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Surveys & Engagement

How to calculate employee turnover rate: A step-by-step guide

Leapsome Team
How to calculate employee turnover rate: A step-by-step guide
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Let’s face it: The era of employee turnover isn’t arriving; it’s already here. Of the 2,500 global professionals we surveyed in our 2023 Workforce Trends Report, a shocking one in three already plans to leave their job within the next 12 months. (1)

These figures do not bode well for employers, managers, or HR professionals, who still contend with the 5.3 million open positions that employees vacated throughout 2023, including the 3.5 million jobs that employees quit willingly. (2)

In other words, turnover issues are not going anywhere anytime soon. Fortunately, there are actionable steps you can take right now to improve the overall health of your organization, beginning with calculating the employee turnover rate.
Explore this comprehensive guide to employee turnover to discover how to interpret and reduce your employee turnover rate, with tips to enhance employee retention.

1. Leapsome’s Workforce Trends Report, 2023

2. Bureau of Labor Statistics, 2024

Main takeaways from this article:

  • Employee turnover rates indicate the number of employees that left an organization within a certain period, such as monthly or annually.
  • There are two types of employee turnover, voluntary and involuntary, though both impact overall business health equally. 
  • Leadership can apply several turnover calculations to monitor workforce strength, including voluntary and new hire turnover rates.
  • Leapsome has identified multiple recurring causes of high employee turnover, such as lackluster onboarding processes and insufficient benefits.
  • Managers and HR leaders can improve employee turnover rates and increase ultimate retention with time-tested people enablement strategies.

What is the employee turnover rate?

Employee turnover rate measures how many employees leave an organization within a specific period, typically one year. It’s expressed as a percentage to indicate which portion of the workforce has departed within the timeframe. 

As a popular business metric to monitor the health of an organization, calculating employee turnover rate helps assess a company’s management effectiveness over time.

Types of employee turnover

There are two primary types of employee turnover: voluntary and involuntary turnover. The differences between the two are spelled out in their names. Voluntary turnover refers to the employees who willingly choose to leave an organization, whereas involuntary turnover refers to the employees who were asked to leave an organization by leadership. 

Our team surveyed thousands of employees across various industries to identify the many sources of turnover. Generally speaking, voluntary turnover stems from poor onboarding, development, and compensation opportunities. Exit and engagement surveys are highly beneficial for discovering the unique reasons for voluntary turnover at each company.

Speaking of unique reasons, the sources of involuntary turnover are typically more specific to each organization. Involuntary turnover can be caused by poor performance or behavioral issues on the employee’s behalf, evolving business needs, structural changes to the workforce, and even company budget cuts.

While the word ‘turnover’ often has a negative connotation, it’s important to point out that no organization is immune to departures. A low turnover rate enables fresh talent to enter a company and allows employees who no longer align with a business’s objectives to grow in a separate direction. However, here’s a look at the dangers of a high turnover rate.

The impact high turnover can have on your business

Too many employees leaving their positions over a short period can have far-reaching and long-lasting adverse effects on your company’s performance. That’s why employee retention is so important for creating a dynamic and resilient workplace.

Here are some of the consequences an organization with a turnover problem may face:

  • A weak and unstable company culture — Culture is the bedrock of an organization, but it’s also a significant indicator of its health. Employees leaving can cause their colleagues to question whether they’re happy with their jobs. They may wonder what’s going on behind the scenes if many people are moving on to other opportunities, which could result in them displaying behavior that doesn’t align with your company’s culture. For instance, a business encouraging radical candor may notice staff not openly sharing their concerns.
  • Mounting hiring and onboarding costs — Experts say replacing an employee can cost three or four times their salary. If you have high turnover, you must keep allocating your budget toward expenses like job advertising, interviewing, and onboarding instead of investing in your people’s growth and development.
  • Lower-than-usual productivity levels — When teams can’t work at regular capacity, they find it harder to match their usual output. For example, if your programming department loses two or three people, even if everyone works just as hard as before, the entire team will still write less code. Staff is also at a much higher risk of burnout if forced to work over capacity.
  • Dissatisfied customers and clients — When capacity and productivity levels are lower, companies might struggle to meet their usual service standards. Customers may feel disappointed, give you negative feedback, or even turn to your competitors.
  • A breakdown in employee relationships — Rapidly changing teams make building strong, lasting connections difficult. That means they’ll be less likely to notice and respond when a team member needs professional or emotional support.
  • More cases of burnout and stress — Fluctuating staff levels make it harder for managers to stay on top of everyone’s workloads. They may feel unsure about how many people they need to complete a task before its deadline and over-delegate. If these oversights keep happening, it can lead to burnout and more employee absences.
  • An escalating number of resignations — As staff leaves, they may also inspire their coworkers to quit. A recent Visier study found that people are 9.1% more likely to quit when a colleague does, and that number can be even higher for smaller, more close-knit teams.
  • Poor employee morale — All the factors above can contribute to a negative atmosphere and lower morale as people watch their teammates resign, worry about the company struggling, and receive less-than-optimal results despite their usual hard work.

