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Retention Rate Definition (and Formula)

Drawing of a figure in suit flying toward an open door marked "Exit" and a huge magnet draws him back into the room.

Analyzing a company’s employee retention rate is essential so leadership can determine if there are departments or areas that need improvement. If so, they can work on developing strategies. Assessing the employee retention rate can also give insight into the overall health of a company. Consequently, you can create employee retention strategies to combat high employee turnover rates.

What Is Employee Retention Rate?

An employee retention rate measures how many employees are retained at the company during a specific period. You can do this by comparing how many employees are at the company on a starting date with how many of the same employees are still there on the ending date. The starting and ending date is for a measurable period that the company chooses, such as one quarter or a year.

Importance of Understanding Retention Rate

Employee retention is an essential part of operating a successful business. If you have a high turnover rate, you’re spending a lot of money on replacing employees. You have money invested in the employees’ training, which is lost if they leave. You also must spend additional funds to recruit, interview, and hire new employees when they leave. A company with a high retention rate will be healthier and better positioned for the future. Implementing strategies for retention is a key element of success.

Knowing the retention rate will alert companies to any issues they may need to address. It also provides them with better insight as to how their current employee retention efforts are doing. If the rate is low, they know modifications are necessary. If it’s high, they can keep on the same path they’re on.

Most companies perform employee retention rate calculations regularly, such as quarterly or annually, so they can keep on top of this issue.

What Is the Retention Rate Formula?

Let’s look at how to calculate retention rate. You can use the following formula to get a retention rate:

Determine the total number of employees who were at the company at the start of the period (we’ll call this amount “A”).

Next, count the employees again at the end of the period and see how many of the original employees there are (this amount is “B”). To find out how many employees are left, you can subtract “B” from “A” (this is “C”).

A – B = C

Now, you will perform the second part of the calculation. Take the number of employees that left (“B”) at the end of the period and divide it by the total number of employees (“A”). For example, B ÷ A. The answer will be a decimal, which needs to be converted to a percentage, so you’ll have the rate. Multiply the decimal by 100 and simply add the percentage sign. Now you have the retention rate. The full formula looks like this:

Step 1: A – B = C

Step 2: B ÷ A = decimal x 100 = retention rate

Examples of Retention Rate Formulas

It’s easier to understand the retention rate calculation by looking at some examples. These examples take the formula and put it into practice.

Example 1

A marketing firm has 50 employees at the beginning of the first quarter. On the last day of quarter 1, 42 of the original employees still work there. Let’s plug in our data to determine the retention rate.

Starting number of employees is: 50

Number of employees who left during the period: 8

Remaining number of employees is: 42

Calculation: 50 – 8 = 42 employees remained during the quarter.

The next step is dividing the remaining employees by the total number of employees at the beginning: 42 ÷ 50 = 0.84

Now, multiply 0.84 by 100 to convert it to a percentage. The retention rate is 84%.

Example 2

A local auto dealership has 245 employees at the beginning of the fiscal year. Of the 245 original employees, 185 were still employed at the company on the last day of the year.

Starting number of employees is: 245

Number of employees who left during the period: 60

Remaining number of employees is: 185

Calculation: 245 – 60 = 185 employees remained over the course of the year.

The next step is dividing the remaining employees by the total number of employees at the beginning: 185 ÷ 250 = 0.74

Now, multiply 0.74 by 100 to convert it to a percentage. The retention rate is 74%.

Example 3

A production company has 1,565 employees at the beginning of the calendar year, and 1,425 of them remain at the end of the calendar year.

Starting number of employees is: 1,565

Number of employees who left during the period: 140

Remaining number of employees is: 1,425

Calculation: 1,565 – 140 = 1,425 employees remained during the quarter.

The next step is dividing the remaining employees by the total number of employees at the beginning: 1,425 ÷ 1,565 = 0.91

Now, multiply 0.91 by 100 to convert it to a percentage. The retention rate is 91 %.

