Employee Turnover Rate
Last updated: Sep 17, 2025
What is Employee Turnover Rate?
Employee Turnover Rate is a human resources metric that measures the percentage of employees who leave an organization over a specific time period, such as a month, quarter, or year. It includes both voluntary departures, where an employee chooses to leave, and involuntary departures, such as termination or layoffs. The metric helps organizations understand the stability of their workforce, identify potential issues in the workplace, and assess the effectiveness of their retention strategies. A high turnover rate can signal underlying problems within the company, while a low rate generally indicates a stable and engaged workforce.
Employee Turnover Rate Formula
How to calculate Employee Turnover Rate
Let's calculate the annual employee turnover rate for a small business. Step 1: Determine the number of employees who left. - Over the last year, 15 employees left the company. Step 2: Calculate the average number of employees. - The company had 100 employees at the beginning of the year. - It had 90 employees at the end of the year. - Average Number of Employees = (100 + 90) / 2 = 95. Step 3: Apply the formula. - Employee Turnover Rate = (15 / 95) x 100 - Employee Turnover Rate = 0.15789... x 100 - Employee Turnover Rate = 15.8% (rounded) The company's employee turnover rate for the year is 15.8%.
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What is a good Employee Turnover Rate benchmark?
What is considered a "good" turnover rate varies significantly by industry, company size, and region. A commonly cited benchmark for a healthy turnover rate is under 10%. However, some industries, such as retail and hospitality, naturally experience higher rates. For example, the average voluntary turnover rate in Canada is 10.2%, with the retail and wholesale industry at 21.0%. By contrast, the average for the finance and insurance sector is 1.6% in the US, with professional services at 4.7%. Higher-level positions tend to have lower turnover rates, likely due to better compensation, more autonomy, and stronger support systems. It's more useful to benchmark your organization's turnover rate against its own historical data and against similar companies in your specific industry.
How to visualize Employee Turnover Rate?
A line chart can help you optimally visualize your Employee Turnover Rate data by letting you see how this metric trends over time. You can then adjust your strategy to meet your goals.
Employee Turnover Rate visualization example
Employee Turnover Rate
Line Chart
Employee Turnover Rate
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Measuring Employee Turnover RateMore about Employee Turnover Rate
Employee Turnover Rate is a foundational metric for business leaders and HR professionals, as it directly impacts an organization's productivity, morale, and financial performance. The cost of replacing an employee is significant, with some sources estimating it to be between one-half to two times the employee’s salary. These costs include recruiting, onboarding, and training a new hire, as well as the loss of productivity and institutional knowledge from the departing employee.
Understanding the types of turnover is crucial for a meaningful analysis. As the initial definition suggests, turnover can be categorised as either voluntary or involuntary.
Voluntary Turnover occurs when employees choose to leave on their own. This is often considered the most telling indicator of a company’s health, as it can be influenced by factors such as:
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Lack of Career Advancement: A leading reason for voluntary departures is the absence of opportunities for professional growth and development. Employees want to see a clear career path and feel that the company is invested in their future.
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Inadequate Compensation and Benefits: While not always the primary reason, uncompetitive pay and benefits can be a significant factor in an employee's decision to leave.
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Poor Management and Work Environment: Ineffective, unsupportive, or non-empathetic managers can lead to low morale and high turnover. A toxic or unfulfilling workplace culture can also drive employees away.
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Burnout: High workloads and a lack of work-life balance can lead to employee burnout, which is a major contributor to turnover.
Involuntary Turnover is when an organization terminates an employee's contract. This can be due to:
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Performance Issues: An employee not meeting job expectations or performance standards.
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Misconduct: Violations of company policy or other disciplinary issues.
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Layoffs: Organisational restructuring or a reduction in force due to economic factors.
Analysing voluntary and involuntary turnover separately provides a more nuanced understanding of why employees are leaving. For instance, a high involuntary turnover rate might suggest issues with the hiring process or training, whereas a high voluntary turnover rate often points to problems with employee engagement, culture, or compensation.
Best Practices for Managing Employee Turnover Managing and reducing employee turnover requires a strategic, multifaceted approach. Simply tracking the rate is not enough; businesses must actively use the data to inform their decisions.
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Conduct Stay and Exit Interviews: Stay interviews involve speaking with current employees to understand what makes them want to stay with the company, helping to address issues before they lead to a departure. Exit interviews with departing employees can provide valuable feedback on why they are leaving and highlight areas for improvement in the organization.
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Improve the Hiring and Onboarding Process: Hiring the right person for the role and the company culture is the first step to reducing turnover. Providing a proper onboarding experience, which can include mentorship and training, helps new employees feel supported and integrated.
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Invest in Employee Development: Providing opportunities for learning, training, and career advancement is a top reason for retention. When employees see a clear path for growth, they are more likely to stay with the company for the long term.
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Recognise and Reward Employees: Regular and timely recognition for employees' accomplishments, whether through formal programmes or informal gestures, is crucial for making them feel valued and appreciated.
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Offer Competitive Compensation and Benefits: Periodically reviewing and adjusting salary bands and benefits to remain competitive within the industry is important for attracting and retaining talent.
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Foster a Positive and Flexible Culture: A healthy work environment, empathetic management, and a focus on employee well-being can significantly impact retention. This includes offering flexible work arrangements where possible to support work-life balance.
Employee Turnover Rate Frequently Asked Questions
What is the difference between turnover and attrition?
Turnover includes all employee separations, both voluntary and involuntary (like layoffs). Attrition typically refers only to voluntary departures or reductions in force that are not replaced, so it is a narrower metric.
Should we include all departures in our turnover calculation?
This depends on your analytical goals. For overall workforce stability, include all departures. For deeper insights, segment your analysis: voluntary vs. involuntary, regretted vs. non-regretted, or by tenure bands. For example, high turnover among employees with less than one year tenure suggests onboarding or selection issues, while increased departures among tenured staff might indicate career development problems.
Our turnover rate seems low compared to benchmarks—is this always positive?
Not necessarily. Unusually low turnover can indicate insufficient performance management, lack of career growth triggering disengagement without departure, or compensation structures that reward tenure over performance. A professional services firm with 3% turnover against an industry benchmark of 15% should investigate whether they're retaining the right people for the right reasons.