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Employee turnover rate is a metric that tracks the percentage of employees leaving an organization over a specific period. It highlights how often staff leave, whether due to resignations, retirements, or terminations, indicating the state of workplace stability and employee satisfaction.
High turnover can signal poor motivation, ineffective management, or misaligned expectations, low turnover indicates a positive work environment with reduced hiring costs and increased employee morale. While turnover impacts various industries, it can be essential in roles that often require micro-credentials, like IT or cybersecurity.
Not sure where to start? In this article, we’ll share an easy guide to calculating employee turnover rates, with practical tips and examples to ensure organizations build a resilient and thriving workforce.
Types of Employee Turnover
Employee turnover rate essentially has two main types—voluntary and involuntary turnover.
Voluntary turnover
Voluntary turnover happens when an employee decides to leave their role at a company, including retirements and voluntary resignations. In this process, employees need to submit a notice, at least two weeks in advance, whereas organizations need to set up exit interviews to understand the reason for the turnover.
Involuntary turnover
Involuntary turnover happens when an organization decides to terminate an employee from their position. Common reasons for involuntary turnover include organizational restructuring, employee underperformance, and limited budgeting, leading to necessary staff cuts.
Both types of turnover can have significant impacts on organizations, Voluntary turnover often points to issues with employee dissatisfaction or engagement, whereas involuntary turnover indicates deeper organizational or performance-related challenges. Calculating turnover in either case is vital for identifying and addressing underlying issues, and making informed decisions to reduce turnover costs and achieve workplace stability.
Why it’s important to calculate turnover rate
Calculating employee turnover rates is vital for HR teams and high-up management. It helps them understand workforce viability and identify any issues affecting retention. It also provides businesses with insights into patterns like employee departures, and pinpointing areas that need improvement, like job compensation.
Turnover rates also reveal the financial impact of replacing employees, including hiring, onboarding, and training costs. By calculating and monitoring employee turnover rates, organizations can take targeted actions to elevate retention, streamline hiring processes, and make more informed decisions that support long-term growth.
What Impacts Employee Turnover Rates?
For optimal turnover rates, companies need to implement quality employee retention strategies. Some key factors that can influence employee turnover, for better or worse, include:
- Job compensation. If employees aren’t satisfied with their salary based on their role obligations, it can lead to resignations which directly impacts employee turnover. Meeting salary expectations according to job performance and industry demands is key for optimizing turnover, ensuring retention, and reducing hiring and onboarding costs.
- Job flexibility. Work flexibility, from remote working to flexible working hours, can help reduce employee turnover rates. Companies with flexible work options are likelier to train employees more efficiently and reduce burnout, leading to higher job satisfaction and therefore, retention.
- Professional development. Employees require continuous growth in the workplace to expand their careers. Organizations offering career development opportunities, alongside verifiable digital certifications, see lower employee turnover rates due to their ongoing investment in employee growth.
- Employee engagement and motivation. Disengaged employees are the least likely to stay at a company. Increasing their motivation and engaging them through interactive learning or hands-on practice should be a priority among organizations looking to lower turnover rates.
How to Calculate Employee Turnover Rate
There are various ways to calculate employee turnover rate, depending on what organizations want to monitor. As a rule of thumb, to calculate the employee turnover rate, organizations should divide the number of employees who left by the average number of employees during that period. The result is then multiplied by 100 and expressed as a percentage, making it easier to interpret and compare. Employee turnover can be calculated monthly, quarterly, or annually.
To do it accordingly, organizations need to consider three metrics:
- Number of employees at the start of the period
- Number of employees at the end of the period
- Number of employees who left during the period.
Let’s go over this formula using practical examples based on different periods.
Monthly employee turnover rate
What’s being calculated: The monthly employee turnover rate measures how often employees leave your company within a single month. It’s useful for identifying short-term trends and seasonal patterns in turnover.
Steps to take:
- Count the total number of employees at the start and end of the month to calculate the average workforce size (Start+End)÷2
- Determine how many employees left the organization during the month.
- Apply the formula: (Employee Who Left÷Average Number of Employees)x100
Example:
- Employees at the start: 50
- Employees at the end: 48
- Employees who left: 3
Step 1: Calculate average workforce: (50+48)÷2=49
Step 2: Calculate turnover: (3÷49)x100=6.12
The turnover rate for the month is 6.12%.
Quarterly employee turnover rate
What’s being calculated: The quarterly turnover rate provides a mid-range view of workforce stability, helping companies track turnover trends across three months. It’s a valuable metric for identifying patterns or anomalies in hiring or turnover.
Steps to take:
- Add the number of employees at the start and end of the quarter, then divide by two to find the average workforce size.
- Total the number of employees who left during the quarter.
- Apply the formula: (Employees Who Left÷Average Number of Employees)x100
Example:
- Employees at the start: 150
- Employees at the end: 140
- Employees who left: 20
Step 1: Calculate average workforce: (150+140)÷2=145
Step 2: Calculate turnover: (20÷145)x100=13.79
The quarterly turnover rate is 13.79%.
Annual employee turnover rate
What’s being calculated: The annual turnover rate captures long-term trends and provides a big-picture view of workforce vitality, ideal for strategic planning and benchmarking against industry standards.
Steps to take:
- Find the average workforce size by adding the total employees at the start and end of the year; then dividing by two.
- Count the total number of employees who left during the year.
