Retention rate is the percentage of people in an original group who remain with a business, organization, or product over a specified period. Companies use retention rate to measure how many employees stay, how many customers continue their relationship with a business, or how many users remain active on a digital platform.
A high retention rate means a larger proportion of the original group remained during the measurement period. A low retention rate means a greater proportion did not remain.
Retention rate helps businesses evaluate workforce stability, customer relationships, and user engagement. The calculation and interpretation depend on the group being measured.
Retention Rate Calculator
Calculate your employee or customer retention rate by entering the starting population and the number retained during your selected period.
For employee retention, enter how many employees worked at the company at the beginning and how many of those same employees remained at the end.
For customer retention, enter the starting customer count, ending customer count, and the new customers included in the ending population.
The calculator returns the retention percentage, the number retained, and the proportion of the original group that was not retained.
Retention Rate Calculator
Calculate the percentage of employees or customers retained over a period. New hires do not count as retained employees from the original group.
Employee retention rate
88%
(88 ÷ 100) × 100 = 88%
This cohort-based calculation excludes new hires.
For customer calculations, enter new customers who are included in the ending count. The formula is most reliable when you can identify the original customer cohort directly. No values are transmitted by this calculator.
How to Calculate Retention Rate
The general retention rate formula measures how many members of the starting group remained through a defined period.
Retention Rate (%) = (Original Group Members Retained ÷ Original Group Members at Start) × 100
The two inputs are:
- Starting population: The number of employees, customers, or users in the original group.
- Retained population: The number of those original members who meet the retention criteria at the end of the measurement period.
The retention percentage should range from 0% to 100% when measuring a fixed original cohort.
A business must establish the measurement period and definition of being retained before calculating the rate.
Employee Retention Rate Formula
Employee retention rate measures the percentage of employees who remain employed throughout a specified period.
Employee Retention Rate (%) = (Employees From the Starting Group Still Employed at the End ÷ Employees at the Start) × 100
This calculation excludes employees hired after the measurement period began.
The Society for Human Resource Management (SHRM) describes employee retention using the number of individual employees who remained employed throughout the period divided by the starting employee count.
For example, a business starts the year with 100 employees. At year-end, 88 of those original employees still work for the company.
Employee retention rate = (88 ÷ 100) × 100 = 88%
The company retained 88% of its original workforce.
Employees who joined during the year do not count as retained members of the original group, even if they remain employed at year-end.
Customer Retention Rate Formula
Customer retention rate measures the percentage of existing customers who continue doing business with a company during a specified period.
A commonly published customer retention formula is:
Customer Retention Rate (%) = ((Customers at End − New Customers) ÷ Customers at Start) × 100
Where:
- Customers at End (E): The total customer count at the end of the period.
- New Customers (N): New customers included in the ending population.
- Customers at Start (S): The customer count at the beginning.
For example, an online business starts the quarter with 200 customers, acquires 30 new customers who remain active at the end, and finishes with 210 customers.
Customer retention rate = ((210 − 30) ÷ 200) × 100 = 90%
The business retained 180 of its original 200 customers.
The Shopify customer retention methodology also explains this formula for measuring the proportion of existing customers retained.
For more precise reporting, companies should track the actual original customer cohort. A simple ending-count formula can become misleading when new customers leave before the period ends or account reactivations complicate the customer count.
User Retention Rate Formula
User retention rate measures the percentage of users from an initial group who return to or remain active on a digital product after a specified interval.
User Retention Rate (%) = (Users From the Original Cohort Active at the Defined Interval ÷ Users in the Original Cohort) × 100
For example, a mobile application gains 1,000 new users on Monday. Of those users, 250 return on the seventh day.
Day-7 retention rate = (250 ÷ 1,000) × 100 = 25%
User retention requires a precise definition of activity. A company may measure users who return on a specific day, within a time window, or on or after a certain day.
These calculations can produce different results.
Amplitude’s retention analysis documentation explains the differences between exact-day retention and return-on-or-after retention.
What Is a Good Retention Rate?
A good retention rate is one that meets an organization’s retention objectives and compares favorably with relevant historical results and industry benchmarks. There is no universal retention percentage that applies to every business, employee population, or digital product.
