Formulas available to calculate retention rate
Q: I want to determine the rate of retention in my company. Is employee retention the same as employee turnover? Is there a formula for retention?
A: Retention, a component of the overall staffing process, measures how well an organization retains employees. Retention management is an effort to keep sufficient numbers and types of employees to minimize organizational ineffectiveness.
Employee turnover looks at departures as a staffing measure. Turnover is used to determine patterns or reasons behind the departures. The resulting number is a benchmark that employers can use to measure their effectiveness against other employers. Most often employees' departures are viewed as voluntary or involuntary.
Retention and turnover are therefore different in that they measure different aspects of the recruiting process.
To find retention, determining the correct variable is essential. Here are the basics:
Every percentage question or problem uses the exact same equation, which looks like this:
------- = ----------
There are generally two givens in a percentage problem. With two out of three unknowns, the equation can be rearranged to get the unknown variable. With three unknowns, there are really only three different questions that can be posed:
1. What is ___ percent of ___?
(Given whole and percentage, find part)
2. ___ is what percent of ___?
(Given part and whole, find percentage)
3. ___ is ___ percent of what?
(Given part and percentage, find whole)
Therefore, the equation for retention would be:
R= # of retained employees X 100
Number of positions in the organization
The relationship between retention and turnover is expressed as R= 100 – T (Turnover Rate).
Suppose a small employer has 100 employees. There are also 100 positions resulting in a fully staffed organization. Over the past year, 15 employees have left the organization. Therefore,
T= (15/100) X 100 = 15%
R=(100/100) X 100 = 100%
R=100 - 15
So in this example, the turnover rate would be 15 percent and the retention rate would be 85 percent.
Article by Dyane Holt, SPHR, is an information specialist for SHRM's Information Center from http://www.shrm.org/kc/solutions/articles/archives/CMS_019515.asp#P-8_0