What is employee retention?
Definition
Employee retention is a company's ability to keep the people it wants to keep, for as long as the business needs them.
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Employee retention is keeping the people you want to keep.
It is also called staff retention or talent retention. The opposite is employee turnover: retention is about the people who stay, turnover about the people who leave.
The word want does the work in the definition. A retention program that tries to keep everyone ends up spending its effort on people who should move on.
Every other retention measure rolls up to this outcome.
It is the outcome every term in this glossary eventually rolls up to. Framed properly it is about the people you want to keep, not about keeping everyone.
It is also cheaper than replacement. Each person kept avoids a cost of turnover: recruiting, onboarding, ramp time and manager time.
You measure retention with a small set of metrics.
- Retention rate: the share of people present at the start of a period who are still there at the end.
- Regretted attrition: the exits you would have paid to prevent, as a share of all exits.
- New-hire retention: the share of a hiring cohort still employed after a milestone.
- Median tenure by team, which shows where knowledge is concentrated.
Formula
Retention rate = employees present at both start and end ÷ headcount at the start × 100
Here is a worked example with round numbers.
Take an invented company with 150 employees on 1 January. On 31 December, 135 of those 150 are still employed, and 20 people were hired during the year.
Worked example
Employees on 1 January
150
Of those, still employed on 31 December
135
Hired during the year
20
- The 20 new hiresLeft out of both sides
Retention rate
135 ÷ 150 × 100 = 90%
The retention rate is 135 ÷ 150 × 100 = 90%. The 20 new hires are left out of both sides of the calculation, which is why the retention rate and the turnover rate rarely add up to 100.
The levers that move retention are mostly local.
- Managers who hold regular one-on-ones, where most problems surface first.
- Stay interviews with the people you most want to keep.
- Visible paths for internal mobility, so a move does not require a resignation.
- Early warning from resignation signals, so a conversation happens before a decision.
Most of these work at the level of one team or one person, which is why company-wide perks rarely move the number much on their own.
These are the common mistakes with employee retention.
- Treating retention as keeping everyone, instead of the people the business needs.
- Reading 100 minus the turnover rate as the retention rate.
- Relying on exit interviews, which explain losses after the fact.
- Measuring once a year, long after the people affected have made their decision.
Work out your own retention rate.
Enter your starting headcount, how many of those people left, and the people you hired during the period, and the free calculator works out the retention rate.
Calculate your retention rateFree, no signup required.
These related terms are in the glossary too.
The retention rate is the percentage of employees present at the start of a period who are still employed at the end of it.
Employee turnover is the movement of people out of a company over a set period, counted as the employees who leave and are replaced.
Regretted attrition is a departure the company did not want: someone whose performance, skills or relationships you would have paid to keep.
New-hire retention is the share of a hiring cohort still employed after a set milestone, commonly ninety days, six months or one year.
Flight risk is the likelihood that a specific employee leaves in the near future, based on observable signals rather than a manager's hunch.
Employee engagement is how committed and involved people are in their work and their company, beyond simply doing the tasks assigned to them.
These pages on this site go deeper.
Back to the HR glossary, where all 52 terms are defined.