Understanding why employees leave and how often is critical for any HR professional aiming to build a strong, stable workforce. The employee turnover rate is more than just a number; it’s a key indicator of organizational health, management effectiveness, and employee satisfaction. In this comprehensive guide, we’ll break down what turnover rate means, why it matters, how to calculate it, and what you can do to improve it.
Whether you’re facing high turnover or just want to stay ahead, this article will equip you with the insights and strategies you need.
What Is an Employee Turnover Rate?
Employee turnover rate refers to the percentage of employees who leave an organization during a specific period, typically measured over a year. In simple terms, it’s how frequently employees exit your company relative to your workforce size.
This employee turnover rate definition includes all departures. Both those who quit voluntarily and those who are let go involuntarily. The rate is usually calculated on an annual basis and expressed as a percentage of the total workforce.
For example, a 15% turnover rate means 15 out of every 100 employees left over the measured period. This metric is also sometimes called staff turnover and is a key HR indicator of organizational health and the effectiveness of hiring and retention strategies.
In summary, if you’ve ever wondered “What is an employee turnover rate?” It’s essentially a measure of how often employees leave and need to be replaced.
Importance of measuring Employee Turnover
High employee turnover can be costly and disruptive, which is why measuring it is so important. When employees frequently leave your organization, productivity suffers, team morale dips, and the company incurs significant expenses to recruit and train replacements.
By tracking your employee turnover rate, you gain insight into whether your company’s turnover is normal or a problem that needs addressing. A high turnover rate often flags deeper issues within the organization.
For instance, it may indicate problems with management, company culture, lack of growth opportunities, or inadequate compensation. On the other hand, a low turnover rate is generally a positive sign, suggesting a stable and engaged workforce and saving the company money in the long run.
Ultimately, measuring turnover empowers HR managers to identify red flags early and take action. It helps answer questions like: Are we losing people faster than we should? and What might be causing departures? With this information, you can implement targeted retention strategies before small issues become big problems, creating a more empowering and supportive work environment for your team.
How do I calculate Employee Turnover Rate?
Calculating employee turnover is straightforward and involves a few simple steps. This employee turnover rate calculation can be done for any time frame (e.g. monthly, quarterly, or yearly) depending on what insights you need. Here’s how to do it:
1. Determine the time period
Decide if you’re measuring turnover for a month, a quarter, or a year.
2. Count the number of employees who left during that period
Include all separations. Both voluntary resignations and involuntary departures (e.g. terminations, retirements).
For example, say 10 employees left your company during the year.
(Tip: Do not include temporary leaves like maternity or disability leave, since those employees are expected to return and not truly “lost” from the company.)
3. Find the average number of employees during the period
Add the number of employees at the start of the period to the number at the end of the period, then divide by 2. This gives you the average workforce size.
For example, if you had 100 employees at the beginning of the year and 95 at the end, the average is (100 + 95) ÷ 2 = 97.5 (you can round to 98).
4. Calculate the turnover rate
Divide the number of employees who left by the average number of employees, then multiply by 100 to get a percentage. Using the example above, turnover = (10 ÷ 97.5) × 100.
By following these steps, you can answer “How do I calculate employee turnover rate?” for your organization. Many HR managers perform this calculation regularly (often quarterly or annually) to keep tabs on retention. In the next section, we’ll look at the exact formula and an example to illustrate this calculation.
Employee Turnover Rate Formula
The standard employee turnover rate formula is:
Turnover Rate=
Number of Employees Who Left / Average Number of Employees X 100%.
In other words, you take the total employees who left in the period and divide by the average employee headcount, then multiply by 100 to convert to a percentage. Many organizations use the average number of employees in the denominator for accuracy, especially if headcount fluctuated during the period.
For example, if 10 employees left out of an average workforce of 95, the turnover rate would be about 10.5% (since 10/95 × 100 = 10.5%). The formula above (shown in the image) illustrates one common approach: some standards simply use the starting number of employees as the base, but the core idea is the same. You’re measuring what percentage of your staff departed during the time frame. Whichever formula variant you use, consistency is key so that you can compare your turnover rate over time.
Example: Calculating Turnover Rate
Let’s walk through a quick example calculation to solidify how this works. Imagine your company had 100 employees at the beginning of the month and 90 at the end of the month. During that month, 10 employees left the company (some may have left mid-month and perhaps a few new hires joined, which is why you ended up with 90).
- Average number of employees (for the month) = (100 + 90) ÷ 2 = 95.
- Number of employees who left = 10.
- Turnover Rate = (10 ÷ 95) × 100 = 10.53%.
In this example, your employee turnover rate for the month would be approximately 10.5%. This means about ten and a half percent of your workforce turned over (i.e., had to be replaced) during that single month. By running these numbers, HR managers can quickly gauge if a particular period was high or low in turnover and investigate any anomalies.
