of those same employees remained at year-end, its retention rate would be 80%.

Whether that rate is healthy depends on the organization’s context, history, industry, and role mix.

Why Do Teams Choose Lever?

Teams choose Lever when they want clearer visibility across hiring, less manual work, and workflows that can adapt as they grow. Lever combines ATS and recruiting CRM capabilities with automation, configurable workflows, and actionable insights.

Make Your Retention Metric Useful

Knowing your employee retention rate is one thing. Knowing what to do with it is where the real value comes in.

Start by making sure you're measuring it consistently. Then, look beyond the number itself. Is retention improving? Are certain teams seeing more employees leave than others? And what might those patterns tell you about where there's room to improve?

Want better visibility into your hiring process? See how Lever helps teams track recruiting performance, spot opportunities for improvement, and make more informed hiring decisions.