Retention rate and turnover rate typically do not sum to 100% because they measure different aspects of employee movement within an organization:

1. Retention Rate:

  • Definition: The percentage of employees who remain with the organization over a specific period.
  • Formula:
  • Focus: It focuses on how many employees stayed with the company.

2. Turnover Rate:

  • Definition: The percentage of employees who leave the organization (voluntarily or involuntarily) over a specific period.
  • Formula:
  • Focus: It looks at how many employees exited the company.

Why They Don’t Sum to 100%:

  1. Different Denominators:

    • Retention rate uses the starting number of employees as the base, while turnover rate often uses an average number of employees over the period.

  2. Different Time Frames:

    • Some employees might join and leave within the same period, affecting turnover but not retention.

  3. New Hires:

    • New hires within the period are not considered in the retention rate calculation but can affect the turnover rate.

Example:

  • Start of Year Employees: 100
  • End of Year Employees: 90 (10 left, but 5 new hires were made)
  • Retention Rate:
  • Turnover Rate:

Here, 90% + 11.1% doesn’t equal 100% because they measure different things.