Tips to Increase Your Retention Rate

If your retention rate is lower than you expected or wanted, you can implement these tips to help improve it:

  • Hire right. Start with employees who match the business culture and are a great fit for the job.
  • Have an open-door policy for employees who are having problems or difficulties in the workplace.
  • Be sure to reward your employees according to their performance. You can use merit increases, job promotions, and other incentives to keep them engaged.
  • Offer training and educational opportunities, so employees continue to grow and thrive.
  • Provide a salary and benefits package that makes employees feel the compensation is fair.

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Recession Vs. The Great Resignation: White Gloves, Not Boxing Gloves, Recommended

Two male hands in boxing gloves clashing against each other as flames explode from them.

Inflation versus The Great Resignation looked like a boxing match with no sure winner. After all, unemployment was — and still officially is at time of writing — at 3.6 percent, a point short of the half-century low we saw in 2020. The turmoil the pandemic caused to people’s lives turned the phenomenon of “job hopping” into “The Great Resignation”/”Great Reshuffle” in a way nobody had expected, with a powerful effect on hiring teams the world over.

The result was a demand for flexibility from employees only too willing to move on to — what they perceived as — greener pastures if more flexibility wasn’t forthcoming, leading to exacerbated retention issues across industries. Reality switched from a world in which employers demanded flexibility of their employees and potential employees to one in which employees demanded it of their employers and potential employers.

Round 1 – Bullying and Backlash

Wishing it away didn’t work, although many tried. Why is anybody’s guess. Productivity and profits surged during lockdown; and, although there is more than one reason for this, remote work proved itself, kept costs low, kept quality up, and helped those profits surge. Attempts to instate “back-to-office” policies failed and were adapted or rescinded across some major companies. The reaction for Apple was seismic. Over 1,000 employees, current and former, signed an open letter, part of which said:

“Stop treating us like school kids who need to be told when to be where and what homework to do.”

The company also lost a highly valued director in its machine learning division, Ian Goodfellow, to Google, specifically due to its back-to-office mandate. (KO in favor of Google on that one.) Having a black eye and egg on one’s face at the same time isn’t a good look, which may have been on Elon Musk’s mind when his return-to-office demand contained the caveat:

“If there are particularly exceptional contributors for whom [remote work] is impossible, I will review and approve those exceptions directly.”

Welcome back, non-exceptional people! Don’t forget we’re a family with a thriving company culture! Yay! High-five, anyone?

While Musk continues to straddle the two worlds of tech industry genius and luddite, Apple backed off, citing (awkwardly clears throat) COVID. Many big players in the financial industry also tried the hard-line, boxing gloves on approach, and came away with a black eye. However, COVID itself may be more than an excuse for those demanding remote work rights. If variants keep coming and everything keeps changing, stability of some sort is required — not just for quality of life or health, but also for business as usual — at least in terms of productivity and results.

All of which makes employees appear far more business-savvy than many “leaders” running businesses – and seemingly in circles – today.

Points to the employees, then.

Round 2 – Clashing With Chaos


Inflation v. The Great Resignation didn’t get past the weigh in, image wise. Asking employees to start forking out hard cash just to sit in the office all day, when their money is worth much less than it was pre-COVID, appeared to be the perfect ingredient in a perfect storm, making The Great Resignation potentially worse for bosses attempting to punch below a tightened belt.

Counters with uppercut. Ouch.

And it didn’t help that the the tech industry lost $1 trillion over 3 days of trading. News of layoffs, lots of layoffs, soon followed. Then the rescinding of job offers, demonstrating objectively that the industry was turning on a dime in response to the downturn. Suddenly, the tech industry and other industries existed like night and day, only side-by-side, one stomping on hiring strategies and burning offers, the other bending over backwards to get new people in.

Has anybody not placed a bet yet?

As inflation became slowly worse, the new phenomenon of rescinded job offers started spreading to other industries, such as retail marketing, insurance and consulting. Storm clouds were closing in and the word “recession” was on everybody’s lips, with some predicting a close call by the end of 2022, others a “mild” recession early in 2023, and some, like Jeremy Grantham, warning that the BIG POP is coming and $45 trillion of assets in the US alone will be wiped out.