From productivity levels to employee morale, the above turnover data demonstrates that a decline in employee retention rate will only decrease a company’s performance. It’s vital to measure turnover to identify meaningful patterns in how employees enter and, more importantly, exit your organization. Here’s how to calculate the employee turnover rate at your company.

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Employee turnover rate formula

To calculate how many employees departed from your company during a given period, use the following formula:

Employee turnover rate % = The number of employees who departed / [(Beginning + ending headcount) / 2] x 100 

Take a look at how to apply the turnover rate formula at your organization. 

How to calculate employee turnover rate (step-by-step) 

You need a few metrics to calculate the employee turnover rate, including the total number of employees at the start and end of a given period. For example’s sake, this step-by-step guide will solve the annual turnover rate. Let’s take out our calculators and get started.

Step 1: Select a time period 

There are various time frames to calculate your company’s turnover rate, whether monthly, quarterly, semi-annual, or annual. It’s essential to select a relevant time frame when calculating your company’s turnover rate to spot meaningful patterns in your data. 

For example, if you calculate your turnover rate quarterly, you can have four timely percentages to compare at the end of the year. From here, you can contemplate how various changes within each quarter, such as individual employee performance reviews or department-wide budget cuts, influenced your employee turnover rate over time.

Step 2: Calculate the number of employees who departed

Once you’ve selected a time frame, look up the exact number of workers employed at the start of the period. For example, if you calculate your quarterly turnover rate from January to March, identify your starting headcount on January 1. Next, identify the remaining headcount of active employees on March 31. 

From here, subtract your remaining headcount from your starting headcount to calculate the number of employees who left your organization during your selected time frame.

Step 3: Calculate the average number of employees 

The next step in the employee turnover formula is calculating your average number of employees. As the name might suggest, this figure refers to the average workforce size during your chosen period. It’s calculated by adding the number of employees at the start and end of a period and then dividing the sum by two.

Step 4: Apply the formula

At this point, you should have two numbers to plug into the employee turnover rate formula: your number of employee departures and your average number of employees within a certain period. 

First, divide the number of departures by the average number of employees. Then, multiply that figure by 100 to determine your final turnover percentage.

A graphic displaying the equations businesses need to calculate their employee turnover rate.

A step-by-step example

Unless you’re a mathematician, the sheer amount of numbers in the turnover rate formula can be intimidating. Fortunately, they don’t have to be. Consider the following example to illustrate the calculation process from beginning to end:

Imagine you work for a travel insurance company and want to calculate your turnover rate for the second quarter of the year (Q2). You had 300 employees at the start of April 2023 and were down to 280 by June 30. 

First, find the number of employees who departed in Q2:

300 starting headcount - 280 ending headcount = 20 employee departures

Next, determine the average number of employees you had during Q2 2023: 

300 starting headcount + 280 ending headcount / 2 = Average number employees

580 / 2 = 290 average employees

The final step is putting the above calculations into the employee turnover formula: 

(20 employee departures / 290 average employees) x 100 = Employee turnover rate

0.068 X 100 = 6.8% employee turnover rate 

In this example, your quarterly employee turnover rate is 6.8%.

Other turnover rate calculations

When it’s time to calculate the turnover rate, sometimes you look for more than just time-based insights, like quarterly or annual calculations. For instance, maybe you’d prefer to calculate the voluntary turnover rate versus the involuntary.

Select a timeframe just like you did above to get started on your voluntary and involuntary turnover calculations. However, when calculating the number of employees who departed, only factor in the number of employees who left willingly for your voluntary turnover rate and only factor in the number of employees who were asked to leave for your involuntary turnover rate. 

For instance, imagine you have a 100-person workforce but 10 left voluntarily over the past month. 

100 starting headcount - 90 ending headcount = 10 voluntary departures

100 starting headcount + 90 ending headcount / 2 = 95 average employees

(10 voluntary departures / 95 average employees) x 100 = 10.5% voluntary turnover rate 

You can also calculate turnover based on tenure, department, role, or demographic. For example, you can calculate the new hire turnover rate by using the number of new hires at the start of a period as your starting headcount and following the rest of the formula as usual.

