The Best Retention Metrics Employers Should Be Tracking in 2021

Countless employers are focused on hiring top talent, but how many organizations commit the same time and resources to employee retention? Companies can save money and headaches in the long run—and get a leg up on the competition—by overhauling their retention strategy. As you begin this process, use the following metrics to measure your efforts. 

What is Employee Retention?

Employee retention refers to an organization’s ability to keep its employees and is usually represented as a percentage that is calculated on an annual basis.

To calculate the employee retention rate, divide the number of employees who have been in their position for a year by the number of employees in the position a year ago. If a position was added during the year, it would be excluded from the calculation.

Important Retention Metrics Employers Should Track

Use the following metrics to track your retention efforts:

1. Voluntary Turnover Rate

Voluntary turnover is a type of employee departure when a team member leaves a role or organization on their own terms, either for a new position, to relocate to a different city, or for another reason. 

In many cases, voluntary turnover can be especially costly because the departures can be unexpected and result in unfinished projects that require other teammates to pitch in.

Use this equation to calculate the voluntary turnover rate:

• Take the total number of employees who voluntarily left your company within a predetermined time frame (i.e. all employees who left The ABC Company in 2020 of their own volition)
• Divide this sum by the average number of employees in that predetermined time frame
• Multiply this sum by 100 to calculate your turnover rate percentage

2. Involuntary Turnover Rate

Involuntary turnover is a type of employee departure where a team member is dismissed from a position within a company. 

This can be the result of many different factors, including poor performance, company cutbacks, company restructuring, a violation of company policies, and more.

Use this equation to calculate the involuntary turnover rate:

• Take the total number of employees who involuntarily left your company within a predetermined time frame (i.e. all employees who were laid off or terminated by The ABC Company in 2020)
• Divide this sum by the average number of employees in that predetermined time frame
• Multiply this sum by 100 to calculate your turnover rate percentage

3. Attrition Rate

Employee attrition is a staffing metric that determines the natural rate of team member departure within a given organization. In these cases, when an employee leaves the company, their position isn’t filled or replaced by a new hire. 

A good attrition rate is typically low, as it indicates that the company is growing by adding new positions or filling vacancies instead of eliminating a position altogether. Meanwhile, a bad attrition rate is typically high.

Use this equation to calculate attrition rate: 

• Take the total number of employees who departed in a specified time frame and divide it by the average staff size throughout that same time frame
• For example, if your company had 26 people leave in 2020, began the year with 238 employees, and ended the year with 214 employees, the employee attrition rate would be calculated as follows:
• 238 + 214 = 452
• 452 / 2 = 226
• 26 / 226 = 11.5%
• In this example, the employee attrition rate would be 11.5%.

4. Retention Rate by Manager

Certain managers may have higher-than-average turnover rates for their teams. While not necessarily indicative of poor management—some managers may just have bad luck—it’s certainly good to know in case the trend needs to be addressed. 

To calculate this rate, simply use the turnover calculation but only include the employees who worked under a certain manager within a specified time period. The result can be calculated for each manager to compare performance among the management team

How HRIS Technology Can Help Track Retention Metrics

HR and hiring managers shouldn’t be expected to calculate all of these rates by hand. Thankfully, HR technology provides a comprehensive solution that makes life easier for the organization. 

Using an applicant tracking system (ATS), human resources professionals can store and track all necessary hiring data and processes in one single portal. In the best ATS platforms, the entire recruitment cycle begins and ends in the system, from job postings to onboarding.

An ATS may be provided through a comprehensive human resources information system (HRIS) or as a standalone tool. With the former, all employee data is easily integrated for the most essential HR processes, including benefits administration, PTO tracking, and Form 1095-C reporting.

What Else Should Employers Know About Retention?

There’s more to retention than simply knowing the numbers. In addition to tracking the right metrics, organizations should employ retention strategies that can reduce turnover within their ranks. 

From conducting an HR audit to enhancing employee engagement and educating teammates on available resources, each tactic can improve the company’s retention rate.