Glossary: HR & Recruiting Definitions
Employee turnover refers to the total number or percentage of employees who leave an organisation during a certain period. Turnover is calculated in terms of the employee turnover rate and includes both the voluntary and involuntary departure of workers.
Only positions that are replaced by a new hire are included in the employee turnover rate. Meaning, it excludes when a position inside an organisation will not be filled in the future, for example, due to restructuring or downsizing.
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 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:
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.
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.
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:
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.
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:
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