High vs. Low Turnover Comparison
It’s also useful to understand high turnover vs. low turnover in practical terms. Below is a comparison illustrating how organizations with high turnover differ from those with low turnover:
|
High Turnover (e.g. 20%+ annually) |
Low Turnover (e.g. 5% or less annually) |
|---|---|
| Frequent employee departures and resignations. A constant “revolving door.” | Infrequent departures; employees tend to stay with the company much longer. |
| High costs for recruiting, hiring, and training new staff to replace leavers. | Lower recruitment and training costs, saving time and money over the long term. |
| Often indicates problems such as poor morale, low engagement, management issues, or inadequate pay/benefits driving people away. | Often indicates strong employee satisfaction, good management, and effective retention strategies are in place. |
| Can disrupt teamwork, productivity, and institutional knowledge continuity, impacting overall performance. | Builds a stable, experienced team that knows the company and can be more productive and cohesive. |
As shown above, high turnover is usually a red flag that warrants investigation, whereas low turnover is usually a sign that your retention efforts are successful. Every organization will have some turnover, but the goal is to keep it at a healthy level (more on that below) rather than at an extreme high.
Different Types of Employee Turnover
Not all turnover is the same. HR professionals distinguish between different types of turnover to better understand the nature of employee departures:
Voluntary Turnover
This is when employees choose to leave on their own. For example, an employee resigns to take a job at another company, pursue a career change, or retire. These departures are initiated by the employee’s decision. High voluntary turnover is often a sign that employees are dissatisfied with something (role, pay, culture, etc.) and can indicate deeper organizational issues if it’s widespread.
Involuntary Turnover
This occurs when employees are forced to leave the organization. Involuntary turnover includes layoffs, redundancies, or terminations due to poor performance or misconduct. In these cases, the employer makes the decision to part ways. Some involuntary turnover (like letting go of underperforming staff) can be part of normal operations, but excessive involuntary turnover might point to hiring mismatches or training issues.
Internal Turnover
Internal turnover happens when an employee leaves their current position but remains within the company in another role. For instance, an employee might transfer to a different department or get promoted to a new position.
In this case, the employee is not lost to the organization, though their old position will need to be filled. Internal turnover can be positive, as it often means you’re retaining talent and providing growth opportunities internally.
However, it still creates a vacancy that needs backfilling. (Many companies view internal transfers and promotions as a sign of a healthy talent development culture, rather than a problem.)
External Turnover
External turnover is what we typically think of as turnover . An employee leaves the company entirely to work elsewhere or due to other reasons. This is the classic case where the organization loses an employee and must hire a replacement from outside.
High external turnover is generally more concerning than internal turnover, because it means the company is losing human capital and expertise to the outside market.
Understanding these categories is useful. For example, if you notice a lot of voluntary external turnover (people quitting to join other companies), you might focus on improving internal conditions like culture or career paths.
If you have mostly involuntary turnover, you might examine your hiring process or performance management to see why so many people aren’t working out. And if you have high internal turnover, it could signal strong internal mobility (which is good) or possibly that certain departments have a habit of employees transferring out.
Breaking down turnover into types helps pinpoint the underlying dynamics behind the numbers.
Common Causes of Employee Turnover
Employees leave organizations for a wide range of reasons. Some causes are under the company’s control, while others are external. Here are some of the most common causes of employee turnover:
Inadequate Compensation and Benefits:
Unsatisfactory pay is a classic reason employees jump ship. If people feel they can earn significantly more elsewhere, or that their benefits (healthcare, vacation, etc.) are lacking, they’re more likely to leave.
Poor Management or Leadership
Employees often cite a bad manager or lack of support as a reason for leaving. A popular saying is “people leave managers, not companies.” Toxic or ineffective leadership can drive even loyal employees away.
Lack of Career Growth
When there are few opportunities for promotion, skill development, or advancement, ambitious employees may seek new jobs where they can progress in their careers. Stagnation can lead to frustration and turnover, especially among high performers.
Work-Life Imbalance and Burnout
Excessive overtime, lack of flexibility, and high stress can cause burnout. If employees feel overworked or unable to balance their job with personal life, they might leave for a role that offers better work-life balance.
Limited Training and Development
A lack of training or development programs can make employees feel like they’re not growing. When employees don’t learn new skills or see investment in their development, they may become disengaged and eventually leave.
Unclear Job Expectations or Role Confusion
If people aren’t sure what’s expected of them, or if their role keeps changing without clear communication, it creates frustration. Persistent role confusion or shifting expectations can push employees out.
Insufficient Recognition or Appreciation
If people aren’t sure what’s expected of them, or if their role keeps changing without clear communication, it creates frustration. Persistent role confusion or shifting expectations can push employees out.
