What Is Employee Retention Rate?
Employee retention rate is the percentage of employees who remain with a company over a specified time period, expressed as a fraction of the total workforce at the start of that period.
Employee retention rate is the percentage of employees who remain with a company over a specified time period, expressed as a fraction of the total workforce at the start of that period. High retention correlates with lower cost per hire, better team performance, and stronger company culture. Low retention — especially in sales — is one of the most expensive operational problems a company can have.
How to Calculate Employee Retention Rate
The formula: ((Employees at End of Period minus New Hires During Period) divided by Employees at Start of Period) times 100
Example: If you start Q1 with 50 employees, hire 8 new ones, and end Q1 with 47 employees, your retention rate is ((47 minus 8) divided by 50) times 100 = 78%. Equivalently, your turnover rate was 22%.
Retention Rate Benchmarks by Role
Industry benchmarks vary significantly by role and industry:
- SDR retention — 60-70% annual retention (30-40% turnover). SDR turnover is among the highest of any role — driven by burnout, career advancement pressure, and competitive poaching.
- Account Executive retention — 70-75% annual. Higher because comp is more lucrative and the career path is longer.
- Overall tech company average — 72-78% annually (22-28% turnover).
- Customer success and operations — 80-85% annually, reflecting lower burnout and more stable day-to-day work.
Why SDR Retention Is Uniquely Challenging
The SDR role carries inherent churn: it is designed as a 12-18 month stepping stone to Account Executive. SDRs who are not promoted within 18 months typically leave. Companies that build clear promotion criteria and consistent advancement pipelines retain SDRs significantly longer. External competition also matters — top SDRs receive regular LinkedIn recruiter outreach from competitors.
Retention Starts with Hiring
The strongest predictor of SDR retention is hiring fit: SDRs who genuinely want the AE career path and are aligned on compensation expectations stay longer. Poor culture-fit hires churn in 90 days, costing 1.5-3x their salary in replacement costs. Shortlist screens SDR candidates for motivation alignment and career trajectory fit — not just technical qualifications. Get a free SDR candidate shortlist
Frequently Asked Questions
What is a good employee retention rate?
A good retention rate varies by role and industry. For SDRs, 65-70% annual retention is average; above 75% is strong. For overall companies, 80%+ annual retention is considered healthy.
How do you calculate employee retention rate?
Retention rate = ((Employees at end of period minus New hires during period) divided by Employees at start of period) times 100. This isolates retention from headcount growth effects.
Why is SDR turnover so high?
SDR turnover is high because the role is designed as a 12-18 month stepping stone to Account Executive. Reps who are not promoted leave, and competitive outreach is constant for top performers.
How does hiring quality affect retention rate?
Significantly. Misaligned hires — wrong culture fit, unrealistic compensation expectations, poor role understanding — churn within 90 days. Better upfront candidate screening directly improves 12-month retention rates.