- Apply the formula: (Employees Who Left÷Average Number of Employees)x100
Example:
- Employees at the start: 500
- Employees at the end: 480
- Employees who left: 60
Step 1: Calculate average workforce: (500+480)÷2=490
Step 2: Calculate turnover: (60÷490)x100=12.24
The annual turnover rate is 12.24%.
How to Analyze and Interpret Employee Turnover Rate
Beyond calculating the employee turnover rate, organizations also need to interpret it accordingly to understand the bigger picture. When do employees leave the most? What’s the most common reason? Is the calculated turnover rate good or bad?
These are all questions businesses need to answer to reduce turnover and adjust future strategies. Here are the steps to help analyze and interpret employee turnover rates.
Compare against industry benchmarks.
Start by evaluating your turnover rate based on the industry you’re in. This helps understand whether your rate is within a ‘normal’ range or unusually high. For example, sectors like retail and hospitality generally see higher turnover rates, while industries like finance have lower ones. If your turnover rate exceeds these norms, it may indicate deeper problems in your organization that need addressing.
Identify data patterns
Getting into the specifics of your turnover can help determine any common patterns. Focus on who is leaving—new hires, top performers, or employees in certain departments. Also, consider why they are leaving; for instance, if employees leave shortly after onboarding, there might be unmet expectations. Analyzing why employees leave through exit interviews or surveys can provide insights into dissatisfaction with leadership, lack of growth opportunities, or uncompetitive compensation.
Develop and tailor strategic solutions.
Businesses need to implement targeted strategies based on findings to improve their turnover. Processes like improving onboarding and introducing career development programs and employee recognition initiatives, like digital certifications, can boost morale and engagement. On top, reviewing and adjusting your compensation packages can help stay competitive with industry standards and increase loyalty. Moreover, consider solutions like flexible work policies and team-building activities to improve workplace satisfaction and reduce turnover.
Best Ways to Reduce Employee Turnover Rates
Employee turnover can happen across any organization and industry. While it’s nothing new, reducing this rate is essential for businesses that want to keep quality employees on board and ensure streamlined operations without additional costs on new hires and onboarding.
Here are 6 top ways to reduce employee turnover rates.
Hire & retain the right people.
Selecting candidates who align with your company’s culture and values is essential to reducing turnover. Organizations with effective onboarding see a 69% increase in employees staying for three years. Additionally, assessing your top performers helps elevate their performance to them and ensure their engagement and satisfaction.
Offer competitive compensation and benefits.
Ensuring that salaries and benefits meet industry standards is vital to keeping employees on board. In 2024, 28% of employees said better compensation is the primary reason they left a previous role. As employee roles grow, ensure compensation grows with it, ensuring professionals are acknowledged for their contribution beyond spoken praise.
Provide career development opportunities.
Having a clear path to career advancement is crucial for employees in any role. Offering training programs, digital certifications, and professional development initiatives shows your commitment to employee growth and long-term learning. According to research, 94% of employees said they would stay longer at a company that invests in their career development.
Implement flexible work opportunities.
Flexibility is king in today’s fast-paced business landscape, with more professionals seeking it from employers. Offering various flexibility opportunities, like remote work and flexible schedules, contributes to greater work-life balance. Not only that, but it also helps increase employee satisfaction and retention, ultimately reducing turnover.
Seek and apply feedback.
Reducing turnover is directly related to implementing employee feedback and increasing their commitment to a role. Running regular surveys and seeking active feedback helps identify any gaps that may lead to turnover, be it ineffective workflows or insufficient compensation. At the same time, it gives companies the chance to compare managerial feedback against employee feedback and make aligned decisions.
Rely on AI solutions.
Implementing AI-driven tools helps identify employees at risk of leaving by analyzing patterns. This approach helps address any concerns before they lead to turnover. AI-driven HR solutions can analyze employee engagement metrics to predict potential departures, allowing management to make strategic decisions. According to reports, 78% of employee departures are preventable with timely interventions, making AI a top tool to leverage for reducing turnover.
Employee Turnover Rate—Shaping the Future of Your Workplace
With 28% of employees being “extremely likely” to change companies in the next 12 months, calculating turnover is crucial for understanding business health. Without this crucial metric, businesses risk overlooking critical issues, from employee retention to streamlined operations, resulting in unfavorable outputs and misaligned goals.
High turnover impacts not only the financial viability through recruitment and training costs but also takes a hit on employee morale and productivity. Growing employee satisfaction through implementing certifiable development programs and acquiring feedback helps retain top talent, increases performance, and ensures professional and organizational growth.
By consistently tracking turnover, businesses can identify root causes, anticipate challenges, and make proactive adjustments to ensure long-term success.
Employee Turnover Rate—Frequently Asked Questions
What are the risks of a high turnover rate?
High employee turnover rates can lead to reduced productivity, low employee morale, and disrupted workflows. Companies are also risking additional costs for hiring, onboarding, training, and recruitment, as well as lost productivity as new employees get up to speed.
What is considered a positive turnover rate?
Turnover rates can vary by industry. However, a turnover rate under 10% is generally considered healthy, indicating effective employee retention strategies. However, this can vary depending on the specific industry and company circumstances and long-term goals.
Which industries have the highest and lowest employee turnover?
According to research, industries like finance and insurance have lower turnover rates (1.7%). At the same time, sectors like hospitality (52%)and retail (42%) experience higher turnover rates due to seasonal employment, job dissatisfaction, and wage instability.
