Last updated: March 2025
Quick Answer
Employee turnover rate is the percentage of your workforce that leaves over a specific period. To calculate it, divide the number of employees who left by your average number of employees for the period, then multiply by 100.
Key Takeaways
- ✓ Measure Annually or Quarterly: While some businesses measure turnover monthly, annual or quarterly metrics are generally more useful because they smooth out seasonal hiring spikes.
- ✓ Context is Everything: If your company went through a massive restructuring and laid off 20% of the staff, your turnover rate will spike. When analyzing the data, always separate voluntary turnover (quitting) from involuntary turnover (layoffs/firings).
- ✓ High Turnover is Expensive: The Society for Human Resource Management (SHRM) estimates it costs 6 to 9 months of an employee's salary to identify, recruit, and onboard their replacement.
How to Reduce Employee Turnover
If your voluntary turnover rate is consistently higher than your industry average, you likely have a cultural or compensation issue. To fix the leak:
- Conduct Exit Interviews: Don't just let people leave. Have HR (not their direct manager) conduct an interview to find out the real reason they are resigning. Look for patterns across multiple exiting employees.
- Audit Your Compensation: Are you paying market rates? If a competitor down the street is paying 15% more for the same role, you will constantly lose your best talent.
- Improve Onboarding: Employees who have a negative onboarding experience are twice as likely to look for other opportunities in the near future. Ensure new hires have everything they need to succeed on Day 1.
- Provide Growth Paths: Top performers want to know what their future looks like at your company. If there is no clear path to a promotion, they will seek a promotion at another company.
Frequently Asked Questions
What is employee turnover rate?
Employee turnover rate is the percentage of employees who leave your organization during a certain period of time. Replacing an employee can cost 30% to 150% of their annual salary, so tracking and minimizing turnover is critical for profitability.
What is a good turnover rate?
A "good" rate depends heavily on your industry. Retail and hospitality often see turnover rates exceeding 60-70% per year. However, across most professional industries, a healthy turnover rate is generally considered to be 10% or less.
What is the difference between voluntary and involuntary turnover?
Voluntary turnover occurs when employees choose to leave (resigning to take a new job, retiring). Involuntary turnover occurs when the employer terminates the relationship (firing for cause, layoffs).
How do you calculate employee turnover?
Divide the number of employees who left during a period by the average number of employees during that same period. Then, multiply by 100 to get a percentage.