Toxic Work Environment
A negative or toxic company culture characterized by things like workplace conflict, lack of trust, office politics, or harassment will drive turnover quickly. Employees tend to flee environments where they feel unsafe, bullied, or unhappy.
Better Opportunities Elsewhere
Even if nothing is “wrong” internally, employees might leave because they received a better offer. Competitive job markets and aggressive headhunting by other companies can lure talent away with higher salaries, promotions, or more exciting roles.
Personal Reasons
Sometimes factors outside work cause turnover. For example, an employee relocating for family, deciding to go back to school, or changing careers entirely for personal fulfillment. These reasons might not reflect dissatisfaction with the company at all, but they still contribute to your turnover rate.
It’s important to note that some turnover is inevitable and normal. Life changes and career moves will happen. However, when you see a spike in turnover, especially for negative reasons like those listed above, it’s a sign to investigate. Many of the common causes (pay, management, culture, etc.) are areas where employers can take action to improve. By conducting exit interviews or surveys, you can learn which factors are driving your employees to leave and address them proactively.
Interpreting your Turnover Rate: What’s high, What’s healthy?
Once you’ve calculated your employee turnover rate, the next challenge is interpreting it. What is a “high” turnover rate versus a “healthy” one? The answer can depend on your industry, region, and even the nature of your business, but there are general benchmarks:
Healthy Turnover Rate
Research suggests that around 10% annually is a reasonable benchmark for healthy turnover in many industries.
In fact, Gallup analysts have noted 10% as a healthy target, and conventional HR wisdom often says that keeping your turnover rate under 10% is ideal. A turnover rate in the single digits usually indicates that you’re retaining the majority of your staff, which points to effective retention practices and a stable workplace.
Some turnover (around 5-10%) is considered healthy because it means you’re bringing in some new talent and ideas without losing too many experienced staff.
High Turnover Rate
If your turnover rate is significantly above the average (for example, 15%, 20% or higher annually), it typically qualifies as high turnover. High turnover is a red flag, especially if it’s well above what’s normal for your industry.
For instance, if the average in your sector is 10% and you’re experiencing 20%, that’s cause for concern. High rates mean you’re replacing a large portion of your workforce frequently, which can be very costly and disruptive.
It’s also often a symptom of underlying issues (as discussed earlier). HR managers facing high turnover will want to dig into the reasons and quickly implement strategies to improve retention.
It’s crucial to compare your turnover rate to relevant benchmarks. Turnover norms vary widely by industry and job type. For example, certain sectors like hospitality, retail, or call centers traditionally see higher turnover, whereas government or education sectors tend to have lower turnover rates.
According to one analysis, professional services (e.g. consulting or accounting firms) had an average turnover of about 13.4%, while government agencies were around 8.4%. This illustrates that 15% turnover could be “normal” in one field but high in another. So, always evaluate “what’s high?” in context: compare to industry averages, and consider factors like your company’s size and location.
Additionally, consider the qualitative side of turnover. Not all turnover is equally bad. Losing a poor performer or letting someone go for misconduct isn’t the same as losing a star employee who resigns out of frustration. Some turnover can even be healthy. For instance, when employees leave for promotions or opportunities that your company couldn’t provide, it’s often viewed as “good turnover” because it means you developed someone well. Similarly, a degree of fresh talent coming in can bring new skills and perspectives. The key is to differentiate undesirable turnover (valuable people leaving for avoidable reasons) from acceptable or even positive turnover (natural retirement, internal promotions, or underperformers leaving).
Bottom line: A “healthy” turnover rate is generally one that is at or below the industry norm (roughly around 10% for many organizations). If your rate is much higher, it’s worth investigating and taking action. If it’s much lower, congratulations. You’re likely doing something right in retaining your employees (just ensure you continue to provide growth so that low turnover isn’t due to stagnation). Regularly monitoring and benchmarking your turnover rate will tell you how well you’re doing in holding onto your team and whether you need to adjust your HR strategies.
Strategies to reduce Employee Turnover
Reducing employee turnover is all about improving the employee experience and addressing the causes of why people leave. An empowering, user-centric approach to HR will help your team feel valued and want to stay. Here are several effective strategies to reduce employee turnover:
Hire the right People from the start:
Retention begins with recruitment. Ensure you’re hiring candidates who not only have the right skills but also fit your company culture.
Clearly define job roles and expectations during the hiring process so new hires aren’t surprised later. Some companies use assessments or behavioral interviews to gauge if a candidate is likely to stay and succeed.
By bringing in people who align with your mission and values, you increase the chances they’ll stay for the long haul.
Offer competitive compensation and benefits
One of the simplest ways to improve retention is to pay people what they’re worth. Regularly benchmark your salaries and benefits against industry standards to make sure you’re offering competitive packages. This includes health benefits, retirement plans, bonuses, and perks that matter to employees (like wellness programs or extra holidays).
