Employee turnover can have a significant impact on a company’s overall performance, affecting productivity, morale, and costs. A high turnover rate can signal that deeper issues exist within the organisation. That’s why understanding how to measure turnover and pinpoint its causes is essential for maintaining a stable and motivated workforce.
In this article, we’ll cover how to calculate employee turnover, what qualifies as a high turnover rate, the main reasons behind it, and actionable tips for reducing turnover and improving employee retention.
What is employee turnover?
Employee turnover represents the number or percentage of employees who leave a company within a certain period, usually a year and are subsequently replaced by new hires.
Turnover is classified into two types: voluntary and involuntary. Voluntary turnover occurs when employees choose to leave, often for new opportunities, a different role, or retirement. In contrast, involuntary turnover happens when an employee is dismissed due to factors such as poor performance, behavioural issues, or a mismatch with the company’s values or culture.
How to calculate employee turnover rate
To calculate the annual employee turnover rate, start by adding the number of employees at the beginning of the year to the number you had at the end of the year. Then, divide that sum by two to get the average number of employees for the year. Next, divide the total number of employees who left during the year by the average number of employees, and multiply the result by 100 to get your turnover rate.
Use the same formula for a monthly turnover rate but over a shorter period. First, determine how many employees are left during the month, then divide that number by the average number of active employees for the month, and multiply the result by 100.
What is considered a high employee turnover rate?
A high employee turnover rate is generally considered to be anything above 20% annually. However, this can vary by industry, company size, and role type. For example, industries like retail and hospitality often experience higher turnover rates, sometimes exceeding 30%, due to the nature of the work.
On the other hand, more specialised industries like healthcare or technology may view a rate above 10% as high. In general, if turnover exceeds industry averages or leads to noticeable disruption in business operations, it’s considered high and may signal underlying issues that need to be addressed.
What causes a high employee turnover rate?
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