According to a 2021 study by Mckinsey stating employee retention rate; 40% of surveyed employees said there is a chance they will quit their job in the next three to six months. Retention rate can’t always be predicted yet it is useful to know what percentage it should be.
In this article let’s find out what is employee retention rate and how it varies in different kinds of business industries.
Employee retention rate in numbers
When focusing on particular industries, here is how the numbers looked for respondents with “somewhat likely” responses to leave their jobs in the next three to six months:
- Leisure and Hospitality – 47%
- Good producing – 43%
- White Collar – 41%
- Trade, transportation and Utilities – 38%
- Healthcare – 36%
- Education – 32%
The bad news is, it’s not getting any better. At least unless employers make a conscious effort considering the gravity of the situation.
What is a good employee retention rate?
Considering that 40% of employees showed an intention to quit their job in the coming future, it implies that 60% are not as likely to do so. But is there a guarantee none of these 60% will quit? Or is that 60% even a good number as employee retention rate if any such guarantee is possible?
There is no absolute universal rule for it, but as a general rule suggested by some experts, an employee retention rate of 90% or above is considered good. This means that a company should try to keep its employee turnover rate under 10% or less at all costs. However, it also varies by industry.
Whereas, education and government have higher retention rates, industries like food, retail and hotel etc. struggle with it.
Why do some industries struggle with their employee retention rates?
While other industries have an average turnover rate of 12-15% as suggested by the US Bureau of Labor Statistics, the turnover rate in the hotel industry can go as high as 70-80% i.e. an employee retention rate of a pitiful 10-20%.
Some of the reasons include:
- Reliance of the hospitality industry on seasonal and part-time workers;
- The Unique demands of the industry with an emphasis on high customer satisfaction;
- Lack of proper training to deal with high demand;
- Pathetic salaries;
- Non-Standard hours and lack of predictability;
- Poor recognition and career growth opportunities.
Similarly in industries like utilities and manufacturing employees struggle with similar factors such as lack of professional growth, long shifts, and poor compensation hence their employee retention rates are considerably low.
How to calculate the employee retention rate for your company?
According to SHRM, the employee retention rate is calculated on an annual basis by dividing the number of employees who stayed for the entire period of measurement by the number of employees that were there at the start of the measurement period. Now multiply this number by 100.
A great help can be our employee retention software. It will help you understand employee retention furthermore and figure out the best ways to keep your employees happy in the workplace.
What employers and people in HR need to bear in mind though is that the employee retention rate is subjective. High retention does not always imply that it is healthy too. Retaining a majority of employees also means that you’re retaining the underperformers.