How to interpret your company's turnover rate

Your staff turnover rate is synonymous with your company’s overall health, indicating employees’ satisfaction (or lack thereof) with your organization. At this point, you probably want to know what a healthy turnover rate is. As per recent research, the average employee turnover rate peaked at 47% in 2022. 

However, is 47% a healthy turnover rate? That answer will vary depending on your industry. The healthy turnover average for government jobs is just 20%, whereas the average for hospitality positions is four times higher at 82%. So, comparing your turnover calculations to industry trends is vital to interpreting your findings accurately. 

Realistically, your company’s turnover rate becomes a problem when it surpasses your employee retention rate because you’ll no longer have enough headcount to support business objectives. It also should become alarming when it drops lower than industry standards. 

Most importantly, remember that you'll need to consider the context to identify meaningful patterns in your data. Be sure to monitor your company’s turnover rate following periods of organizational changes and track the causes of turnover to learn what’s causing employee departures.

Top eight causes of employee turnover

Employee turnover can strike any segment of your workforce, from recently onboarded new hires to long-standing department veterans. The only way to address a high turnover rate is by getting to the root of the problem. Consider the top eight causes of employee departure that could lead to a higher-than-desired turnover rate at your organization.

1. Underwhelming salaries

38% of professionals are dissatisfied with their current salary. Not only that, but compensation is the area of the employee experience with the highest reported levels of discontent.

A critical aim of compensation is to reflect your staff’s contributions to your organization. When employees believe their pay doesn’t match the value they provide through their work, they start looking for jobs with more generous compensation. And if your company is paying below the industry standard, it’s easy for competitors to lure your top talent away with better offers.

2. A lack of career advancement opportunities

Hays says that 24% of employees would leave their current role for a promotion with a different company. Most people want to advance in their careers, whether they’d prefer a vertical or a lateral move across the company. And when their employer doesn’t meet their expectations or show them a clear path toward their goals, they can become frustrated and look elsewhere for opportunities.

3. Ineffective learning & development programs

Some companies prioritize compensation and benefits to the detriment of their learning and development (L&D) programs. But today’s professionals are moving away from traditional work norms where salary, benefits, and status dominate. 

The modern workforce wants a more well-rounded employee experience that includes development and growth. This mismatch in values probably means that 40% of professionals changing jobs in 2022 did so due to a lack of development opportunities.

Photo of an office space full of professionals following a presentation.

Modern employees want a more well-rounded employee experience that includes learning and development opportunities

4. Insufficient benefits

19% of employees would consider leaving their jobs for better benefits. Some of the top perks they’re asking for include: 

  • Extra annual leave
  • Funds or stipends for learning and development
  • Well-being programs
  • Dental and vision insurance
  • Company-sponsored pensions

However, according to research, employers are underdelivering on most of these.

5. Lackluster onboarding processes

New hires frequently report that onboarding processes are inadequate. A recent survey discovered many new hires didn’t think their employers had fully integrated them into the company culture or properly trained them on their tech stack. Problems like that are likely responsible for 40% of recently hired professionals actively searching for a new job.

6. Poor relationships with leaders

There’s a saying about turnover that goes, “Employees don’t leave companies; they leave managers.” It’s true — research shows managers can contribute to a company’s turnover problem with the following bad habits:

  • Giving feedback too frequently or infrequently
  • Not showing any interest in team development
  • Setting unclear expectations
  • Appearing to show a preference toward certain employees

All of the above can frustrate your staff, make them feel unsupported, and prevent them from realizing their full potential. This may ultimately push your employees to look for work elsewhere.

7. Toxic company culture

Many factors characterize an unsupportive working environment. Clashing values may lead to constant conflict or an us-versus-them mentality between management and staff. Some companies lose focus on worthwhile initiatives like development and career advancement in favor of profits and their bottom line. And when workplaces turn toxic, a massive 90% of workers think about quitting.

8. Life changes

Many employees resign because major life events change their situation or priorities, and they don’t get sufficient support or accommodation from their employers. 

For example, new parents may quit their jobs when they can’t reconcile their schedules with childcare needs. Or someone who’s struggling with a new health condition might not be able to come into the office regularly and might resign if they can’t set up a remote or flexible work arrangement.

However, professionals going through changes in personal circumstances may be able to stay in their positions if their employers are empathetic and flexible about their working conditions.

📉 Looking for the most effective ways to reduce employee turnover?

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11 tips to improve employee retention

Once you understand the causes of high employee turnover in your organization, you can explore solutions. Try using employee retention incentives or attending HR conferences to find the most innovative strategies. Here are some popular ideas:

1. Offer competitive salaries

Show your people you value their work with generous compensation packages. If your budget restricts your compensation management, aim to offer at least above the industry average.

