Employee Retention- Why recruiters should be focused on this metric

Employers are often tempted to equate “retention rate” with “turnover rate”, yet there is a distinct difference. The retention rate, or stability index, deals specifically with the employees that stay and works in tandem with turnover rates to provide an all-encompassing view of employee movement. Calculating either metric alone only tells part of the story; but combining both gives an expansive snapshot into your workforce’s behavior.

The basic formula for calculating retention is:

# of individual employees who remained employed for entire measurement period /

# of employees at start of measurement period) x 100

When calculating the number of employees who were with your company for the entire duration, remember to include only those that started and ended on both dates. Any personnel hired between these two days should not be taken into account since we are trying to track how many people stayed through it all.

To calculate the retention rate, you can measure it on a yearly basis by dividing the number of employees who have worked for one year or more with the amount existing in those roles from twelve months ago. Note that any positions added during this period won’t be taken into account. Additionally, measurement periods could also vary depending on whether you want to track immediate results of retention initiatives or consider workers kept after a reduction in force some time before now.

This data is a great representation of employee stability, however it does not account for the workers that left during the monitored period. A turnover rate measurement would offer an all-encompassing view by exhibiting what percentage of employees separated in that same timeframe. Usually, turnover rate is calculated as separations divided by the average staff size throughout this era.

The basic formula for calculating turnover is:

(# of separations during the measurement period /

average # of employees during the measurement period) x 100

The example below illustrates how retention and turnover rates are not always the inverse of each other.

In a department of eight, two people left and were replaced during the measurement period.

• R (retention) = (6/8) X 100 = 75 percent
• T (turnover) = (2/8) X 100 = 25 percent

However, what if during the measurement period, two positions became vacant, were filled, became vacant again and were filled again?

• R = (6/8) X 100 = 75 percent
• T = (4/8) X 100 = 50 percent

Clearly, tracking both metrics gives the employer a more complete picture between retained and separated employees.

Employee retention is one of the most important aspects of running a successful business. Keeping employees engaged and motivated not only improves job satisfaction, but it can also lead to improved productivity, lower costs, and higher morale. However, creating a culture that promotes employee retention requires more than just providing adequate salary and benefits. 

The ability to retain great talent starts with understanding what an employee values most in their work environment. This includes establishing clear goals for performance, recognizing hard work with rewards, providing opportunities for career development, and fostering a culture of appreciation and collaboration. 

When employees feel valued for their contributions and feel that there is room for growth within the organization, they are less likely to look elsewhere for employment. Retaining quality staff can help businesses maintain consistent operations while minimizing the cost of recruiting new hires. Additionally, it enables employers to focus their resources on defining objectives and reaching targets instead of searching for new talent. 

Why should recruiters care?

If your firm has an issue with retention, you will have a tough time in recruiting. It’s also important to note this information, especially those employees who leave before their first year, is critical for recruiters to learn how to recruit more effectively.

If your quick quit rate for 90 days or less is above 20% in a large organization, it’s past time for you to stop and evaluate the recruiting and interview process. This is a costly mistake to continue to make and will drain your company’s financial resources. While turnover and retention are not traditionally part of the general recruiting metrics but with the economy changing as fast as it is, it’s time for us to own retention as part of the talent organization. They are codependent.

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Creating a positive work environment is key to ensuring long-term success in employee retention. Taking steps to ensure that all staff members feel appreciated and that they have the necessary support can go a long way in increasing engagement and loyalty among workers. In turn, this helps create an atmosphere of collaboration that allows teams to effectively reach goals and build greater success together in the long run.