Calculating your employee turnover rate is fairly straightforward. Simply divide the number of employees that leave within a specific period by the average number of employees that work during that period and multiply by 100—or use our free calculator below.
Your turnover rate helps you identify potential issues, assess employee satisfaction, evaluate your recruitment efforts, and understand how your company compares to industry benchmarks. Most of all, it can save the time and money that comes with hiring and training new employees.
Employee Turnover Rate Formula & Example
Use the following equation to get your company’s employee turnover rate. Employers typically use quarterly or annual durations when computing employee turnover rates.
(# of Employees Who Left the Company Over a Specific Period / ((# of Workers At the Beginning of the Period + # of Workers At the End of the Period) / 2)) X 100
So, if you had 325 workers at the beginning of the fourth quarter of 2022, 310 employees at the end of Q4 2022, and 15 employees left that quarter, your employee turnover rate would be 4.72%.
The calculation would look like this:
15 / ((325+310) / 2 ) * 100
15 / (635 / 2 ) * 100
15 / 317.5 * 100
0.0472 * 100
= 4.72%
Pro Tip: Using the same formula, you can measure employee turnover throughout the entire organization or of smaller segments (i.e., location, department, or supervisor). Reporting on subcategories may help determine potential reasons for turnover in your organization.
Is Your Turnover Rate High?
Generally, a high turnover rate is bad news, while a low turnover rate indicates a healthy organization. However, knowing if your turnover rate is high depends on context and the goals of the organization.
There are several factors to consider to get a more accurate picture. These include:
- Your rate over the past couple of periods: It will help you understand the baseline and see if your turnover rate is trending up or down.
- Any unique or outlier events: Any difference in your turnover rate may be a result of certain outlier events, such as COVID-related business effects, a merger, or restructuring.
- Whether employees are leaving voluntarily vs involuntarily: Voluntary turnover is when employees leave the organization on their own accord, whereas involuntary turnover happens when an employee gets fired or laid off. If there are more employees who leave voluntarily, it could be a reflection of dissatisfaction or lack of engagement among employees.
- Industry your organization belongs to: Some industries have a higher turnover rate than others. For example, according to Bureau of Labor and Statistics (BLS) data, the leisure and hospitality industry in 2022 had a much higher turnover rate (82.6%) than the education and health services industry (38.3%).
To get more insight into your company’s turnover rate, consider asking the following questions:
- What types of employees are leaving? Are they senior employees or new hires?
- Why are they leaving? If the senior employees are quitting, they might have experienced a plateau in their career or need an upskill. If it’s the new hires, perhaps there are unmet job expectations.
- When do they leave? Is there a pattern in which particular employees quit? Do they stop after a few months or after their appraisal?
- What department has the most number of quits? Are they dissatisfied with their salaries, positions, or managers?
In the News:
While the year-over-year figures in the graphic above look optimistic, a recent discussion on IDG TECHTalk said that the Great Resignation is far from over. Businesses will still see many employees leaving their jobs searching for better opportunities.
Impacts of a High Employee Turnover Rate
A 2022 study showed that a high turnover rate can disrupt the social dynamics and relationships of employees both within and across teams. It can also lower employee morale, disrupt communication patterns, and increase stress in the workplace. All of these could affect productivity—and, eventually, company revenue.
Studies have shown that it costs 25%–200% of an employee’s salary to replace them. So, if someone makes $72,000 a year, it could cost from $18,000 to $144,000 to hire a temporary replacement, recruit a permanent replacement, and onboard the new hire. If the new hire ends up being a poor fit, you will have to go through the same process again.
Is Employee Turnover Bad?
Even with the negative impacts in mind, not all turnover is bad. There are instances in which turnover can be beneficial for a company. Those benefits may include the following:
- Strengthened company culture: If you have employees who do not believe in your mission, vision, or core values, it may help your company culture for those employees to move on.
- Increased opportunities: Employees leaving creates opportunities for the organization and current workers. It may enable a high-performing employee to move into a role with greater responsibility. Additionally, it can allow the company to avoid complacency and group thinking by bringing in fresh perspectives and ideas from new employees with diverse backgrounds and experiences.
- Exposes hidden problems: When a high-performing employee leaves, many companies learn that the employee may have been covering for issues that need fixing—lack of people management skills, inadequate systems, nonexistent processes, or underperforming co-workers, to name a few. Being alerted to these issues now may prevent bigger problems later.
Having an offboarding process in place where you can conduct exit interviews with employees is very valuable to an organization. It will help you determine their reason for leaving and identify opportunities for improvement.
How HRM Software Helps Reduce Employee Turnover Rates
Human resource management (HRM) software can help reduce turnover in several ways:
- Improve communication: HRM software makes employee management easier and helps employees share information, provide feedback, and address concerns through one platform. This can help increase employee engagement and job satisfaction.
- Enhance employee development: You can also use this software to help track employee performance and provide opportunities for training and development. As a result, employees may feel more valued and invested in their work, reducing the likelihood of turnover.
- Streamline administrative tasks: By automating administrative tasks, such as payroll and time tracking, employees can focus more on meaningful work. It can also reduce burnout, increase job satisfaction, and reduce the likelihood of turnover.
- Improve performance management: HRM software provides feedback on employee performance in real time. This can help address performance issues early on and provide opportunities for improvement, reducing turnover due to poor performance.
If you need a tool that can help you manage your organization, we recommend Rippling, our top recommendation in our guide to the best HR software for small businesses. It provides a full suite of HR features that include employee management, payroll and benefits, time tracking, and more.
If you need help retaining your employees, check out our articles on employee retention and retention statistics.
Employee Turnover Rate Frequently Asked Questions (FAQs)
Employee turnover is typically overseen by the human resources (HR) department of an organization. The HR department is responsible for managing all aspects of the employment lifecycle, including hiring, onboarding, performance management, and offboarding.
Employee retention is important for both financial and cultural reasons. By investing in employee retention, organizations can save money, increase productivity, and build a positive reputation as an employer of choice.
A “good” rate can vary widely depending on the industry, with some industries experiencing much higher or lower turnover rates. It’s important for organizations to track their own turnover rates and compare them to industry benchmarks to determine what a good turnover rate is for their particular situation.
Bottom Line
Understanding your workforce lifecycle and taking steps to keep them engaged in the workplace is essential for maintaining a successful business. In addition, determining the frequency of turnover and understanding why it is happening will help your business make the adjustments necessary to retain your valuable employees, keep customers happy and employee morale high, and save on employee replacement costs.