2. Build a fair and transparent promotion process

Show your staff what they can achieve at your company with clear career paths. Once they know what opportunities exist, they’ll be more likely to pursue them with you than look for them externally.

3. Focus on learning and development

71% of employees say they’d like more opportunities to upskill. Meet their needs and reduce turnover by offering career development opportunities like training, mentoring, and seminars.

4. Provide generous benefits packages that target staff needs

Similar to salaries, offering a competitive benefits package is a great retention strategy. To make the most out of this approach and keep to your budget, investigate which benefits your people need or desire most and prioritize those.

5. Recognize and reward excellent employee performance

Companies with effective recognition programs have staff members who are 56% less likely to be actively job hunting. Employee recognition can be a cost-effective way to reduce turnover and build a more positive work environment for everyone to enjoy. These can be simple initiatives like bulletins about employee achievements or a Praise Wall.

6. Foster a feedback culture

Consistent feedback is vital to organizational health. And when you normalize exchanging feedback, you create a work environment where your team feels comfortable sharing their opinions and receiving constructive criticism. That means employees feel like they have a voice and problems get solved faster.

7. Invest in the onboarding process

Set new hires up for success. Create a comprehensive onboarding plan and schedule regular meetings and feedback sessions so managers can tailor training to each individual.

8. Introduce flexible work schedules

Make your business more accommodating by letting staff work from home and choose their hours. It shows you understand their needs and helps those juggling other responsibilities stay at your company.

Photo of happy professionals commuting to their office.

Flexible work schedules can help you reduce employee turnover while showing staff you understand and care about their needs

9. Boost employee engagement

Companies with engaged staff have up to 43% less turnover. Using engagement surveys to discover what motivates your team and acting on those findings can be a cost-effective way to reduce turnover. Don’t forget to check your employee NPS (eNPS) score to see whether your engagement levels are low.

1‍0. Ensure a healthy work-life balance

Protect your people from burnout and show you recognize the importance of their lives outside work by encouraging them to take regular breaks and leave the office on time. Also, check in with your reports frequently to verify whether you’ve given them realistic workloads and deadlines.‍

‍11. Finetune your hiring process

Hiring candidates for cultural add over skills and experience increases the likelihood that they’ll integrate well into your company and stay. Ask the right questions to see whether their values align with yours. Also, communicate those values so candidates can make a fully informed decision about whether they’d enjoy working with your company. Once you’ve offered someone a position, connecting with your new hire frequently before their start date can increase their willingness to commit to your organization by up to 87%.

Achieve a healthy turnover rate with Leapsome

Given the damage high turnover rates can cause, it’s natural to be concerned about your company’s retention rate. But with the proper knowledge and close monitoring of the situation, you can reduce employee turnover and keep it low.

HR software solutions like Leapsome can help you maintain high retention rates. Our platform automates the repetitive, time-consuming parts of performance reviews and onboarding. That leaves you more time to focus on supporting your people and helping them grow. 

We also provide a flexible Competency Framework and Compensation module so you can build fair, consistent, and transparent processes that put your employees first.

Elevate your company's retention strategy and empower your workforce with Leapsome, the all-in-one intelligent people enablement platform. Request a demo today!

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Employee turnover FAQs

Is employee turnover bad?

Employee turnover is not bad when the number of employee departures does not impact organizational workflow or productivity or negatively influence other employees. Some turnover is necessary to infuse new talent into an organization. However, employee turnover can be bad when the turnover rate surpasses the employee retention rate, leaving positions unfilled. 

Why is the employee turnover rate important to measure?

It’s important to calculate turnover to identify meaningful patterns in your people engagement processes, including onboarding effectiveness, feedback culture, and management styles, to determine how these patterns correlate with losing employees and how to fix them.

What is a good turnover rate?

There is no specific ‘good’ turnover rate; individual turnover rates should be compared to industry standards. The average turnover rate is 47%, though that figure has been inflated by industries like hospitality, where the turnover rate is much higher (82%). 

Is a high turnover rate good?

No, a high turnover rate is not good. High turnover indicates that many of your employees are leaving your organization. A high voluntary turnover rate indicates that many employees leave due to dissatisfaction. In contrast, a high involuntary turnover rate suggests that organizational restructuring or budget cuts negatively influence your workforce. 

Is a low turnover rate good?

A low turnover rate is excellent. In most companies, low turnover suggests that most employees, including top performers, remain in their positions. However, a certain degree of employee turnover is still welcomed to invite new talent to join the organization in their place.

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Leapsome Team

Written by the team at Leapsome — the all-in-one people enablement platform for driving employee engagement, performance, and learning.
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