Still, Ali did beat Foreman in ‘74, so why worry?

However, geniuses who are never wrong — like Jeremy ‘Debbie Downer’ Grantham — aside, there are those who believe the lessons of history can help us understand what level of recession we’re heading into – if we’re not there already, of course. (Shhh.)

Bubble bursts like the financial crisis of 2007-2008 and the dot-com disaster of 2000-2001 were both credit-driven — debt-related excesses in their relative infrastructures built up until bursting point, giving us around a decade of economic woes. Recession based on inflation has historically inflicted less damage to corporate earnings, which should make a big difference to investors.

Many industries remain strong and should be able to go the distance.

In a mild recession, there is no sure bet that employers will suddenly gain the upper hand, at least not to the point of putting on boxing gloves and snarling orders at employees to return to the office or else. The best strategy is a white gloves approach. Flexibility should be considered here to stay, at least among those who wish to remain competitive and heal any hiring and retention issues.

Once people have been given something, it’s hard to take it back.

That’s human nature and it shouldn’t be underestimated. And that’s without even broaching the subject of company culture or morale among teams. Loyalty gives great ROI if you know how to inspire it. March was the 10th consecutive month that resignations passed the 4 million mark, so there are lots of companies out there who have absolutely no idea how to do that.

And they’ll pull on the boxing gloves once the recession becomes official.

Round 3 – Keeping Your Balance


The Great Reshuffle was named when it became apparent that people quitting their jobs were not moving out of the labor force, but into other occupations. It’s a good phrase to describe a sense of balance — although not much relief for companies who were left and found it difficult to attract new talent.

But who’s to blame for that? The Great Reshuffle was really all about talent leaving to go to companies who offered more flexibility, a better work-life balance, greater respect, a chance for an enhanced sense of team morale and personal work satisfaction.

To companies losing out it was more like the Ali shuffle. Still, thinking hard about using agility and coordination to beat your competition isn’t a bad thing. Especially for those who’ve made mistakes in the past. Investing in long-term retention, rather than hoping people will feel trapped into staying, will pay back on the investment many times over for any business — just as those who crack the whip will eventually pay for it.

Besides, whips don’t fit in a boxing metaphor.

Any recession will bring a rebalancing of power, of course.

Those who think this gives them the upper hand — revenge against selfish employees who wanted a life of their own — and turn it into a fist, will be at a serious disadvantage to those who don’t. Demanding that people return to the office at their own increasingly high expense, while saying “Not you, buddy” to those being laid off, will bring only more negative surprises the “experts” didn’t see coming. Still, your own business fitness, your own expertise, and your finely-tuned strategies are yours to apply as you wish.

In the end, it all depends on who you have in your corner.

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What’s in a Name? Inflation Spreads to Job Titles

“What’s in a name? That which we call a rose

By any other name would smell as sweet.”
— from Romeo and Juliet by William Shakespeare

After reading that quote you could be forgiven for thinking Shakespeare had never even heard of Google algorithms, digital job boards and job search, long-term career development in a technology-driven world, corporate hierarchies or wacky job titles.

Actually, you’d be correct. If Shakespeare were alive today and in the hiring business, there’s little doubt he would take a different view and possibly write instead:

“What’s in a name? A Head of Creative

Named a Dream Alchemist smells like horse s**t.”

— from Recruiter and Jobseeker by William Shakespeare

Wow, he’s good. And right. The sad fact is that “Dream Alchemist” has been used as a job title for what should properly be the title “Head of Creative”. It’s hard to say how many sad endings (or non-starters) this has seen, but who’d bet on Leonardo DiCaprio starring in the movie?

Here’s the problem(s).

Self-Indulgence vs. Success

The crazy job title named above is, as stated, real. And in real terms it’s purely self-indulgent; an indicator of the brand type and company culture (perhaps). It’s so self-indulgent that, as pointed out in a previous article, it gives zero thought to the fact no jobseeker on earth would type it into a search bar when looking for the job it represents.

