Does Your Company Have a Healthy Employee Retention Rate?

A company’s employee retention rate is one of the clearest indicators of workforce stability and long-term business health. According to a recent study, the average voluntary turnover rate for businesses in the US from 2024 to 2025 was 13.0%.¹ While that number offers helpful context, it doesn’t tell the full story for your organization. A company can still grow in size while quietly experiencing high turnover. If hiring is constantly replacing departing employees, that could signal instability, not growth. Understanding your employee retention rate, along with the factors influencing it, requires more than surface-level metrics. It takes careful analysis and the kind of HR expertise that connects workforce data to strategy. Here, we'll provide some insight on how to assess your retention and make impactful improvements.

Quick Overview: How to Determine if Your Company Has a Healthy Retention Rate

• Employee retention rate measures workforce stability, showing the percentage of employees who stay over a set period; it offers deeper insight than turnover alone, especially when distinguishing between voluntary and involuntary exits.
• A “healthy” retention rate depends on context, including industry, company size, geography and workforce model; benchmarking against the right peers and tracking internal trends is key.
• High turnover carries significant direct and indirect costs, including recruiting expenses, productivity gaps, burnout, morale decline and loss of institutional knowledge.
• Voluntary departures often signal preventable issues, such as limited career growth, inadequate compensation, weak management or poor work-life balance.
• Improving retention requires a proactive strategy, including competitive compensation and benefits, strong onboarding, manager development, employee engagement initiatives and consistent HR support.

What Is an Employee Retention Rate?

Employee retention rate measures the percentage of employees who remain with an organization over a specific period of time. It's one of the most common metrics to measure how successfully a company keeps its workforce engaged, satisfied and committed.

To understand retention clearly, it helps to compare retention vs turnover. Retention focuses on the employees who stay, while turnover measures the percentage of employees who leave during the same timeframe. Although both metrics are related, retention provides a more stability-focused view of workforce health. You also need to consider whether the turnover is voluntary or involuntary. 

• Voluntary turnover occurs when employees choose to leave, often for better compensation, career advancement, flexibility or improved work-life balance.
• Involuntary turnover includes terminations, layoffs, or role eliminations initiated by the employer. Understanding these distinctions helps leaders determine whether retention challenges stem from cultural, operational or market-driven factors.

How to Calculate Your Employee Retention Rate

Calculating retention rate starts with a simple formula, but applying it correctly requires clarity around timing and workforce changes.

The standard retention rate formula is:

Retention Rate (%) = (Number of employees who remained employed during the period ÷ Number of employees at the start of the period) × 100

For example, if you begin the year with 120 employees, but end the year with 102 of the original employees, then you have 85% retention, with a 15% turnover rate.

While having high employee turnover rates isn't the best indication of a good retention rate, what is healthy and what should raise alarm? In short, it depends. A good employee retention rate can vary based on industry and organizational context. 

Why Employee Retention Matters More Than Ever

In today’s labor market, employee retention is a business strategy, not just an HR metric. With ongoing workforce shifts, economic uncertainty and rising talent expectations, organizations that prioritize employee engagement and retention are better positioned to remain competitive and resilient. When an employee leaves, the financial impact can be seen immediately. Direct costs often include:

• Recruiting expenses (job postings, agency fees, background checks)
• Time spent interviewing and evaluating candidates
• Onboarding administration and paperwork
• Training time and resources
• Temporary productivity gaps during ramp-up

Depending on the role, replacing an employee can cost a significant percentage of their annual salary. For specialized or leadership roles, that number can climb even higher. There are also several indirect costs, such as: 

• Reduced team productivity while roles remain vacant
• Increased workloads for remaining employees
• Higher risk of burnout
• Disruption to team cohesion and morale
• Loss of institutional knowledge

When turnover becomes routine, it can normalize instability. High-performing employees may begin to question long-term growth opportunities, creating a ripple effect that further weakens retention.

Is Your Retention Rate Healthy? Key Questions to Ask

Healthy turnover rates by industry vary, so it can be difficult to compare your company to the average employee turnover rate of the country. The first step is knowing what your retention rate is. However, the real value comes when you evaluate employee retention in context, against benchmarks, internal trends and the lived experience of your workforce.

If you’re trying to determine whether your retention rate is truly healthy, here are the key questions leadership teams should be asking.

Are You Benchmarking Against the Right Peers?

