Five Key Employee Retention Metrics to Benchmark in 2025

Introduction

Employee retention is a top priority for many HR professionals and business leaders. Retaining employees not only reduces recruitment and training costs but also ensures continuity and stability within teams. In the end, success for many businesses comes down to its people.

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High employee turnover rates can negatively impact company culture, productivity, and overall business outcomes. By leveraging effective employee retention metrics and strategies, organizations can create an environment where employees stay and thrive. In this blog we will explore the following topics:

• What is Employee Retention?
• Five Key Metrics for Measuring Employee Retention
• How to Track and Measure Employee Retention
• Best Practices to Boost Employee Retention
• Conclusion

What is Employee Retention?

Employee retention refers to the set of strategies, policies, and practices aimed at retaining employees and minimizing turnover. But it’s more than just keeping staff members in their roles. It’s about fostering a workplace environment where talented employees feel valued, engaged, and supported to grow.

Retention is measured over a specific time period, and organizations calculate retention rates to evaluate their success in retaining employees. High retention rates often indicate effective workforce planning, positive company culture, and a robust employee experience. Conversely, a high employee turnover rate, whether voluntary turnover or involuntary, can reveal challenges for businesses looking to retain employees.

To improve employee retention, it’s essential to measure employee retention metrics consistently and address the underlying factors contributing to employee turnover. Successfully reducing the employee turnover rate will have other positive consequences, such as increasing the time period that average headcount stay in post, boost employee satisfaction, and improve performance.

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Five Key Metrics for Measuring Employee Retention

There are a number of ways that you can measure employee retention. Here are five key performance indicators ('KPIs') that you should stay on top of:  

1. Employee Retention Rate

The overall employee retention rate is the main metric for tracking how well an organization retains its workforce over a given period. A good employee retention rate, typically over 90%, suggests that the company effectively balances retaining employees while allowing for growth opportunities through new hires. Here's how to calculate retention rate:

Employee Retention Rate = (Number of employees at the start of the period − Number of employees who left during the period) / Number of employees at the start of the period * 100

This metric provides insights into workforce dynamics for that period and helps HR to measure the success of employee retention efforts.

2. Employee Turnover Rate

The employee turnover rate refers to the percentage of employees who leave an organization during a specific period. It’s a key performance indicator for understanding the stability of the workforce. It can be categorized as voluntary or involuntary, each with unique implications for retention strategies.

Voluntary Turnover Rate

This metric measures the percentage of employees who leave the company by choice, often due to dissatisfaction, better opportunities elsewhere, or unmet career development needs. Here tis the formula for the voluntary turnover rate:

Voluntary turnover rate = (Number of employees who left voluntarily / Average number of employees in the period) * 100

High voluntary turnover rates may signal issues with employee morale, culture, or career growth opportunities.

Involuntary Turnover Rate

This metric tracks employees dismissed or laid off due to performance issues or an organizational restructuring. The calculation is as follows:

Involuntary turnover rate = (Number of employees dismissed / Total number of employees) × 100

High involuntary turnover rates can sometime highlight problems with the hiring process, workforce planning, or development programs for low-performing employees. In times of macroeconomic uncertainty this type of turnover can also increase due to cost pressures.

3. Average Employee Tenure

Average employee tenure reflects the average length of time employees stay with an organization, offering insights into employee satisfaction and organizational stability. It is often measured by the average number of years that an employee is employed. Here's how to calculate it:

Average tenure = Total employment time (years) of all employees / Total number of employees

A longer average length of employment typically indicates satisfied employees and effective retention measures. Organizations can track employee tenure trends to assess the impact of changes in workplace culture or employee experience.

4. Absence Rate

The absence rate measures the percentage of unplanned absences among employees. Frequent absenteeism can be an early warning sign of unhappy employees, low morale, or poor employee engagement. It is calculated as follows:

Absence rate = Total days not working (excluding weekends and holidays) / Total number of work days

Tracking absence rates helps identify patterns that may lead to higher turnover rates, enabling proactive measures to improve employee satisfaction and work environment. This metric is typically tracked for the total employee population, but at the individual level it can be a good indicator of employees who are unhappy. This takes us to our final metric, which is employee satisfaction.

5. Employee Satisfaction Rate

The employee satisfaction rate measures how happy and fulfilled employees feel in their roles. It’s a critical driver of retention, as dissatisfied employees are more likely to seek new opportunities. Unlike the four other metrics, there is no standardized formula to measure satisfied employees. It is usually tracked and managed through the use of employee engagement surveys.  

It's important to note that organizations can improve employee satisfaction by offering career development opportunities, fostering a positive workplace culture, and addressing employee needs through regular feedback and engagement surveys.

How to Track and Measure Employee Retention

Tracking and measuring employee retention requires a systematic approach to gather, analyze, and interpret key data points. By focusing on the right metrics and using effective tools, organizations can gain deeper insights into workforce dynamics and identify areas that need improvement. Here’s a detailed breakdown of the process:

1. Identify the Right Retention Metrics

The first step in tracking employee retention is identifying which metrics are most relevant to your organization’s goals. If you're unsure of what these are, refer to the five key metrics listed in the previous section. They are designed to provide you with a comprehensive view of workforce stability and satisfaction, enabling informed decision-making.

2. Gather Accurate Data

Accurate data is the foundation of effective tracking. To ensure the reliability of retention metrics, organizations should:

• Centralize Employee Records: Maintain a detailed database that includes start and end dates for each employee, department assignments, performance evaluations, and reasons for departure.
• Track Employee Movements: Document promotions, transfers, and resignations to capture workforce dynamics over time.
• Collect Feedback Through Surveys: Regular employee engagement and satisfaction surveys help measure sentiments and identify areas for improvement.

