Enter the qualified wages and the retention cost rate into the Calculator. The calculator will evaluate the employee retention cost. 

Employee Retention Cost Formula



  • ERC is the employee retention cost ($)
  • QW ($) is the qualified wages
  • RCR (.50 for 2020 and .70 for 2021) is the retention cost rate

To calculate employee retention cost, multiply the qualified wages by the retention cost rate.

How to Calculate employee retention cost?

The following steps outline how to calculate the employee retention cost.

  1. First, determine the qualified wages. 
  2. Next, determine the retention cost rate. 
  3. Next, gather the formula from above = ERC = QW * RCR.
  4. Finally, calculate the employee retention cost.
  5. After inserting the variables and calculating the result, check your answer with the calculator above.

Example Problem : 

Use the following variables as an example problem to test your knowledge.

qualified wages = 60000

retention cost rate = 0.7


What are qualified wages?

Qualified wages are the total earnings of an employee that are considered for calculating the employee retention cost. This includes regular pay, bonuses, and other forms of compensation.

How does the retention cost rate vary?

The retention cost rate can vary depending on the year or specific government policies. For instance, it was .50 in 2020 and .70 in 2021. It’s a factor that helps determine the overall cost of retaining an employee.

Why is calculating employee retention cost important?

Calculating employee retention cost is crucial for businesses to understand the financial impact of retaining employees. It helps in making informed decisions regarding employee compensation, benefits, and other retention strategies.

Can the employee retention cost formula be used for any type of business?

Yes, the employee retention cost formula is versatile and can be applied across different types of businesses. However, the specific variables like qualified wages and the retention cost rate might vary based on industry standards and government policies.