The appropriate target depends on four main factors:
- Industry: Employee movement, purchase frequency, and customer relationships differ across industries.
- Measurement period: Monthly retention and annual retention represent different time horizons.
- Population: New employees, long-tenured staff, subscription customers, and application users have different retention patterns.
- Business model: A recurring subscription company requires a different interpretation from a retailer selling products purchased infrequently.
For example, an annual employee retention rate of 90% means that 90 out of every 100 employees in the starting group remained throughout the year. That may represent strong performance for one organization but weak performance for another with consistently higher historical retention.
The U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey illustrates how employee separation patterns differ across industries. Its separation rates should not be treated as direct equivalents of company-level employee retention percentages.
Employers should compare retention results using consistent formulas, equivalent periods, and comparable workforce groups.
What Is Considered a High Retention Rate?
A high retention rate means a large proportion of the original group remains after the measurement period.
For example:
| Retention rate | Retained from an original group of 100 | Not retained |
|---|---|---|
| 95% | 95 | 5 |
| 90% | 90 | 10 |
| 85% | 85 | 15 |
| 80% | 80 | 20 |
| 70% | 70 | 30 |
These percentages explain how retention works. They are not universal performance grades or industry benchmarks.
A high rate can indicate continuity, stable employment, repeat customer relationships, or sustained product use.
However, retention alone does not establish employee satisfaction, customer profitability, or product quality.
What Does a Low Retention Rate Mean?
A low retention rate means fewer members of the original group remain after the measurement period.
For employee retention, low rates may reflect resignations, layoffs, retirements, changing job requirements, or other employment separations.
For customer retention, low rates may reflect cancellations, reduced demand, poor experiences, pricing changes, or purchasing behavior.
For digital products, low user retention can indicate that users do not return after their initial experience.
Businesses should investigate the causes instead of assuming that every departure represents dissatisfaction.
Types of Retention Rate in Business
Retention rate applies to several business functions. Each type measures a different population and answers a different management question.
| Type of retention | What it measures | Primary use |
|---|---|---|
| Employee retention rate | Employees from an original workforce group who remain employed | Workforce stability and HR planning |
| Customer retention rate | Existing customers who maintain a defined relationship with the business | Customer relationship management |
| User retention rate | Users who return or remain active after a defined interval | Product adoption and engagement |
| Client retention rate | Clients who continue purchasing professional or contracted services | Agency and B2B relationship management |
| Subscriber retention rate | Subscribers who maintain their subscriptions | Recurring subscription performance |
Employee Retention Rate in HR
Employee retention rate helps HR teams evaluate how consistently an organization keeps its workforce.
A high employee retention rate can preserve institutional knowledge, reduce repeated recruiting requirements, and support operational continuity.
A low employee retention rate can increase vacancies, training needs, recruiting expenses, and the workload carried by remaining employees.
Retention rate measures the workforce outcome. Employee retention refers more broadly to the practices and conditions that encourage employees to remain with the organization.
Customer Retention Rate in Marketing
Customer retention rate measures how effectively a company maintains relationships with existing customers.
Marketing and customer success teams use retention alongside customer acquisition, repeat purchase behavior, and customer lifetime value.
For example, a marketing agency can measure how many existing clients renew their service agreements over a year.
An e-commerce business may measure repeat customers over a period that reflects its normal purchasing cycle.
Customer retention should not be confused with revenue retention. A company may keep the same number of customers while earning more or less revenue from them.
User Retention Rate in SaaS and Digital Products
User retention rate tracks the continued activity of an original group of users.
SaaS businesses and application teams may calculate retention after one day, seven days, 30 days, or longer periods.
For example, a software company can track how many newly registered users return to complete meaningful actions after their first session.
The definition of a retained user should reflect the product’s intended behavior.
A weekly business reporting application may naturally have a different usage pattern from a messaging application used multiple times a day.
What Does Retention Rate Mean in Finance?
In financial analysis, the term retention may refer to earnings retention rather than employee or customer retention.
The earnings retention ratio, also called the plowback ratio, measures the portion of a company’s net income that is retained instead of distributed as dividends.
