Employee Retention Rates: What You Need To Know & How You Can Improve Them

Posted by Trakstar • December 12, 2022 • 6 min read

Employee turnover rates have been at the forefront of all people leaders’ minds lately – and with good reason. Companies are seeing massive employee churn rates and investing more in employee retention than ever.

In fact, according to one study, the average cost of losing a good worker is $15,000 – and that’s just for their first year. If you factor in the price of finding and training a replacement, that number can skyrocket. The average employee turnover rate in the U.S. is approximately 16% per year, meaning that the average company loses one-sixth of its workforce yearly. That’s scary to think about!

So what can the average people leader do to improve employee retention and reduce company turnover rates?
It might be easier than you think – but you need to invest.

One way to invest? Utilizing talent development software to streamline employee experience. Schedule a demo of Trakstar today to see how we can help supercharge performance management, learning and training, and hiring.

What is Employee Churn?

Employee churn is similar to the organization’s overall turnover rate (employees who leave and new ones have to be brought in). It’s important to note that employee churn differs from the turnover rate. The turnover rate refers to how many employees left and new ones had to be hired. Employee churn, however, considers the number of employees who leave and those who stay.
To calculate employee churn, use this formula:

Employee churn rate = Number of employees quitting during a specific time / Average number of employees in that month X 100

Why Does Employee Churn Matter?

Employee churn is important because it can harm company culture and productivity. When employees leave, replacing them with new ones who are just as productive can take months or even years. You might lose out on opportunities while your team is understaffed and in flux.
Employee churn rates can tell you a lot about your organization. What is your culture really like? Do people enjoy working for you? What’s your onboarding program like? How welcoming are your employees?
These questions can be answered by looking at your employee churn rate. And if the answer is not what you want it to be, then it’s time to do something about it.

How to Improve Employee Retention Rates

If you’ve calculated your employee turnover cost and know it’s time to improve employee churn rates, you can do some simple things to improve them.

Build Better Training Programs

The average corporate training costs are enough to bring the focus back to retention for corporations that need to do a lot of training when they onboard new employees. If you’re in a leadership position, then it’s up to you to make sure that your training costs are providing ROI. If you have a low employee retention rate, they might not be.

Training is an investment in the future of your organization and its employees. Make sure that every dollar spent on training goes towards something worthwhile! The average cost of training a single employee can be anywhere from $1,000 to $3,000, depending on the type of training. When you multiply this by the number of employees you train each year, it becomes clear that retention is an integral part of your business model. A low employee churn rate means that people want to stay at your company; they like working there and feel valued.

Investing in a learning management system is a fantastic way to ensure you’re getting good ROI on your training programs and decreasing employee turnover simultaneously.

Compensation and Employee Turnover

When it comes to employee turnover, what you pay is a significant factor in whether someone leaves your company. Note that this is one of many factors but is a substantial contributor to the average employee retention rate.
If your employees are underpaid and overworked, they will look elsewhere, and as the competition for talent heats up, they are likely to find it. Especially your best talent.

On the other hand, if they feel like they’re being compensated fairly for their work—and are given opportunities to advance their careers—they won’t be as likely to look elsewhere. This is why it’s so important to have a clear understanding of how much your employees should earn when they start at your company and what their earning potential could be down the line.

Try to tie compensation to performance. Use performance reviews as a time to reflect on compensation rates and use merit to suggest promotions, succession plans, and raises.

Improve Culture

Improving workplace culture is a fantastic way to keep employee retention costs low. The culture of your company matters, and if you have a good employee culture, you’ll have a lower employee churn rate.

How can you improve culture? Make sure you keep your culture creators happy, promote work-life balance and employee wellness, run engagement surveys when things are in flux, keep an open line of communication with your employees, and socialize with them. It can be hard for some employees to view HR leaders and managers as people, too – so make sure you help them do just that.


According to Trakstar’s 2023 Outlook Survey, many employees value flexibility in the workplace over almost anything else. Flexibility can be hard to define within a workplace, but it could mean allowing people to work from home, create their own hours, build their own schedules, or add their own personal touches to the things they do.

The most common reason people value flexibility is the ability to spend more time with their families, but there are other reasons too. People who value flexibility may have a disability or chronic illness that makes it hard for them to leave work at a certain time every day. They may also be parents of young children and want more control over when they can take breaks from work to attend school meetings or help with homework. People with outside interests may value flexibility because they can travel to locations for football games, for example, or cross items off their to-do lists.

What Are Your HR Goals for 2023?

If you want your company to be successful, it starts with your people and ensuring that your best people stick around for a long time. HR needs to focus on employee retention rates and churn and the impact they have on your employees. It may also mean weeding out some of the bad ones.

It is critical, particularly for companies facing uncertain futures as we move through the next few years.

Remember that great employees build resilient workforces. To invest in your HR department, your employees, and your organization, click here to schedule a demo of Trakstar.

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