Companies invest time, money, and resources in training and grooming employees. Watching them leave your company is not desirable. At the same time, there is no single business that retains all its employees. 57% of CEOs agree that employee retention is a top priority because it's expensive for companies to replace an employee.
In a 2024 ASE Survey, the overall turnover percentage in companies was 18.4%. Businesses must know why employees leave a company to optimize their retention strategies. Keep reading to understand employee turnover rate, its impact on business, and best practices to reduce employee turnover.
What Is Employee Turnover Rate?
Employee turnover rate is the frequency at which workers depart an organization within a given time. It's a percentage value and indicates the firm's ability to retain its workforce.
The rate comprises voluntary turnover (resignation, retirement) and involuntary turnover (firings, layoffs). High turnover usually indicates some issues within the company, like a bad manager, low morale, or insufficient career development.
You can measure it across the entire company, department, job function, or location. It can help you see which areas have higher attrition and why. Knowing your employee turnover rate is crucial for organizational planning. It has direct effects on hiring expense, productivity within the team, and company culture as a whole.
What Drives High Turnover?
Most workers don't leave suddenly overnight. There is generally a pattern behind the departures. Typical drivers are:
Unfavorable work environment
Lack of recognition
Limited career opportunities
Low pay
Poor leadership.
High turnover is often closely related to the organization's internal problems, like toxic culture, manager-level support failure, or hierarchical structures that cap movement upwards. When individuals don't perceive a future within the company, they quit.
HR procedures also play a role in turnover. An unimpressive hiring plan can result in mismatched expectations. When onboarding is faulty or disjointed, new workers will have a hard time fitting in. 20% of the new hires are more likely to quit in the first 45 days due to poor onboarding. These preventable problems tend to go unseen until the harm is already done, after the new hires quit.
Why Employee Turnover Matters?
Employee turnover affects more than personnel. It interrupts the employee life cycle, decreases morale, and adds costs throughout the organization. Its impact is multifold, as stated below:
Financial Impact
Every employee departure results in substantial recruiting, onboarding, and retraining costs. Those costs tend to total 33% of the employee's yearly compensation. When turnover is frequent, the financial pressure to find a new fit for the role rapidly increases.
Operational & Cultural Risks
High employee turnover doesn't simply impact budgets; it slows processes. Remaining employees:
Take on added workloads
Lose direction because of change
Notice reduced engagement and trust
These impacts spread throughout individual departments and the overall organization.
Business Impacts
Unmanaged staff turnover also harms the employer brand. If trends in turnover persist:
Top performers avoid applying
Managers have trouble keeping high achievers
Onboarding delays disrupt project timelines.
Strategic Implications
Turnover emphasizes underlying issues, work-life balance gaps, career development opportunities, and employee engagement. It indicates whether your retention strategy is paying off or not. That's why minimizing employee turnover isn't merely an HR responsibility. It's key to maintaining stability, productivity, and long-term business success.
Key Types of Turnover to Track
Knowing the various kinds of employee turnover enables HR departments to identify where the actual problems are. Not all turnover is bad. However, neglecting the types and reasons can create expensive blind spots and result in losing valuable talent.
Voluntary Turnover
Voluntary turnover occurs when an employee decides to quit the organization. It may be for a better career opportunity, better compensation, personal grounds, or unhappiness with the existing job. Voluntary turnover at high levels usually indicates employee experience issues, such as no growth, poor management, or a bad work environment. About 42% of voluntary turnover can be prevented, according to Gallup.
Involuntary Turnover
Involuntary turnover is when the organization initiates the departure. It encompasses firings for performance reasons, layoffs, or restructuring. Although some involuntary departures are inevitable, a pattern can indicate hiring mismatches or poor performance management.
Avoidable vs Unavoidable Turnover
Avoidable turnover is exits that can be avoided with necessary action, e.g., those caused by poor culture, insufficient development, or burnout.
