What is employee turnover?

Employee turnover rate meaning

Employee turnover rate is defined as the percentage of workers who leave an organisation during a specified period and whose positions have to be filled by new employees.

A high employee turnover rate means that many employees have left the company, while a low employee turnover rate means that only a few employees have left. So, the lower the turnover rate, the better.

Employee turnover vs attrition

Employee turnover is (slightly) different from employee attrition. Turnover refers to employees leaving positions that have to be filled by a new employee, while attrition refers to employees leaving positions that won’t be filled again in the future.

Here are two examples to explain the difference between turnover vs attrition:

• Employee turnover: An employee decides to leave a company and, in response, the company recruits and hires someone else to fill the position. This will be included in the company’s turnover rate.
• Employee attrition: An employee retires and leaves the company. The company decides the position is no longer needed and will not be hiring a new employee to fill the position in the future. This will be included in the company’s attrition rate.

How to calculate turnover rate

The employee turnover formula is fairly straightforward.

Before turnover can be calculated, the company needs to decide on a time frame for which they want to calculate turnover. Most organisations calculate their turnover rate on an annual basis.

To measure the turnover rate, take the number of employees who left during the period, divide that with the average number of employees that were employed during the period, and multiply this number by 100.

So, the calculation is as follows:

Employee turnover rate = (number of employees who left / average number of employees) x 100

The result of the calculation will be a percentage that indicates the employee turnover rate within the specified time period.

For example, a company wants to calculate their turnover rate for 2021. On average, they had 123 employees working in the organisation and during the year 19 employees left. The company’s annual turnover rate for 2021 is (19/123)*100 = 15.45%.

Please note: temporary hires or workers who take a temporary leave should not be included in the equation.

What is a good employee turnover rate?

The answer to this question depends on multiple different factors. Company industry, location, current trends, and seasonal effects should all be considered as they may affect the employee turnover rate and, therefore, what is defined as either good or bad.

For example, a 2021 U.S. Bureau of Labor Statistics report found that the average annual total turnover rate in the U.S. in 2020 was 57.3%. For a retail company, this may be considered a decent rate, while a marketing agency would probably be horrified by such a turnover.

Furthermore, what is a good employee turnover rate also depends on which turnovers are included in the calculation. The U.S. average turnover rate above, for example, refers to the total turnover rate. But many companies might not be interested in the total number and much rather calculate only a part of the turnover rate (more on this below). What turnover to include is generally based on the reason for the employee turnover.

Causes of employee turnover

Turnover can be broken down into two types: voluntary turnover and involuntary turnover. When measuring and calculating turnover rate, most companies tend to focus on the latter.

Here is the difference between the two types of turnover:

• Voluntary turnover: An employee decides to voluntarily leave the company. Reasons may include a lack of personal growth, conflict with the line manager, a poor feedback culture, or job expectations not being met.
• Involuntary turnover: An employee involuntarily leaves the company when the company forces them to leave, for example when they are fired or made redundant due to budget cuts. Furthermore, any other reason for the employee to leave that’s not due to any resentment towards or conflict with the company may be classed as involuntary. Examples include illness, relocation, or retirement.

What is counted as involuntary turnover may differ slightly per company. What is included will also depend on what metrics the company wants to track and what they aim to achieve by measuring their turnover rate.

For example, a company may decide to also include relocation within voluntary turnover. It could be that they found that for their industry and/or location, this is almost exclusively linked to an employee’s discontent with their current position.

How to reduce employee turnover

Again, there is no one-size-fits-all approach when it comes to reducing employee turnover. However, some common trends and causes of turnover include:

• A negative, toxic, or in any other way unfavourable company culture
• Unreasonable demands and expectations that may lead to burnout and overworking
• Disrespect for employee’s spare time and a lack of adequate work-life balance
• No internal support, guidance, or proper onboarding process to help employees settle in and ensure they have all the tools to do their job
• Lack of flexibility or the option to work from home
• The actual job differing from what was promoted and agreed upon during the interview process
• No attractive perks or corporate benefits

Another way to reduce unnecessarily high staff turnover is by being to identify when an employee is becoming disengaged, and know how to combat this. You can find information on this situation in our article: Identifying employee disengagement in your business (and how to fix it!).