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7 Employee Retention Metrics and How to Use Them

January 11th, 2024 | 3 min. read

By Kristi Feist

On average, the total cost of hiring a new employee can be three to four times the position's salary. The true cost of hiring an employee goes beyond just paying their salary. It includes recruiting, training, and benefits.

In today's economy, finding top talent is difficult. Also, considering that one-third of new hires leave within the first three months, retaining employees can be a challenge. This is why you should focus on retention. We've seen this in our years of experience. That is why Payday is here to help.

Getting your best employees to stay longer will go a long way in helping to improve business performance. Fortunately, tracking certain employee retention metrics can help keep employees satisfied and reduce attrition.

Why is it Important to Have Defined Metrics for Improving Employee Retention

Knowing your employees is crucial to keeping them happy and motivated. This in turn increases overall employee retention.

Defined employee retention metrics can provide key insights to HR leads. The information will enable you to:

  • Get a good understanding of your workforce dynamics
  • Evaluate and improve employee satisfaction
  • Be proactive in addressing problems
  • Create an effective employee retention strategy
  • Save money and resources
  • Plan for the future

7 Important Employee Retention Metrics

Depending on your goals, there are several metrics you can use to measure employee retention. Below are some employee retention metrics examples you need to know and keep an eye on.

Overall Retention Rate

Retention rate refers to the percentage of your workforce that stays at your organization over a given period of time. This is an indicator of your company's ability to keep employees. Apart from the overall retention rate, you can calculate retention rates across different categories. Generally, the higher the retention rate, the better.

Regularly measuring your retention rates enables you to determine the effectiveness of your employee retention strategy. You can then improve your strategy to achieve a happy and satisfied workforce.  

Employee Satisfaction Rate

This indicator measures the level of workplace satisfaction among workers. When measuring workforce satisfaction, be sure to talk to both seasoned staff members as well as new employees.

The metric will help you identify strengths and weaknesses, and find effective ways to drive employee satisfaction. This includes setting ambitious goals, providing exciting and challenging work, offering fair compensation, resolving issues before they become bigger problems and ensuring staff feel valued by your company.


Average Employee Tenure

This is a measure of the average length of time an individual employee works for you. Generally, the average employee tenure is a good indicator of employee satisfaction.

This metric can help you identify areas of concern. That way, you can find ways to lengthen it if it is shorter than expected. Some steps to take to engage and retain employees are discussing career goals and aspirations with staff, recognizing and rewarding employees and establishing clear promotion policies.

Overall Turnover Rate

Besides monitoring how many employees stay with you, keep an eye on the percentage of workers who leave both voluntarily and involuntarily. A high turnover rate is costly; it can lead to low team morale, affect productivity and make it difficult to attract top talent.

A high turnover rate presents an opportunity to review your recruitment, onboarding and employee engagement strategies. This will allow you to build a loyal and committed workforce.  

Engagement Scores

This metric measures the level of employee engagement, motivation and commitment toward their work and your organization. It shows how people feel about their employee experience and their intent to stay with you.

High engagement scores are a sign of happy employees. You can use this metric to create an environment in which staff feel valued, enjoy better relationships at work, have opportunities for growth and development and know your organization prioritizes their wellbeing.

Cost of Employee Turnover

Employee turnover is costly. A clear idea of how much it costs to replace an employee can motivate you to improve your employee engagement and retention levels.

Once you calculate both tangible and intangible costs, you can use the other metrics to help you identify problem areas and solutions to a high turnover rate.


Absence Rate

Absence rate refers to the percentage of employee absences due to unanticipated reasons. Tracking employee absenteeism at an individual level or per department can help you understand the causes.

In case of absenteeism, take time to check in, find out how your staff is doing and ask about how you can support them more. This will help to increase employee engagement and retention.

Better Retain & Engage Your Workforce

Employee retention is a key to your business’s success. Companies should make an effort to create a better employee experience to improve retention and engagement.

In addition to the employee retention metrics listed above, employee engagement software can be of great help in monitoring employee engagement while providing all the support to ensure a healthy and positive workplace, so you can further improve employee engagement and retention. 

To learn more about how Payday HCM is already helping countless businesses keep employees happy and engaged, read how we can be an HR solution for your company.

Kristi Feist

As a seasoned veteran in the industry and with Payday HCM, Kristi maintains a 1000+ client portfolio with a 98% retention rate. As Vice President of the DSO Division, Kristi works with hundreds of DSO-like companies to adopt best practices around the use of payroll technology, implementing processes and empowering employees of DSOs to use the technology.