Unavoidable turnover consists of retirements, moves to a new home, or personal health reasons, circumstances largely beyond the employer's influence. Finding ways to reduce avoidable turnover is central to retention improvement.
Internal vs External Turnover
Internal turnover involves employees leaving their current position but remaining within the company, transferring to another team, function, or location. This shows internal mobility and opportunities for growth.
External turnover is when employees leave the organisation altogether. Persistent high external turnover could signal underlying problems with culture or a lack of employee engagement.
Good Turnover and High Turnover
Good turnover is subjective and it occurs when poor performers depart, opening space for more capable talent or new thinking. High turnover, however, refers to when exits are recurrent and disruptive. It damages morale, raises expenses, and interferes with continuity as people quit early.
How to Calculate Employee Turnover Rate: Step-by-Step Guide
Knowing how to calculate employee turnover rate makes it easier for HR teams to gauge workforce stability within a given period.
The typical employee turnover rate formula is:
Turnover Rate (%) = (Number of Employees Who Left ÷ Average Number of Employees) × 100
Here's how each component works:
Number of employees who separated: The total number of voluntary and involuntary separations during the period.
Average number of employees: Combine the headcount at the beginning and end of the period and divide by two.
Apply this formula to compute turnover rate monthly, quarterly, or annually. The time period should match the trend you are trying to follow.
Example: Monthly Employee Turnover Rate
Suppose a firm had 90 workers at the beginning of June and 110 at the end. Five workers resigned during the month.
Average number of workers = (90 + 110) ÷ 2 = 100
Turnover rate = (5 ÷ 100) × 100 = 5%
So the firm experienced a 5% per-month worker turnover in June.
Track Different Kinds of Turnover Separately
Though the total turnover rate is helpful, tracking voluntary and involuntary turnover separately provides more depth. Calculate these numbers by department, job title, and length of time employed to track turnover trends more specifically.
Interpreting Turnover Data
Turnover figures by themselves are not useful without context. You must interpret them in the right way to pinpoint the reasons behind employees leaving the company.
Go Beyond the Numbers
High turnover isn't always a bad thing, and low turnover isn't always a healthy thing. For example, a bit of turnover is needed to maintain the dynamic within the organization. The question is: What type of employee is leaving? Which teams? At what stage in the employee life cycle?
Benchmark your figures against:
Internal benchmarks: Monitor fluctuations in your own organization's turnover rate between different time frames.
Industry benchmarks: Compare your company against industry averages using outside data.
This helps determine if turnover is part of a larger trend or an immediate internal problem.
Identify Trends and Underlying Causes
Deconstruct turnover statistics to identify trends in:
Voluntary versus involuntary turnover
Individual departments or units with high turnover
Tenure (Do new employees depart within the initial 90 days?)
Reasons provided at exit interviews
The comprehensive turnover report discloses whether your turnover is caused by poor management, poor onboarding, lack of career development, or more profound structural problems.
Use Turnover Insights Strategically
Don't just measure; rather, use turnover insights to inform HR decisions. For instance:
A spike in early departures may reflect shortcomings in your hiring process.
Increased turnover for specific job roles could signal unrealistic job expectations.
Consistent turnover in one team might expose bad management.
Through accurate interpretation of data, HR experts can craft strategies that address the issues at their core. This may involve enhancing working conditions, restructuring tasks, or reinforcing staff engagement.
What Is a Healthy Employee Turnover Rate?
No company keeps all employees forever. Letting go of employees from time to time is normal, even desirable. However, excessive turnover is detrimental to morale, productivity, and the bottom line.
Knowing Industry Benchmarks
A healthy employee turnover rate is generally under 10% per year, depending on the industry and type of role. Rates in retail and hospitality have a higher turnover rate because of seasonal positions and part-time employment. Technology, health, and finance typically aim for a lower turnover rate, considering the expense of bringing in experienced professionals.