So there’s that.

How well your favorite search engine picks up on the broader context of the job description and renders it in results for the actual title search is another question. Many experienced professionals could well be embarrassed by the thought of having such a title applied to them – or having it take pride of place on their resume.

Let’s consider the following:

  1. Job titles should be helpful to those seeing and hearing them.
  2. There’s a time and a place for everything.
  3. Enforced jollity starts to grate on people after a while.

Aside from potentially stopping job posts being visible to many job seekers, the down-to-earth approach to job titles achieves two additional objectives:

  1. Instantly describe the area of expertise required.
  2. Instantly describe the hierarchical level within the department/company.

All good points, all lifted from a previous article linked above. So why not do a quick update and republish the older article? Because – as if you can’t guess – things have since become worse in a way that’s complicated enough to merit a new one.

Still, before we get into that…

Take Our Test

All the following job titles are real. They’ve all been proudly put out there by people who ought to have known better, but didn’t. We’ve already given you the answer to the first of them above, to help tune you in. Can you guess the regular titles for the others?

  1. Dream Alchemist
  2. Chief Chatter
  3. Wizard of Light Bulb Moments
  4. Part-Time Czar
  5. Grand Master of Underlings

Easy, right? (Answers at the bottom.)

The (Job Title) Inflation Situation

So here’s where it gets worse. Self-indulgence causes its own problems, pointed out in basic terms in the article so far. But it is what it is: transparently mindless and in direct conflict with logic — so the problems that wacky job titles cause in various areas of hiring are easy to pinpoint.

Job title inflation, however, is something else.

Economic inflation is on everybody’s minds right now: Will it turn into recession? If so, will we dodge the bullet in 2022 and see mild/wild recession in 2023? Are we on the verge of a massive collapse that could throw everything into chaos? Powerful questions with the usual “time will tell” answer plastered across them.

But the job title inflation question is very much one for today — we are, after all, still at an unemployment rate of 3.6%, near the half-century low achieved in 2020 — and The Great Resignation still looms large, with employee retention top of mind across most industries.

Job title inflation is a retention tool.

It all started before today’s problems kicked in, with startups solving their compensation limitations by handing out titles that gave a sense of achievement and importance. Some of the titles, as shown above, were sillier than others, but they were created primarily as a retention strategy – the low compensation public promotion and flash title.

However, any inflated job title that doesn’t sound like a joke is a unique problem.

Congratulations! Job hop to another company and it’ll look like a demotion. Or you’ll find yourself in a position you don’t have the qualifications or experience to actually do.

It also turns hiring into a time-consuming mine field for recruiters.

Hiring teams are placed in a spot where they are forced to look beyond job titles and into the actual experience of the individual. Anything about leading teams? Growing teams? Actually directing anything?

Still, who said hiring teams don’t love a challenge? (Answers on a postcard, please.) 

For the companies indulging in job title inflation, there are many potential problems. Who gets these inflated titles and why? What do all the other employees make of this? How long have any of these people been with the company?

How do the team hierarchies function? Is somebody with a “director” title actually now the head of a specific team? Or across teams for specific projects? Or is that person actually still an individual contributor?

If so, is everybody that person reaches out to aware of this? Is the person with the new title aware of this? If not, how quickly can we assume a move from complimentary name-calling to total chaos?

The less silly inflated job titles are, the more serious these questions become.

Companies who find themselves living with chaos as a result of inflated job titles place themselves in a position where they have to backtrack, potentially losing outraged or humiliated employees into the bargain.

Did somebody mention retention?

Stopping Superficial Solutions


It’s difficult to believe that inflated job titles started out as anything other than a joke; a kind of brand extension across teams. It’s also hard to avoid the reality of what the practice has become for many companies and how badly it can backfire for both employers and employees.

So it needs to stop.

