05.Mastering Employee Retention: Essential Metrics and KPIs Every HR Department Must Monitor

 Metrics on employee retention give a detailed picture of why people stick with a company. Metrics can be used to track employee retention, spot at-risk workers, and examine trends for what the future may hold. By enhancing employee retention tactics and lowering attrition costs, businesses and their human resources departments can benefit from this analysis. Monitoring key performance indicators (KPIs) and employee retention measures can boost staff content and lower attrition.

Companies can increase staff retention rates by offering competitive pay, training opportunities, and work-life balance, among other things. Employee morale and retention can be raised by making sure that workers feel encouraged, engaged, and pushed, so they feel a sense of accomplishment and fulfillment.

 

How Do You Measure Employee Retention?

The proportion of employees that stick with a company for a specific amount of time is known as employee retention. Typically, retention is determined annually. Depending on the size of your company, you can also monitor retention for particular teams or roles to identify any areas that require additional attention.

 

What’s a Good Employee Retention Rate?

Generally, a decent employee retention rate is around 90%. A retention rate of 100% is not necessarily ideal. Your lowest performers may be among those who depart, which may make room for more motivated, productive workers. The percentage of productive employees varies by sector. Two of the most crucial HR KPIs are retention (how many employees stay) and turnover (how many people depart), which are two sides of the same coin. High-tech, retail, and food services businesses sometimes have higher turnover than other businesses.

Metrics to Track and Monitor Employee Retention

01.Employee Retention Rate 

The ability of a business to retain employees over time is measured by its total retention rate. Around 90% might be considered a strong overall retention rate. A certain amount of turnover can be beneficial for your company and enable you to bring on new hires with desirable and practical skill sets that will grow your company. The retention rate formula is as follows:

 

Image source:https://www.instride.com/insights/employee-retention-metrics/

You won't take new hires who joined throughout the year (or another period you're monitoring) into account when calculating employee retention. People who are hired and then terminate their employment within the measurement year would likewise be excluded from this calculation. This KPI works well with the turnover calculation

02.Turnover rate

The percentage of employees who quit their employers, either freely or involuntarily, is known as the turnover rate. Costly, detrimental to production, and difficult to recruit top people, a high turnover rate is costly. Furthermore, it could point to issues with management or corporate culture. For turnover rate, the following formula is used:

Image source:https://www.zenefits.com/workest/how-to-calculate-employee-turnover-rate/

Similar to retention, the definition of a good turnover rate varies considerably by industry and job category Between 12% and 20% is a good general benchmark to use as a guide.

03.Voluntary Turnover Rate

The percentage of employees that decide to leave their jobs is known as the voluntary turnover rate, but why does significant employee turnover occur? It usually happens for a variety of reasons, such retiring or changing jobs. These individuals typically have higher levels of competence than those who are let go involuntarily, therefore replacing them usually costs more. The calculation of voluntary turnover rate is as follows:

Image source:https://www.aihr.com/blog/voluntary-turnover/

04.Involuntary Turnover Rate

The percentage of people that are let go or fired in a specific time period is known as the involuntary turnover rate. A high percentage of involuntary turnover indicates that the hiring procedure may need to be reviewed in order to prevent future mistakes. Involuntary turnover rate is calculated using the following formula:

Image source:https://www.netsuite.com/portal/resource/articles/human-resources/employee-retention-metrics.shtml

05.Employee satisfaction

Employee satisfaction is a crucial indicator of employee retention since satisfied workers are more likely to stay in their positions than unsatisfied In general, satisfied employees are paid fairly, have solid benefits like health insurance, feel challenged and inspired by their work, and collaborate well with coworkers and bosses. They are more productive, better at serving customers, and better brand ambassadors.

Employee satisfaction can be measured with the support of a survey. A Net Promoter Score (NPS) is a tool used by some businesses to measure staff satisfaction. Employees are asked questions based on  NPS used for customers, such as "On a scale of 1 to 10, how likely are you to recommend this company to a friend or colleague as a good place to work?" Scores of 9 or 10 are considered "promoters," 7 or 8 are considered "passive," and 0 to 6 are considered "detractors." We only consider promoters and detractors for this score.

Image source:https://www.aihr.com/blog/employee-satisfaction-metrics/

06.Absence rate

The frequency of unexcused absences your staff members suffer over a specific period of time is indicated by their absence rate. Every employee occasionally misses work due to illness or other personal reasons, but a high absenteeism rate might be a sign of more serious issues at work, such a toxic workplace. Use the formula below to calculate the employee absence rate:

Image source:https://acornlms.com/enterprise-learning-management/absence-rate

What is a good employee absence rate?

Absence rates differ by industry, just like other retention metrics do. However, a rate of 3-5% or less is often seen as desirable, while a rate of more than 10% can be regarded as high.

Conclusion

employee retention metrics and KPIs provide a window into the workforce's health and happiness. By scrutinizing these numbers, companies can grasp why employees stay and identify potential departures. This analysis guides strategies to create a contented, committed team.Balancing retention rates involves factors like fair pay, growth chances, work-life balance, and nurturing culture. However, there's no universal "good" rate; it varies by industry and context.These metrics, including retention and turnover rates, employee satisfaction, and absence rate, offer insights to tackle issues, refine strategies, and enhance the employee experience. This data-driven approach not only boosts morale but also cuts attrition costs. In today's ever-changing work environment, these insights are vital for building a strong organization.

References

Holliday, M. (2022) 10 employee retention metrics and KPIs HR departments should track, Oracle NetSuite. Available at: https://www.netsuite.com/portal/resource/articles/human-resources/employee-retention-metrics.shtml (Accessed: August 26, 2023).

Employee retention metrics: The numbers you need to know (and track) (no date) Instride.com. Available at: https://www.instride.com/insights/employee-retention-metrics/ (Accessed: August 26, 2023).

Sommerville, A. (2023) Strategies & best practices to reduce your employee absence rate, Acorn PLMS. Pursuit Technology. Available at: https://acornlms.com/enterprise-learning-management/absence-rate (Accessed: August 26, 2023).