How to calculate the Employee Retention rate and how to improve employee retention for businesses

Employee Retention

In today’s competitive business landscape, retaining your top employees is crucial for sustained success.

Employee retention goes beyond just recruitment—it’s about creating an environment where employees feel valued, engaged, and motivated to stay.

In this glossary definition, we’ll explore the ins and outs of employee retention, from its definition to key strategies, different types, and frequently asked questions.

Employee Retention Definition

Employee Retention refers to the efforts an organisation undertakes to retain its valuable employees over a specified period.

It’s about creating an environment where employees are motivated to stay, grow, and contribute their best to the company’s success.

You may also be interested in related terms: Employee Turnover and Employee Attrition >

Types of Employee Retention

When organisations are developing their Employee Retention Strategies, there are three typical retention strategies:

Tactical Retention

Tactical Retention focuses on providing tangible benefits to employees, such as financial incentives, bonuses, and benefits, to encourage them to stay.

Strategic Retention

Strategic Retention involves creating an environment where employees feel a strong connection to the company’s mission, values, and goals.

Cultural Retention

Cultural Retention centres around fostering a positive workplace culture that aligns with employees’ values and encourages them to remain part of the organisation.

Key Drivers of Employee Retention

Given the diversity of employees in most workplaces who come from different backgrounds, experiences and so on its not suprisingly to learn than there are a lot of different factors that can influence employee retention.

Whilst not an exhaustive list, the following are typically the leading factors that influence employee retention and a focus on these will lead to an increase in employee retention.

1. Workplace Culture

A positive and inclusive culture that fosters collaboration and values employees’ contributions can significantly impact retention.

2. Recognition and Rewards

Acknowledging and rewarding employees for their hard work and achievements makes them feel appreciated and encourages loyalty.

3. Professional Development

Offering opportunities for skill enhancement and career growth within the organisation demonstrates a commitment to employees’ long-term success.

How to calculate Employee Retention
Improving Employee Retention provides a host of benefits for your business.

4. Work-Life Balance

Striking a balance between work and personal life enhances job satisfaction and reduces burnout, leading to higher retention rates.

5. Competitive Compensation

Providing competitive salaries and benefits ensures that employees feel their contributions are appropriately compensated.

What are the 3 R’s of employee retention?

No matter your industry, someone always finds a handy acronym that enables you to remember essential information. When it comes to Employee Retention, the 3 R’s of Employee Retention is a pretty good one!

Below we explain the 3 R’s essential principles and explore how they contribute to employee satisfaction and in turn, increasing employee retention.


Recognition is a powerful tool that fuels employees’ sense of value and belonging.

Acknowledging their efforts, achievements, and contributions can significantly boost morale and job satisfaction.

Regularly recognising employees fosters a positive work environment and encourages them to stay committed.

Effective recognition strategies:

  • Publicly praise employees’ accomplishments during team meetings or company-wide communications.
  • Implement an employee recognition program that includes peer-to-peer recognition.
  • Offer personalised feedback and appreciation, focusing on specific contributions.


Rewards go well beyond monetary compensation.

They encompass tangible and intangible benefits that make employees feel appreciated and motivated to excel.

Providing rewards demonstrates that the organisation values and invests in its employees’ well-being and growth.

Strategies for effective rewards:

  • Offer competitive compensation packages, including salary, bonuses, and benefits.
  • Provide opportunities for skill enhancement, career development, and training.
  • Consider non-monetary rewards like flexible work arrangements, extra vacation days, or wellness programs.


Retention is the ultimate goal of employee engagement strategies.

By nurturing a workplace culture that prioritizes employee well-being, growth, and job satisfaction, you can create an environment where employees are eager to stay and contribute their best.

Key retention strategies:

  • Provide clear paths for career advancement and growth within the organisation.
  • Foster a positive work culture built on open communication and respect.
  • Implement initiatives that promote work-life balance and mental well-being.

How do you calculate Employee Turnover?

Employee Retention needs to answer the question “What percentage of our employees working here on Date 1 were still working here on Date 2?”

The basic formula for employee retention is the following:

How to calculate employee retention rate

If 55 people were working at my company as of 1 December and 40 of those same people were still working at my company as of 31 December, my retention rate for December would be the following: 40/55 * 100 = 72.72%

The problem with this formula is that it has not allowed for any new hires – as such, you may find Employee Attrition can provide you with additional insight.

Free Download – Employee Turnover Rate Calculator

To download the Employee Turnover Rate Calculator, you need to be an ACXPA Subscriber (free to join) or an ACXPA Member.  Discover which membership is right for you >

What’s the difference between Employee Retention and Employee Turnover?

The terms are often used interchangeably but there is a difference between retention and turnover – in fact, they are almost the exact opposite:

  • Employee Retention relates to people staying
  • Employee Turnover relates to people leaving

Whilst that may look like a pretty obvious distinction, the formulas for calculating each one a quite different and can reveal additional insights.

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