Do you still work for your first employer? Probably not. In fact,
the Bureau of Labor Statistics reports that the average person has
been at their job for 4.2 years. In other words, while some people
stay for a long time, turnover is real and expected. Many
businesses worry about their employee retention rate, as turnover
can be expensive.
The employee retention rate is not the same across all industries.
You’d expect that a university that offers tenure to professors has
a higher retention rate than the local McDonald’s, which is often
considered a starter job. People will come and go from both jobs
but not at the same rate.
How Do You Calculate the Employee Retention Rate?
Retention is how many employees stay under your employment.
Frequently, Human Resources professionals talk about turnover, i.e.
how many employees leave their employment with you. If you have 100
employees and 5 quit, you have a turnover rate of 5% (5/100) and a
retention rate of 95% (95/100).
Salary.com reported that in 2018 (downloadable pdf), the total
retention rate for all industries was 80.7% which includes
voluntary and involuntary terminations. This means that 19.3% of
people left a job in 2018, for whatever reason. Most of these were
voluntary terminations, with 14% of people choosing to leave their
Employee Retention Rate by Industry
Retention rates vary by industry, which is expected. Salary.com
found the following employee retention rates:
Manufacturing & Distribution: 80%
Is a Low Employee Retention Rate Bad?
Naturally, companies want to minimize their turnover, as it is
quite expensive to replace employees. Employers need to recruit and
train every new employee before they can start working as
efficiently as the previous person. For some jobs, this training
period is brief, but for others, you can expect a long period of
six months or more before the new hire performs at an acceptable
This, however, does not mean that all turnover is bad. You don’t
want your business to remain static; and new people bring new
ideas. Additionally, if your industry relies a lot on low-skilled
(and thus, low paid) labor, when employees leave, it might mean you
have successfully trained them for positions in which they will
earn more money.
While this can take a toll on your business, employees moving up
into better-paying jobs is great for those individuals and the
community at large.
Is a High Employee Retention Rate Good?
It depends. High employee retention rates can also indicate that
your employees are stuck in their jobs. Stagnation can happen when
the economy is bad—-there are no other jobs to go to—so employees
stay with the company, regardless of their engagement level. As the
economy improves, people will leave for better jobs.
This type of turnover is bad for your business—the first people out
the door tend to be the employees who have the best skill sets and
who are the most in demand by other employers.
How Can You Keep Your Employee Retention Rate High?
Given the dire consequence of losing your best employees whenever
labor markets rebound, you’re probably wondering, how you can keep
your employee retention rate high? Organizations with high employee
retention rates have best practices that you can apply in your own
These are five key recommendations you can implement to increase
your employee retention.
Offer a competitive salary and benefits.
Never assume that because your pay and benefits were fair three
years ago that your pay is fair now. This is especially true in
expanding industries such as software development and nursing or in
cities that are experiencing growth.
You should benchmark your jobs against the market every year and
make sure that you pay your employees market rates. As a portion of
a complete compensation package, employees also appreciate access
to bonuses, profit sharing, activities, and events.
Train your managers.
You’ve heard the saying that people don’t leave jobs, they leave
managers. This is true; even though other circumstances such as
feeling properly compensated may also affect employee decisions
Make sure your managers are well tra