When employees feel they’re compensated fairly (or even generously) for their work, they have fewer reasons to look elsewhere.
Provide Growth and Career Development Opportunities
Invest in your employees’ development, and they’ll invest back in your company. Create clear career paths and advancement opportunities. This could involve training programs, mentorship, tuition reimbursement, or simply new challenges that allow employees to build their skills.
When people see a future for themselves at your organization (and are learning and growing), they’re much more likely to stay rather than take their talents elsewhere. Also, consider promoting from within. It boosts morale and shows that loyalty is rewarded
Improve Management and Leadership
Because bad bosses are a common reason for quitting, work on developing strong, empathetic leaders. Train managers in people-management skills, communication, and coaching. Encourage open dialogue and make sure managers recognize and address team issues promptly.
Sometimes, reducing turnover is as straightforward as training managers to be more supportive and fair. Good leadership creates an environment where employees feel respected and motivated, which in turn boosts retention.
Foster a Positive Work Culture:
Culture is a make-or-break factor. Strive to create a work environment that is inclusive, respectful, and engaging. Encourage teamwork, recognize achievements, and celebrate milestones. Even small morale boosters like team lunches, shout-outs for good work, or fun contests can strengthen an employee’s emotional connection to the company. Also, keep an eye on workload and stress: a culture that values work-life balance (for example, discouraging excessive overtime and encouraging people to use their vacations) will reduce burnout and turnover.
Encourage Work-Life Balance and Flexibility
Bottom line: A “healthy” turnover rate is generally one that is at or below the industry norm (roughly around 10% for many organizations). If your rate is much higher, it’s worth investigating and taking action. If it’s much lower, congratulations. You’re likely doing something right in retaining your employees (just ensure you continue to provide growth so that low turnover isn’t due to stagnation). Regularly monitoring and benchmarking your turnover rate will tell you how well you’re doing in holding onto your team and whether you need to adjust your HR strategies.
Listen to Employee Feedback (and Act on It):
One of the most user-centric things you can do as an employer is to regularly seek and respond to feedback from your team. Conduct stay interviews (informal chats to ask employees what’s going well and what could be better), run anonymous surveys, or have an open-door policy. The key is to find out what matters to your employees and if they have any concerns that might push them to leave. Maybe they want more flexible vacation policy, or they feel career progression is unclear. Whatever it is, take it seriously. When employees see that you listen and make improvements based on their input, trust increases and turnover decreases.
Recognize and Reward Employees:
A little appreciation goes a long way. Implement programs to recognize employees for their hard work. Whether it’s a formal rewards program or just a culture of saying “thank you.” Acknowledge milestones like work anniversaries or successful project completions. When people feel valued and appreciated, they are far less likely to seek that validation elsewhere.
Leverage Technology and AI for Retention
Smart tech can be an invaluable tool in modern HR. For example, HR software can automatically track your turnover metrics and even flag unusual spikes or patterns. Going a step further, AI-powered analytics can help predict which employees might be at risk of leaving by analyzing indicators like engagement survey scores, performance data, or even sentiment in communication.
By using predictive analytics, HR managers can proactively intervene. For instance, if an AI tool suggests an employee is disengaging, managers could have a career development conversation or address their concerns before they decide to resign. AI can also personalize the employee experience: think chatbots that answer HR questions 24/7, or algorithms that recommend internal job openings or training courses to employees based on their profiles.
These innovative, technology-driven approaches help create a more responsive and supportive workplace. They empower HR teams to be more proactive in retention, addressing issues early and tailoring growth opportunities to individual needs. In short, smart use of technology can augment your human touch, ensuring no employee feels like just a number.
By implementing these strategies, you create an empowering environment where employees feel heard, challenged (in a good way), and rewarded. Many of these changes, from better communication to flexible work options are low-cost or minimal effort but can dramatically improve how people perceive their job.
In fact, studies have found that 77% of the causes of turnover are preventable by employers with minimal effort. This means that with a bit of focus and commitment, you can significantly improve retention. Every initiative, whether it’s adopting an AI-driven HR platform for insights or simply training managers to give more recognition, contributes to a workplace where employees want to stay and grow.
In conclusion, managing your employee turnover rate is about understanding it and then taking action. Start with a clear definition and accurate calculation of your turnover rate, recognize its importance as a barometer of organizational health, and break down what type of turnover you’re seeing. Keep an eye on whether your rate is in a healthy range or signaling trouble, and most importantly, tackle the root causes with thoughtful, modern HR strategies.
By doing so, you’ll not only reduce costly turnover but also build a more engaged, loyal, and high-performing team. Which is a win-win for your employees and your business.
