What Is Employee Turnover?
Employee turnover is the rate at which employees leave an organization during a specific time period — usually calculated monthly, quarterly, or annually. It includes both voluntary exits (resignations) and involuntary exits (terminations, layoffs, retirements).
Turnover is one of the most important metrics in HR and people analytics because it tells you how stable and sustainable your workforce is.
Why It Matters
Understanding employee turnover is critical for several reasons:
- Cost: Replacing employees is expensive — recruiting, onboarding, and lost productivity all add up
- Culture: High turnover can erode morale and trust
- Continuity: Losing key roles disrupts workflows and projects
- Customer Experience: Frequent staff changes can affect service quality and satisfaction
- Strategic Planning: Turnover rates affect workforce planning, budgeting, and value creation strategies
Especially in private equity–backed companies, where every headcount decision impacts the bottom line, turnover isn’t just an HR concern — it’s a business risk.
How to Calculate Employee Turnover Rate
The basic formula is:
Turnover Rate = (Number of employee separations during the period ÷ Average number of employees during the period) × 100
This gives you the percentage of employees who left the company in a given timeframe.
Example Calculation
Let’s say:
- 10 employees left during Q2
- Your company had an average of 120 employees during that period
Turnover Rate = (10 ÷ 120) × 100 = 8.3%
Your turnover rate for Q2 is 8.3%.
What’s Considered a “Good” Turnover Rate?
There’s no universal “right” number — it depends on industry, region, and role type. But here are some broad guidelines:
- 5–10% annual turnover is low and often indicates strong retention
- 10–20% is common in many industries
- Above 20% may signal deeper cultural, leadership, or compensation issues
- Above 30% is typically unsustainable, especially in skilled or leadership roles
Retail, hospitality, and call centers often have higher turnover. Tech, healthcare, and finance tend to aim for lower rates.
The key is to track your own baseline and look at trends over time.
Types of Employee Turnover
There are several ways to break down turnover:
1. Voluntary Turnover
When employees choose to leave on their own (e.g., resignation, better offer, burnout)
2. Involuntary Turnover
When the company initiates the exit (e.g., performance termination, layoffs, restructuring)
3. Regrettable Turnover
Voluntary exits of high performers or key talent the company wanted to retain
4. Non-regrettable Turnover
Departures that are neutral or beneficial to the company
5. Internal Turnover
When employees move to other roles or departments within the same company
Each type of turnover has different causes and implications — so tracking them separately can help you prioritize solutions.
Common Causes of High Turnover
High turnover rarely happens for just one reason. Common drivers include:
- Poor management: Employees leave managers, not companies
- Lack of career growth: No clear paths for advancement
- Compensation gaps: Pay or benefits are below market
- Burnout: Workload or pressure becomes unsustainable
- Toxic culture: Lack of trust, inclusion, or psychological safety
- Limited flexibility: Rigid policies around location or scheduling
- Weak onboarding: New hires don’t get the tools or support they need
Employee surveys, exit interviews, and stay interviews can help identify which of these factors are at play in your organization.
Data You Need to Track Turnover
To monitor turnover effectively, collect:
- Dates of employee exits
- Reason for departure (voluntary/involuntary, resignation/termination)
- Department, manager, location, and tenure of each employee
- Average headcount during the period
- New hire start dates (for replacement tracking)
- Engagement and eNPS scores (for predictive insights)
More advanced organizations also layer in metrics like:
- Retention by manager or team
- Turnover of new hires (within 90 or 180 days)
- Turnover among high performers or top 10% of talent
Impact of Employee Turnover on Business Performance
Turnover isn’t just a people issue — it has measurable impacts on performance:
Financial Impact
- Increased hiring costs
- Lower productivity during ramp-up
- Lost ROI on training and development investments
Knowledge Loss
- Departing employees take institutional knowledge with them
- Handovers are often incomplete or rushed
Team Morale
- Remaining team members take on extra work
- Risk of burnout and additional exits rises
Execution Risk
- Missed project deadlines
- Inconsistent customer or client experience
High turnover can erode not just your workforce, but your company’s competitive edge.
How to Reduce Employee Turnover
Once you identify the causes, here are effective strategies to improve retention:
1. Hire for Fit and Role Readiness
Use structured interviews and realistic job previews to ensure alignment from day one.
2. Strengthen Onboarding
A strong first 90 days sets the tone for long-term success and engagement.
3. Train and Support Managers
Great managers reduce turnover. Poor ones drive it. Invest in their development.
4. Offer Career Growth Opportunities
Even lateral moves and skill-building projects help employees feel invested in.
5. Benchmark and Adjust Compensation
Stay competitive in base pay, bonuses, benefits, and recognition.
6. Improve Internal Communication
Keep employees informed, heard, and connected to the company’s mission.
7. Collect and Act on Feedback
Use engagement surveys, eNPS, and stay interviews — and show that feedback leads to change.
8. Track Early Warning Signs
Rising absenteeism, decreased engagement, or declining manager effectiveness often precede turnover.
Turnover vs. Retention: What’s the Difference?
- Turnover measures how many people left
- Retention measures how many people stayed
They’re two sides of the same coin. Most organizations track both, but some prefer to emphasize retention as a more positive, proactive metric.
Example: If your quarterly turnover rate is 8%, your retention rate is 92%.
FAQs About Employee Turnover
Should I include internal transfers in my turnover rate?
No. Internal moves don’t count as turnover — they actually support retention.
How often should I track turnover?
Quarterly is common for reporting. Monthly can be useful in high-churn environments.
What’s more important: voluntary or involuntary turnover?
Voluntary turnover is often more impactful — especially when it’s regrettable talent.
Can turnover rate be negative?
No. But it can be zero — meaning no one left during the period.
Final Thoughts
Employee turnover is one of the clearest signals of organizational health. It impacts everything from productivity and culture to EBITDA and valuation — especially in fast-paced or investor-backed environments.
By understanding how to calculate, monitor, and act on turnover data, HR teams can move from reactive firefighting to proactive strategy — helping to create a workplace where great people stay, grow, and contribute over time.