Voluntary vs Involuntary Turnover
Steep voluntary turnover can reflect preventable issues such as a poor work environment, insufficient room for advancement, or burnout. If top performers leave, it's a cause for concern. Involuntary turnover, however, could suggest poor hiring practices or management issues, particularly if rates drastically increase in one or more departments. Monitor both to determine whether your turnover is strategic, unintentional, or entirely avoidable.
Context Matters
There isn't a single, universal benchmark. Consider:
Company stage: Startups can have increased churn due to changing roles and expectations.
Employee life cycle: Entry-level positions experience more turnover than leadership positions.
Retention efforts: Effective onboarding, engagement, and development initiatives reduce turnover in the long term.
Use these factors alongside raw percentages to judge whether your turnover rate is healthy or needs attention.
How to Reduce Employee Turnover
Successful retention needs a people-led, strategic approach. These strategies assist organizations in minimizing employee turnover and creating lasting engagement.
Develop a Positive Culture with Recognition & Engagement
Organizations that scored highly in engagement score attributed lower turnover to emphasizing six cultural pillars: reward/recognition, open communication, empowerment, wellbeing, pride, and job satisfaction. These companies outperform both national and global standards by a significant margin.
Tip: Implement everyday recognition (both peer-to-peer and manager-initiated), open information-sharing, and valuable feedback loops.
Provide Competitive Compensation & Customized Benefits
Poorly paid employees tend to quit, but investing in pay and applicable benefits lowers this turnover. For instance, IKEA reduced UK turnover from 41% to 27% by raising pay, introducing a buddy system, and including shift flexibility.
Tip: Let employees select perks that are important to them (e.g., mental wellbeing, childcare, profit-sharing).
Enhance Career Development & Internal Mobility
Workers care about advancement. 94% of employees would remain for a longer period if career advancement were offered. Presenting employees with career advancement opportunities helps them develop skills that directly drive business outcomes and also provides a clear path for career progression, increasing their engagement and job satisfaction.
Tip: Establish clear in-house career paths, job rotation opportunities, mentoring, learning allowances, and microlearning opportunities.
Facilitate Work–Life Balance & Well Being
Flexible work arrangements and true policy equity increase retention in organizations that provide equitable flexibility, experience up to 466% higher job satisfaction, and have a 679% improved probability of employees working for over one year.
Tip: Implement flextime, hybrid schedules, mental health support, and burnout prevention programs.
Enhance Manager-Employee Relationships
Workers tend to leave managers, not employers. Trust, feedback, and support are key. One-to-ones and good leadership training minimize turnover risk massively.
Tip: Coach managers in communication, coaching, and appreciation; establish clear expectations and have regular catch-ups.
Communicate, Listen & Act on Feedback
Exit and stay interviews identify latent drivers for turnover. Organizations applying this feedback minimize attrition and identify actionable insights.
Tip: Conduct regular pulse surveys and stay interviews. Close the loop report results and make changes.
Foster Team-building, Belonging & DE&I
Inclusion and recognition increase loyalty. Peer-to-peer appreciation, team-building activities, ERGs, and organizational values create commitment and lower turnover.
Tip: Organize frequent team events; enable ERGs; mark milestones that mirror organizational values.
Structure Tasks to Prevent Cognitive Burnout
Excessively demanding task sequences (the "streak-end rule") cause staff to feel flooded, sensing that even in otherwise well-balanced jobs.
Tip: Don't assign back-to-back hard tasks; interleave them with standard work. Structure workflows to handle mental exhaustion.
Conclusion
Employee turnover rate is more than a statistic; it's a measure of the health of your organization. High turnover may interfere with teams, exceed budgets, and compromise long-term performance. Turnover statistics are an effective driving force for change when measured regularly and properly interpreted. Streamlining your hiring process, improving engagement initiatives, and providing a positive working environment can lower employee turnover and establish a more stable, motivated workforce. Strategic turnover management depends on data-driven decisions and having a clear vision of what motivates your people to stay.