Any job titles should be questioned in terms of how the title functions within the hierarchy, and what experience and/or qualifications it requires. If it appears that employees are being handed out managerial or other high-level titles without objective justification, the potential toxicity of the move should be pointed out.

For example, if an employee is hired into an managerial position, or moved up into one, all employees should be notified about that change and what it means for them in terms of professional relationships and teamwork.

If that isn’t deemed necessary, there’s a problem.

If, by making it less desirable for one person to leave, a company makes it entirely desirable for others to leave, that is a massive fail. And the potential downsides of inflated job titles are so destructive for individuals, teams, and companies, you can guarantee the desired upside has much better ways of being achieved.

Possibly any other way.

Answers: 1. Head of Creative; 2.Call Center Manager; 3. Marketing Director; 4. Assistant Manager; 5. Deputy Manager. See complete list.

Pat Brien is the Senior Co-Director of Shakespearean Strategy for Starbound Success (and you’re not).

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The Closing Gap Between Passive and Active Candidates

Male hr manager holding magnifying glass head hunting choosing finding new unique talent indian female candidate recruit among multiethnic professional people faces collage.

The pre-pandemic annual average voluntary turnover rate was made up of 31.9 million employees quitting their jobs. This year, it’s likely to jump almost 20% to 37.4 million. According to the Gartner November 2021 survey, 52% of employees said that flexible work policies will effect their decision about whether to remain or move on; 16% stated they would be willing to quit if asked to work on-site full-time, while 8% said they would quit if asked to work partially on-site.

“New employee expectations, and the availability of hybrid arrangement, will continue to fuel the rise in attrition. An individual organization with a turnover rate of 20% before the pandemic could face a turnover rate as high as 24% in 2022 and the years to come. For example, a workforce of 25,000 employees would need to prepare for an additional 1,000 voluntary departures.”

— Piers Hudson, Senior Director, Gartner for HR Leaders

Tough crowd.

With the hiring and retention issue hitting hiring teams so hard, it’s tempting to wonder what the expansion rate on “hard-to-fill” positions is right now, particularly when bringing retention into the equation. With that in mind, hiring teams need to continue playing smart, looking into opportunities that may not have existed pre-pandemic, and developing new approaches.

Let’s take a look.

What Turns Passives Into Active Candidates?

Look at the numbers above again. They represent a lot of professionals in real-world jobs across industries sitting out there right now. Would you describe them as “passive”? If so, be careful when approaching any of them with a good offer, as they’ll likely bite your hand off.

Those passives have been primed for action.

To blow Ladders’ trumpet, our 7 million highly experienced, highly qualified members are identified in our database as active or passive; even though, as stated, that may not matter as much as it once did. Either way, those candidates can be reached out to very quickly through Ladders Recruiter.

Ladders Recruiter Resumes are immediately visible — and legible — on the search page, with full member contact information at your fingertips. Switching between a larger view and back to the same spot you left on the search page is a two-click thing, if needed at all.

You can sell yourself on the idea of how much pain that removes from the process.

Obviously, while this is a boon if you’re hiring for a “tough to fill” position right now, it remains a boon if you’re building a pipeline for the long-term. Passive candidates have a green light for hiring projects and should be worked into your upcoming hiring strategies.

So thinking of passive candidates as pending candidates — who just need to be reached out to in conversation —  could be an effective way of turning the tables on The Great Resignation. Even with that, there’s a lot more you can do to make the “new normal” roll up its sleeves and start working for you.

And it’s quite simple.

Mandates for Candidates? Not So Much

Mandating on-paper qualifications as a prerequisite to employment, rather than seeking-out real talent yourself, is not the right way to adapt to the new realities faced by hiring teams. The less we impose on potential candidates, the more potential you have to fill positions over the short-term and the long-term. How does that work? Easy. Just lighten up a little.

Like this.

How many “must-haves” appear in your latest job posts? If candidates don’t check all the boxes, including formal qualifications and years of experience, are they automatically filtered out from the candidate pool? Why not make the formal qualifications a “nice to have” and think harder about what those years of experience actually mean, for example?