Modern HR tools and software can automate data collection and reduce manual errors, making the process seamless and efficient.

3. Use Consistent Time Periods

Retention metrics should be tracked over time frames that are consistent to allow for meaningful comparisons. Most organizations analyze data monthly, quarterly, or annually. This consistency helps identify trends and seasonal patterns in employee turnover. By focusing on the same period each year, HR professionals can better measure the impact of their retention strategies.

4. Segment Data for Deeper Insights

Segmenting retention data by categories such as department, job role, or manager can reveal valuable insights in specific parts of the organization. Here are three segments to explore:

• Function-Specific Trends: Identify which teams or functions experience higher turnover rates and investigate the causes. Consider leveraging data from CompanySights, which has a large range of external benchmarks at the function level - Learn more here.
• Retention by Performance Level: Analyze whether top-performing employees are more likely to stay or leave, and ensure that retention strategies are aligned to retain valuable talent.
• Managerial Influence: Examine retention rates by manager to understand leadership effectiveness and identify areas for improvement.

5. Leverage HR Analytics Tools

Advanced HR analytics platforms enable organizations to track and visualize retention metrics in real time. These tools can provide the following attributes:

• Real-Time Dashboards: Live tracking of employee retention rates, turnover rates, and other key metrics.
• Predictive Analytics: Use data models to forecast flight risks and proactively address potential turnover.
• Custom Reports: Generate detailed reports tailored to specific organizational needs, such as retention by location or tenure.

By integrating analytics tools into workforce planning, HR professionals can make data-driven decisions to improve retention.

6. Monitor Leading and Lagging Indicators

Retention data includes both leading indicators (predictive measures) and lagging indicators (historical measures). Monitoring both is essential:

• Leading Indicators: Metrics such as employee engagement, satisfaction rates, and absence rates can be helpful data points to predict future turnover trends.
• Lagging Indicators: Metrics like turnover rates and average employee tenure provide insights into past performance.

By balancing these indicators, organizations can identify problems early and measure the success of retention initiatives.

7. Incorporate Feedback Loops

Employee feedback is a powerful tool for understanding the "why" behind retention metrics. We recommend that you conduct:

• Exit Interviews: Gather insights from employees who leave to understand their reasons for departure and identify systemic issues. Then track common themes that arise - Is it the lack of career progression, a bad manager, or something else?
• Employee Interviews: Engage with current employees to learn what motivates them to stay and what improvements they would like to see. Pro-active HR teams are very good at this, as it involves reaching out to people to get a detailed understanding of what is going on.
• Pulse Surveys: Regular, short surveys to measure employee sentiment and engagement. This can range from a single question sent out to employees each week, to a more detailed questionnaire every month. It's about getting a feel for the sentiment within the workforce at that point in time.

Feedback loops ensure that tracking employee retention is not just a numbers game, but a strategy grounded in employee needs and perspectives.

8. Measure Progress Over Time

Retention tracking involves ongoing monitoring to measure progress and success. Organizations should:

• Set Baseline Metrics: Establish a starting point for retention rates and other key metrics.
• Track Improvements: Regularly evaluate whether strategies such as enhancing the work environment or refining the hiring process are yielding results.
• Benchmark Against Industry Standards: Compare metrics like average employee tenure and turnover rates with competitors to identify areas where your organization excels or lags behind.

Sourcing trusted benchmarks can difficult and time consuming. Consider using a third-party data provider, such as CompanySights.

9. Use Retention Metrics to Inform Strategy

The ultimate goal of tracking employee retention is to drive actionable change. We recommend that you use these data insights to:

• Refine Workforce Planning: Address high involuntary turnover or unexpected voluntary departures by improving hiring, training, and performance management processes.
• Boost Employee Engagement: Leverage engagement and satisfaction data to implement targeted initiatives, such as career development opportunities or workplace culture improvements.
• Enhance Onboarding and Development: Monitor new hire retention rates and adapt onboarding processes to ensure new employees feel supported.

Retention metrics should be a cornerstone of strategic decision-making, guiding policies that enhance employee experience and reduce turnover.

Best Practices to Boost Employee Retention

There are many things Improving employee retention requires a combination of thoughtful strategies and proactive efforts aimed at fostering a supportive work environment. By implementing the following best practices, organizations can address key issues that cause employees to leave while creating an environment where they are motivated to stay and thrive.

1. Refine the Hiring Process

A strong hiring process ensures that new employees align with the company’s values and expectations. Clear communication during recruitment and a smooth onboarding process can significantly improve new employee satisfaction rates.

2. Offer Career Development Opportunities

Employees are more likely to stay when they see opportunities for growth. Providing training, mentorship, and internal promotions supports internal growth and fosters long-term loyalty.

3. Foster a Positive Workplace Environment

A healthy workplace culture enhances employee morale and engagement. Encourage open communication, recognize achievements, and prioritize work-life balance to create a supportive work environment.

4. Regularly Measure Employee Satisfaction

Conduct surveys to assess employee satisfaction rates and use the feedback to make targeted improvements. Engaged and satisfied employees are more likely to stay and contribute as productive employees.

5. Address Turnover Trends

Analyze voluntary and involuntary turnover data to understand why employees leave. Address the underlying causes by improving workplace conditions, offering growth opportunities, or refining performance management processes for low-performing employees.

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Conclusion

Employee retention is a critical factor in organizational success. By tracking retention metrics such as employee retention rate, turnover rates, and employee satisfaction rate, organizations can gain valuable insights into their workforce dynamics and identify opportunities for improvement.

Effective strategies, such as refining the hiring process, offering career development opportunities, and fostering a positive workplace environment, can improve retention rates and ensure that employees stay engaged and satisfied. In doing so, companies can build a resilient workforce that drives long-term success.