How to calculate employee retention rate
Work out what share of your starting team stayed, with fictional worked examples for a year, a quarter and new starters, how the figure differs from turnover, and the counting mistakes to avoid.
Last updated November 10, 2026
Employee retention rate is the percentage of the people on your team at the start of a period who are still employed at the end of it. Divide the number who stayed by the number you started with, then multiply by 100. It answers one narrow question: of the people I had, how many did I keep?
Employee retention rate formula
Retention rate = employees at the start who are still employed at the end ÷ employees at the start × 100
- Choose the period and the group, such as the whole business for a calendar year or one store for a quarter.
- List everyone employed on the first day of the period. That is your starting count.
- Mark each person on the list who left before the last day, whatever the reason.
- Count the people left unmarked, divide by the starting count and multiply by 100.
Label the result with its period and group, such as "Main Street store, second quarter".
Do new hires count in retention rate?
No. Anyone hired during the period is left out of both numbers, because the measure follows the people you already had. If new starters were added to the end count, hiring would hide departures. Lose four people, hire four replacements, and the headcount looks unchanged even though a fifth of a 20-person team has gone.
Some organizations use variations that include hires. Whichever definition you choose, write it down and use it every time.
Employee retention rate example
All figures in these examples are fictional.
A full year
On January 1, a hardware store employs 20 people. Five of them leave during the year. The owner hires 7 people, 2 of whom leave by December 31, so the year ends at 20.
| Figure | Value |
|---|---|
| Employees on January 1 | 20 |
| Of those, left during the year | 5 |
| Of those, still employed on December 31 | 15 |
| Hired during the year | 7, not counted |
| Retention rate for the year | 75% |
15 ÷ 20 × 100 = 75%. The headcount is unchanged, yet a quarter of the original team has gone.
Quarterly retention rate
The same store had 21 employees on April 1. Two of those 21 left by June 30, and the three people hired in May are ignored. 19 ÷ 21 × 100 = 90.5%. Round the same way each time, here to one decimal place.
Monthly retention rate
Each month is calculated from its own starting list. In a 20-person store, one leaver makes a 95% month and two make 90%. Twelve monthly results do not combine neatly into the annual figure, because later months start from lists that include people hired earlier in the year. Calculate the year from its own January 1 list.
Retention rate for new hires
New starters need a cohort measure. A cohort is everyone who started in a chosen window, such as one year. Instead of a calendar period, you check each person a fixed time after their own start date.
How to work out a 90 day retention rate
- List everyone who started in the window.
- Wait until each person has passed 90 days from their own start date. Someone who started last week cannot yet be counted.
- Count how many were still employed on their 90th day.
- Divide by the number who started and multiply by 100.
By the following March, all 7 people the fictional store hired had passed 90 days. Five were still employed on their 90th day: 5 ÷ 7 × 100 = 71.4%.
Northern Ireland's official business advice site notes in its staff turnover guidance that turnover is usually highest among new hires and falls the longer people stay. The Victorian Public Sector Commission's guide to people metrics describes the mirror image. Its "new hire failure factor" is short-tenure separations divided by external hires, multiplied by 100. If your 90-day result is low, look at the first weeks, starting with the employee onboarding checklist.
Retention rate vs turnover rate
Turnover counts every departure in the period, including new hires who did not stay, and divides by the average of the opening and closing headcounts. The employee turnover rate calculator uses that method.
| Measure | Retention | Turnover |
|---|---|---|
| Who is counted | Starting list only | Everyone who left |
| New hires | Excluded | Included if they leave |
| Divided by | Employees at the start | Average of start and end counts |
| Fictional store, full year | 75% | 35% |
The store lost 7 people in total, 5 from the original team and 2 new hires. Its opening and closing counts were both 20, so turnover was 7 ÷ 20 × 100 = 35%. The two rates add to 110%, not 100%, because they count different people. Retention shows whether your existing team is staying; turnover shows how much hiring the year required.
Pitfalls that distort the number
- Seasonal staff. People hired for a busy season and expected to leave at its end pull the rate down if they are on the starting list. Leave them out of the group or report them separately.
- Transfers. A person who moves to another store has left that store's list but not the business. Decide whether a store-level rate counts transfers as leaving, and keep to the rule.
- Small numbers. In a team of eight, one departure moves the rate by 12.5 percentage points. Compare several periods or a rolling 12 months before calling something a trend.
- Mixed reasons. The formula counts retirements, dismissals and resignations alike. Report voluntary leavers separately if useful, but keep the headline calculation unchanged.
What is a good employee retention rate?
There is no single figure that fits a small shop. Published rates use different groups, periods and formulas, so another organization's number is rarely like for like. The Victorian guide makes the same point: benchmarking needs a standardized measure applied consistently.
Compare with your own past periods instead, calculated the same way for the same group and season. A fall from one year to the next tells you where to look. The employee retention plan guide covers finding the causes and acting on them. Before replacing a role, the staff cost calculator shows its weekly and yearly cost, including employer costs.
Where Headoffis fits
Headoffis does not calculate retention or turnover. Its Employees page shows how many people are active, and if you run an offboarding checklist for each leaver, those records are dated from the person's last working day. Keep your own list of who was employed on the first day of each period, and count from that.