Its formula is:
Earnings Retention Ratio = (Net Income − Dividends) ÷ Net Income
This financial ratio measures retained profits, while employee and customer retention rates measure how many original group members remain.
The Corporate Finance Institute’s explanation of the retention ratio covers this separate financial concept.
Retention Rate vs. Turnover, Attrition, and Churn
Retention, turnover, attrition, and churn describe related changes in populations, but their formulas and purposes can differ.
| Metric | What it measures | Example |
|---|---|---|
| Retention rate | Percentage of the original group that remains | 90 of 100 starting employees remain: 90% retention |
| Employee turnover rate | Employee separations relative to average workforce size over a period | 12 separations divided by an average workforce of 100: 12% turnover |
| Employee attrition | Reduction in workforce through departures, sometimes without replacement | A company leaves several vacated positions unfilled |
| Customer churn rate | Percentage of existing customers lost under a defined churn measurement | 10 of 100 starting customers are lost: 10% churn |
Is Retention Rate the Opposite of Turnover Rate?
Employee retention and employee turnover describe opposite workforce outcomes, but their reported percentages are not always mathematical complements.
Retention typically measures employees from the original workforce who remain.
A common employee turnover formula divides employee separations by the average number of employees during the period.
Different denominators, replacement hires, and repeated employment changes can produce results that do not add up to 100%.
The employee turnover guide covers the separate turnover calculation and its interpretation.
Is Retention Rate the Opposite of Churn Rate?
Retention and churn are mathematical complements when they measure the same original population, period, and mutually exclusive retained-versus-lost outcomes.
Cohort Churn Rate (%) = 100% − Cohort Retention Rate (%)
For example, a business retaining 90% of its original customers has a 10% loss rate for that same cohort.
However, churn and retention reports may use different counting rules. Companies must align the definitions before comparing them.
How to Measure Employee Retention Rate Accurately
HR teams should calculate employee retention using a fixed group of employees and a clearly defined period.
1. Select the Measurement Period
Choose the time frame that corresponds with the business question.
Monthly retention can identify short-term workforce movement. Quarterly retention can support workforce reporting. Annual retention provides a longer-term view of workforce continuity.
Employers should use equivalent periods when comparing results.
2. Identify the Starting Employee Group
Record the individual employees actively employed at the beginning of the period.
The employee count should use a consistent definition covering the categories included in the report.
For example, a company may report full-time and part-time employees together while tracking contractors separately.
3. Count the Original Employees Who Remained
At the end of the measurement period, identify which members of the original group are still employed.
Do not include employees hired after the start date in the retained count.
For example, a company begins the year with 100 employees, hires 40 more, and finishes with 120 employees.
The ending headcount alone does not establish the retention rate.
If 90 of the original 100 employees remain, annual employee retention is 90%, regardless of how many replacement or additional employees joined.
4. Calculate and Compare Cohort Results
Apply the employee retention formula consistently.
Then compare retention by department, employment type, role, location, manager, or hiring cohort when the group sizes are large enough to support meaningful conclusions.
An HR analytics system can connect headcount data with hiring records, separation reasons, employee characteristics, and historical workforce patterns.
5. Investigate the Reasons Employees Leave
Retention calculations identify how many employees remained. They do not explain why others left.
Use exit interviews, employee feedback, workforce records, and management observations to investigate relevant patterns.
Separate voluntary departures from involuntary separations and review early-tenure departures independently when useful.
Why Is Retention Rate Important?
Retention rate helps organizations evaluate continuity in their workforce, customer base, or product audience.
For HR teams, retention can reveal changes in workforce stability and potential replacement hiring requirements.
For customer-focused businesses, retention supports analysis of recurring relationships, purchasing behavior, and customer lifetime value.
For software businesses, retention helps teams assess sustained product usage after acquisition or activation.
Retaining valuable employees can reduce repeated recruiting and onboarding costs. Maintaining customer relationships can also reduce dependence on constant customer acquisition.
However, retention should be evaluated alongside performance and business outcomes.
For example, high employee retention does not necessarily establish that workers meet performance expectations. Employers can combine retention with quality of hire to evaluate longer-term recruitment outcomes.