Retention benchmarks vary significantly by:

• Industry
• Company size
• Geographic location
• Workforce composition (hourly vs. salaried, frontline vs. knowledge roles)

Comparing your retention rate to a national average without adjusting for these factors can be misleading. For example, a 75% retention rate might signal concern in a professional services firm, but be typical in retail or hospitality.

Instead of chasing generic benchmarks, ask:

• Are we comparing ourselves to companies with similar workforce models?
• Are our trends improving year over year?
• Are certain departments or roles outperforming others?

Context is everything when you evaluate employee retention effectively, and it's essential when looking at ways to improve employee engagement and overall organizational culture.

Are Departures Voluntary or Preventable?

A healthy retention rate also factors in the reason behind the departures. Start by analyzing:

• What percentage of exits are voluntary?
• How many departures occur within the first year?
• What themes appear in exit interviews?

High voluntary turnover often points to preventable issues, such as:

• Limited career advancement
• Inadequate compensation
• Burnout or workload imbalance
• Poor manager relationships

If most departures are preventable, your recruitment and retention strategy may need strengthening. If exits are primarily performance-based or part of strategic restructuring, the story may be different.

Are Your Benefits and Policies Competitive?

Compensation and benefits remain among the strongest drivers of retention. Employees today evaluate not just salary, but the full employment experience. If you want to retain employees, it's recommended to work with HR professionals to determine how you can be more competitive with benefits and work-life culture. When employees feel like they're respected and well cared for, they're less likely to look for a job at another company. And, although a stronger benefits package may be a higher upfront cost, it can save money on constantly having to find new hires and go through the onboarding process. Especially when the cost of turnover is often between 50% and 200% of an employee's annual salary.[1] 

Are Managers Equipped to Retain Talent?

Research consistently shows that employees don’t just leave companies; they leave managers. While exit interviews are important to understand why an employee leaves, making sure that your leadership team has the tools necessary to make new employees feel welcome and supported can be an effective tool to reduce turnover, especially during the first year. Consider training managers to help with turnover and retention efforts, especially if you notice trends of high voluntary leave under certain leaders.

Signs Your Retention Rate Isn't as Healthy as You Think

It's also important to watch out for signs of poor employee retention before they lead to organizational issues. Some key indications that you have a low retention rate that needs attention include:

• High turnover in key roles
• Frequent exits within the first year
• Low engagement or morale indicators
• Exit interview themes
• Rising recruiting and onboarding costs

Luckily, there are several ways you can improve employee retention and create a more positive work environment.

Tips to Maintain a Healthy Employee Turnover Rate and Maximize Retention

In order to improve your organization's employee retention, there are a few things you should consider. The following are tips to help improve employee experience and boost retention regardless of your industry.

• Offer competitive and transparent compensation. Regularly benchmark salaries and communicate clearly about pay structures and growth opportunities.
• Strengthen your benefits package. Provide comprehensive health, retirement and voluntary benefits that reflect today’s workforce expectations.
• Invest in strong onboarding experiences. A structured, supportive onboarding process increases first-year retention and accelerates engagement.
• Prioritize manager development. Equip managers with coaching, feedback and communication training; employees often stay because of great leadership.
• Create clear career pathways. Outline growth opportunities, internal mobility options and skill development plans to reduce stagnation.
• Monitor retention data regularly. Track retention and turnover trends quarterly to identify early warning signs.
• Conduct meaningful exit interviews. Identify patterns in voluntary departures and address preventable issues.
• Promote employee engagement initiatives. Recognition programs, feedback loops and team-building efforts improve connection and employee satisfaction.
• Support work-life balance and flexibility. Flexible scheduling, remote work options and mental health support can significantly impact retention.
• Ensure payroll and HR processes are accurate and consistent. Administrative friction, compliance issues or benefits confusion can quietly erode trust.
• Encourage open communication. Provide channels for employees to voice concerns before they become resignation letters.
• Foster a strong workplace culture. Align company values with daily operations to create a sense of purpose and belonging.

How TriNet Can Help Improve Retention

Improving retention requires more than tracking metrics. It requires compliant HR processes and proactive leadership support, amongst other things. As a PEO service provider, TriNet helps businesses strengthen employee engagement and retention by providing access to competitive benefits, streamlined payroll and HR administration and strategic HR guidance. By reducing administrative friction and supporting managers with expert resources, TriNet enables organizations to build a more stable workforce and lower the cost of employee turnover over time. Book a demo with TriNet today to learn more.

¹Indeed, “Estimating the Costs of Employee Turnover.”