What is retention rate?
Retention rate is the share of employees present at the start of a period who are still employed at its end. It answers a simple question: of the people we had, how many did we keep?
Turnover and retention are among the indicators covered by the ISO 30414 family of human capital reporting standards, which gives the metric a common reference for companies that report it externally.
Why is retention rate useful for recruitment?
Because it can follow a cohort. The retention of the people hired in a given year, measured at six and twelve months, is one of the few signals that links a recruitment decision to an outcome.
A low first-year retention among new hires is rarely a pay problem alone. It often points to a gap between what was promised and what the job turned out to be, which is a quality of hire question.
How is retention rate different from attrition rate?
Attrition rate counts departures across everyone employed during the period. Retention follows a fixed group from start to end. People hired during the period do not enter a retention calculation, while their departures do count in attrition.
This is why the two can disagree. A team can keep its long-standing members and still lose most of its recent joiners, which a single attrition figure would average away.
What does retention rate reward, and what can go wrong?
It rewards keeping people, which can turn into keeping people who should have left. A high retention rate in a team that no longer performs is not a success.
It can also hide where the retention comes from. Counter-offers and retention bonuses raise the figure without solving why people wanted to leave. Pair it with the reasons for departure and with internal mobility, and read it by cohort rather than for the whole company.