If that thought-power doesn’t instantly hypnotize the rest of your hiring team, tests can be easily applied to the application process. These provide real-world data for yourself and your team to work from. A little “show, don’t tell” added into the hiring process doesn’t have credibility because a third party says it does, it has credibility because you watch it happen and know it does.

Making a big difference in any assessment.

You also should be willing to balance the hard and soft skills a candidate has against the core needs of the position, questioning which areas could easily be dealt with through training. This can often be the case in areas like software for team collaboration, in which successful adoption is probably not a major obstacle. 

A small investment could provide fantastic ROI for retention.


Stability Through Flexibility

If remote work is possible at your company, you’re in a good place. (Pun intended.) The numbers at the top of the article stand out in terms of how strongly employees feel about flexible work, particularly remote or hybrid options. Not to mention the fact that remote-work-mad 2021 marked the most profitable year for American corporations since post-World War II.

So there’s that.

The Great Resignation remains in power and employers playing hardball with “back to the office” mandates face a potentially serious backlash. Internationally, six-month four-day week trials are underway, with thousands of participating companies and a huge amount of anticipation about restructuring the way we all work forever. Inflexible leaders, determined to show everybody who the boss really is, could be set to become dinosaurs.

Adapt and survive, if you like. The bottom line is simple: If you’re conducting a reach out campaign to passive candidates, for a company offering flexible work options, your chances of a fast and positive response shoot up; particularly, of course, if the recipient doesn’t have flexible work options, or doesn’t have anything as tempting as what you can offer.

Investments and ROI. Again.


Over and Underlooked People

From 2020 to 2021, the number of people with disabilities in employment went up from 17.9% to 19.1%, after a drop from 19.3% in 2019, as compared to a 2020-2021 rise from 61.8% to 63.7% rise for people without a disability. According to the Centers for Disease Control and Prevention, 26% of adults in the United States have some kind of disability.

Once again, an investment in a reliable, qualified and experienced person with a disability could be another ROI boon for retention. Of course, everybody wants to make the right noises when it comes to championing people with disabilities — being patronizing always gets you applause in today’s world — but looking at what a person can offer as talent, as an expert, from a purely business perspective, could win your business a lot more.

And a remote work option is likely to give you a big boost in hiring and retaining this talent base. As an example, according to CNN, one Gabe Moses enjoys working his full-time call center shift while lying on his stomach on a mattress set on the floor of his apartment. His previous commute and long hours in an office often left him in pain and without the ability to speak.

Not good for somebody working in a call center.

There are many stories like that and others that make clear remote work isn’t a straightforward solution for every person with a disability. In less severe cases, for example, investments in special software needed to be made and many companies have risen to that challenge. Smart investments for great ROI is a recurring theme here, as it is in all business questions, and it’s highly likely to be the right answer to the hiring and retention question.

So who are the underlooked people?

They’re the people working in the companies you’re hiring for. Here’s the problem: People settle into a role, the boss is happy, everybody is happy. The person becomes that role. When it comes time to look for somebody higher up the ladder, the hiring team automatically looks outward, for that perfect fit, that shiny new expert.

And the person who knows the job inside out is invisible. Even though they’re supremely aware of all the inner quirks and idiosyncrasies of bosses, teams, systems, the flow, the go-to people, the stay-away-from people, the whole damn thing — making it much smarter to move such a person up and hire from outside for the position just vacated.

Or scratch your head when that person quits.

Never Mind the Gap

Given that we’ve all had a gap of some sort forced into our lives over the last two years, employment gaps are pretty much meaningless right now.

Gaps in resumes are abundant today. This is partly because many older, experienced professionals went into forced retirement during the pandemic. Many will return, if the incentives are right. And if hiring teams need reliable, experienced experts, not being a sap about a gap makes sense. Forced retirement aside, people were let go or furloughed left, right and center over the last two years, so let it slide.

Goodbye, gaps.

Wait — that’s the second gap closed in this article so far.

Something must be working.