How Can Companies Improve Employee Retention Rates?
Employers can improve retention by identifying avoidable causes of departure and addressing the conditions that influence employees’ decisions to remain.
Improve Onboarding and Role Expectations
Clear responsibilities, accessible tools, practical training, and consistent manager communication help new employees adapt to their positions.
A structured employee onboarding process establishes early expectations and provides a basis for evaluating progress.
Track early-tenure retention to identify problems associated with recruitment, onboarding, or mismatched job expectations.
Review Compensation and Career Development
Employers should evaluate compensation competitiveness, internal pay consistency, advancement opportunities, and access to relevant training.
Employees may leave when their responsibilities increase without corresponding development opportunities or when career progression becomes unclear.
Evaluate Management and Employee Engagement
Managers influence workload distribution, feedback, recognition, communication, and professional development.
Employee engagement provides a related measure of how involved and committed employees feel toward their work.
Engagement and retention should be tracked separately. An engaged employee may still leave, and a disengaged employee may remain for other reasons.
Address Problems Identified in Workforce Data
Compare retention outcomes with exit feedback, employee surveys, workload conditions, and management practices.
If one department consistently loses employees during their first six months, investigate the hiring expectations, onboarding experience, manager relationships, and working conditions associated with those departures.
Changes should respond to evidence from the affected workforce rather than generic retention assumptions.
Common Mistakes When Calculating Retention Rate
Counting new employees as retained: Employees hired after the starting date do not belong to the original retention cohort. Including them can inflate or distort employee retention results.
Using ending headcount without identifying the starting group: A company can increase its total workforce while losing a substantial proportion of its original employees.
Mixing measurement periods: A monthly retention rate cannot be compared directly with an annual rate without considering the different time horizons.
Treating every departure as a retention failure: Retirements, layoffs, relocations, performance-related terminations, and personal circumstances can affect retention for different reasons.
Using one benchmark for every business: Retention patterns differ by occupation, industry, workforce composition, and business model.
Confusing employee retention with employee turnover: The two metrics may use different denominators and will not always total 100%.
Ignoring employee performance or customer value: High retention is useful only when the retained relationships also contribute to the organization’s objectives.
Frequently Asked Questions About Retention Rate
What does an 80% retention rate mean?
An 80% retention rate means that 80% of the original group remained during the measurement period. For example, if a company starts the year with 100 employees and 80 of those employees remain at year-end, its annual employee retention rate is 80%.
Is a higher retention rate always better?
A higher retention rate generally indicates greater continuity, but it does not automatically mean better business performance. Employers should consider employee performance, voluntary departures, and workforce requirements. Customer-focused businesses should consider customer profitability, satisfaction, and revenue alongside retention.
Can retention rate exceed 100%?
A correctly calculated retention rate for a fixed original group cannot exceed 100%. A result above 100% usually indicates that new members were included in the retained count, the formula was applied incorrectly, or the business is measuring a different metric, such as net revenue retention.
What is the difference between retention rate and retention percentage?
Retention rate and retention percentage generally describe the same measurement: the proportion of an original group retained over a period, expressed as a percentage. The calculation must specify the population, timeframe, and definition of retention.
What is annual retention rate?
Annual retention rate measures the percentage of an original group that remains after one year. For employee retention, divide the number of employees from the start of the year who remain employed at year-end by the starting employee count, then multiply by 100.
How often should businesses calculate retention rate?
Businesses can calculate retention monthly, quarterly, or annually depending on the population and business objective. HR teams may use monthly and annual workforce reports, while subscription and digital product companies may need shorter measurement intervals. Consistency matters when comparing trends.
What is the difference between employee retention and customer retention?
Employee retention measures the proportion of workers who remain employed by an organization. Customer retention measures the proportion of existing customers who continue a defined business relationship. Both measure continuity, but they involve different populations, business decisions, and operational goals.
How does remote work affect employee retention?
Remote work can influence employee retention through flexibility, communication, management practices, access to development, and workload conditions. Its effect depends on the organization and role. Employers should compare remote-worker retention using consistent cohorts and consider employee feedback, job responsibilities, and working conditions before attributing retention changes to remote work alone.