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What Is Employee Turnover Rate?
Businesses invest significantly in attracting, hiring, and training employees, making it essential to retain them and their organizational knowledge.
Although some turnover is inevitable, understanding how to calculate and minimize turnover is key to business growth. In this guide, we’ll cover how to calculate turnover rate, why it matters, and actionable strategies to reduce turnover and improve employee retention.
Why Employee Turnover Rate Matters
Employee churn is a natural part of business, but keeping it to a minimum helps you retain top talent and reduce hiring and training costs. A low employee turnover rate often signals high employee satisfaction.
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However, a high turnover rate can highlight underlying issues such as poor management, insufficient compensation, or limited growth opportunities. Evaluating your turnover rate can provide critical insights to improve employee engagement and satisfaction, ultimately leading to better business outcomes.
How to Calculate Turnover Rate
Depending on what you’re measuring, there are several methods to calculate your employee turnover rate.
General Turnover Rate
To find the general turnover rate, divide the number of employees who left during a specific time frame by the average number of employees employed in that time frame, then multiply by 100.
Employee turnover rate = (Number of employees who left / Average number of employees) x 100
Annual Turnover Rate
For annual turnover, divide the total number of employees who left in a year by the number of employees at the start of that year, then multiply by 100.
Annual employee turnover rate = (Number of departed employees in a year / Total number of staff employed at the start of the year) x 100
Voluntary and Involuntary Turnover Rates
Voluntary turnover often highlights employee dissatisfaction or better opportunities elsewhere, while involuntary turnover can indicate mismatches during hiring.
To assess voluntary turnover (employees who leave by choice), divide the number of voluntary departures by the average number of employees during the period, then multiply by 100. Similarly, use the same calculation method for involuntary turnover (employees who are fired or laid off).
Voluntary employee turnover rate = (Number of employees who chose to separate/ Average number of employees) x 100
Involuntary employee turnover rate = (Number of employees fired or laid off/ Average number of employees) x 100
What Is a Healthy Employee Turnover Rate?
According to Marisa Ramirez, Wizehire’s Director of People Operations, a healthy employee turnover rate varies by industry. A 10% employee turnover rate is generally considered healthy across most industries. However, distinguishing between “good” and “bad” turnover is essential for workforce management.
What Is a High Employee Turnover Rate?
Although acceptable turnover rates vary, many organizations aim for a rate below 10%.
Anything above 10% may be considered high, especially in industries where employees tend to stay with the same employer long-term.
How to Decrease Turnover Rate
Companies aiming to reduce employee turnover should examine factors that may lead to increased churn and make strategic changes during the entire employee lifecycle. Below are four actionable tips to improve employee retention.
1. Get Clarification During Exit Interviews
When conducting an employee’s exit interview, try to understand why employees are leaving and gather feedback for improving the work environment. This process helps identify underlying issues that could reduce future turnover.
Some employees, for example, may report a lack of allyship or a hostile work environment. Your HR team and the employee’s supervising manager can assess the situation.
There may also be challenges with quiet hiring when an employee takes on new responsibilities in addition to their current workload. While this can open up opportunities, it can lead to burnout or resenteeism.
2. Watch for Signs of Disengagement
Disengaged employees often exhibit dissastification; Address these issues early during one-on-one meetings and offer a path forward to keep employees engaged. This may look like:
- increased absences, late start times, or behaviors like coffee badging
- lowered productivity, enthusiasm, or responsiveness
- decreased participation in social or team-building activities
When behaviors like these are detected, address them during employee 1v1s so a path forward can be created and mutually agreed upon.
Wize Tip: In a worst-case scenario, consider a performance improvement plan.
3. Appreciate Your Employees
Implementing employee appreciation and recognition programs, which can include formal programs and public shoutouts for team member accomplishments, can promote employee satisfaction and retention rates. Employees who feel undervalued are more likely to look for new work opportunities.
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4. Track Market Trends
Make sure your compensation packages remain competitive by reviewing market benchmarks for pay and benefits. Regularly adjusting your offers can help you stay competitive and retain your best talent.
How to Analyze Employee Turnover Rates
When analyzing turnover rates, consider seasonal trends or significant events (like company layoffs) that might skew the data. For example, school systems may expect turnover in May or June but be more concerned if turnover spikes mid-year.
Comparing Turnover Rates to Industry Benchmarks
One of the most effective ways to analyze your employee turnover rate is by comparing it to industry benchmarks. Every industry has an average turnover rate, and knowing where your business stands in relation to these numbers can provide valuable insight.
If your turnover rate is higher than the industry standard, it could signal issues like poor job fit, lack of engagement, or competitive compensation. On the other hand, if your rate is lower, it could indicate your strategies for retaining talent are working well.
Use these comparisons to identify strengths and target areas that need improvement, giving your business a competitive edge in retaining top talent.
Wize Words
Tracking turnover rates helps identify employee departure trends early. By closely monitoring turnover, you can improve retention through targeted engagement strategies, competitive compensation, and employee recognition programs.
Frequently Asked Questions
The top reason people often leave their jobs is job dissatisfaction. This can come from a few places: maybe they’re not getting along with their manager, there aren’t enough chances to move up or learn new things, the pay may not be great, or they don’t feel recognized for their hard work. Also, a hostile workplace or a poor balance between work and personal life can make employees head for the door.
While market trends may cause shifts in industry retention rates, some industries consistently experience higher-than-average employee turnover rates. These include the construction, retail, accommodation and food services, professional business services, transportation, warehousing, leisure, and hospitality industries. Companies in these industries should proactively prepare for high turnover to prevent concerns around skilled or trained staff shortages.
Turnover rate refers to the percentage of employees who leave a company during a specific period, either voluntarily or involuntarily. It’s a key metric for businesses to assess employee retention and the overall health of the workforce. To calculate turnover rate, divide the number of employees who left the company by the average number of employees during the same period, then multiply by 100 to get the percentage.
Calculating turnover helps businesses understand employee retention and identify potential issues within the workforce. High turnover rates can indicate problems such as poor job satisfaction, inadequate management, or non-competitive compensation, which can negatively affect productivity and morale. By tracking turnover, companies can pinpoint trends, make data-driven decisions to improve retention, and develop strategies to enhance employee engagement and reduce costs associated with hiring and training new employees. It’s a key metric for maintaining a healthy, stable workforce.
What is the formula for calculating turnover rate?
The formula for calculating turnover rate is: Turnover Rate = (Number of Employees Who Left /Average Number of Employees) * 100. To use this formula, divide the number of employees who left the company during a specific period by the average number of employees in the same period, then multiply by 100 to get the turnover rate as a percentage. This calculation provides insight into the stability of your workforce.
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