How to Determine Employee Turnover Rate & Calculator

Why do employees leave? Are they unhappy, dissatisfied with growth opportunities, feeling neglected, or struggling to fit into your organization? Whatever the reason, a high turnover rate is bad for your organization and can be a nightmare for attracting exceptional new hires.

It costs companies anywhere from six to nine months of an employee’s salary to replace them. This doesn’t include the cost of job ads, hiring, onboarding, and training. 

When people are constantly leaving your organization, it affects overall productivity. Employee morale is weakened and prospective candidates stay away because your company is perceived as a bad place to work.

If you’re losing employees faster than you can hire them, those left behind have to pick up the slack. They become overworked and stressed out. Soon, they’re out the door and looking for a new job. It’s a vicious circle that could lead to the end of your organization if you don’t make some changes.

In this guide, we’ll show you how to calculate turnover rate, analyze the data from your calculations, and reduce turnover rate in your organization.

What is employee turnover rate? 

Employee turnover is the percentage of employees that leave an organization over a specified period of time. It measures the employee retention rate during the specified period.

According to the Bureau of Labor Statistics, the overall employee turnover rate as of 2021 is just over 57%. See how yours compares with our calculator.

Employee turnover rate calculator

Turnover rate is a key indicator of long-term success. It offers a holistic assessment of your organization’s recruiting efforts, workplace culture, and employer brand.

Voluntary turnover vs involuntary turnover 

Voluntary turnover is when an employee willingly decides to leave their position. This may be to:

• Pursue another work opportunity
• Relocate to another city or state
• Remove themselves from a bad situation

Involuntary turnover is when an employee is terminated from their position. It could happen for the following reasons:

• Poor job performance
• Violation of company policies
• Absenteeism from work
• Financial issues within the organization

How to calculate employee turnover rate? 

Define the timeline 

The timeline could be monthly, quarterly, or annually. Since it takes longer to get a large dataset that shows meaningful patterns, we advise you to calculate turnover rate either quarterly or annually. Also, you could also use a custom time frame between two dates (Mar 1, 2020, to Oct 31, 2020). 

For our example, we’ll be using a quarterly timeline of January 1st to March 31, 2021.

What is the average number of employees during that period? 

You need three numbers to calculate the employee turnover rate:

• Total number of active employees at the start of a defined period (B)
• Total number of active employees at the end of a defined period (E)
• The number of separations during the defined period (S)

First, calculate the average number of employees which you can find by:

[B+E] ÷2

For example, you want to calculate the employee turnover rate in the first quarter of 2021. That’s a timeline of January to March. Let’s assume the total number of employees at the start of January was 2500 (B). The total number of employees at the end of March was 2300 (E)

B+E = 2500+2300 = 4800

(B+E) ÷2 = 4800÷2 = 2400

Hence, 2400 is the average number of employees in Q1 2021.

Determine the total number of separations during that period 

You must account for every employee departure if you’re to properly calculate the turnover rate. Separation here includes both employees who left either voluntarily or involuntarily during the defined timeline.

Exclude employees on temporary leave and don't add promoted employees to the list. For this example, we’re going to assume that the total number of separations (S) is 200.

Calculate your turnover rate 

To calculate the turnover rate, you divide the number of separations by the average number of employees and multiply by 100 to get the final percentage.

Using the example from above, that would be

% = [Separations÷Average number of employees] X 100

[200÷2400] X 100 = 8.3%

Here's a simple formula:

Compare your figures with industry standards

It’s important to gauge success against industry standards. We’ve included data from the Society of Human Resource Management that shows the turnover rate for different industries. You can use this information to determine the success of your employee retention strategy.

As you can see, retail and wholesale have higher turnovers. On paper, this looks bad—but it isn't necessarily a cause for alarm. Let’s explore why.

What does a high turnover rate mean?

A high turnover rate is when a company has more separations than the average rate. Above, we saw retail and wholesale with an employee turnover that’s higher than the national average. 

But this is expected in such industries because of seasonal hiring practices. Many retail stores consistently hire and let go of workers based on seasonal needs. During the holidays, there’s an uptick in hiring. After the holidays, when foot traffic slows down, they lay off contract workers. 

For other companies where seasonal hiring isn’t common, a high turnover rate is tied to underlying issues in your company. When employees are always leaving, it has a direct impact on productivity and employee morale. This in turn leads to low revenue and sales.

What are the top causes of employee turnover and simple ways to fix them? 

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1. Stress and overwork

Studies have shown that occupational stress increases the risk of turnover. Piling work onto your team is never a good idea. Too much work leads to stress which influences your employee’s decision to leave and find work in a company with a healthy work-life balance. 

Sadly, overworked employees are the norm. In fact, 53% of the US workforce is burned out and overworked.

If employees are leaving faster than you can replace them, productivity dips and your company loses money. Prospective employees will view your organization as a high-pressure environment that isn’t sustainable for long-term growth.

A few ways that employee burnout affects your bottom line include:

• Decreased productivity 
• Low quality work
• Increased absenteeism
• Rise in healthcare costs (due to mental and physical ailments)

Fix: Solve the root cause

The solution depends on the cause of your team’s stress. Here’s how to tell what’s causing yours:

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2. Lack of feedback and recognition 

Employees want to know they’re doing a good job. When managers aren’t offering regular evaluations and feedback, employees don’t know if they’re on track or if they need to improve in specific areas. 

Sadly, many employees don’t get the right feedback from their managers. Not only does feedback offer personal fulfillment, but it also helps with employee retention. One report shows that  79% of employees believe that increasing recognition would make them more loyal to the company.

Look at how engagement soared after giving employees feedback:

Source

Fix: Offer regular feedback to employees

Even if you’re not able to offer routine raises or promotions, it’s healthy to set a regular cadence of managerial reviews so employees know what to expect. Many organizations offer a review three months after hiring and then an annual review. 

Positive feedback and strengths-based growth opportunities help employees grow even more than constructive (or not so constructive) criticism. 

3. Workplace bullying 

Bullying doesn’t end in high school or college. It’s a massive problem in the workplace. They’re not stealing lunches or beating up co-workers in the bathroom. Instead, it happens covertly. 

It’s the manager who uses their authority to pressure employees to work extra hours without pay or to perform non-job-related tasks. The co-worker constantly poking fun at another employee’s clothes, hair, or culture. This can appear to be “jokes” or “just having fun,” but it’s offensive if you ask the employee to be the butt of the jokes. 

Bullying affects mental health. The workplace that used to be fun becomes a dreaded place. The bullied employee feels stressed out, unmotivated to show up, and their productivity suffers. Ultimately, they’ll seek a workplace where they feel protected and valued.  

Fix: Take a stand on bullying

Have a clear anti-bullying policy in place. Encourage employees to speak up in a safe, supportive environment. Have a plan and procedure in place to follow step-by-step for these kinds of complaints and take all allegations of bullying seriously. Take a look at our Employee Handbook Templates to get you started.

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4. Bad managers 

Bob Nelson, one of the foremost authorities on employee engagement and motivation once said

“An employee’s motivation is a direct result of the sum of interactions with their manager.”

84% of US workers blame bad managers for unnecessary stress. Three out of four employees say that their boss is the most stressful part of their job. People don’t leave their jobs, they leave bad managers. According to Forbes, bad bosses are one of the major reasons for employee turnover.

Bad managers could be managers who are simply bad at their job and lack the technical capacity to manage a team. Or, they could be managers that create a toxic work environment.

They may have all the degrees and experience to perform their jobs. But they fall short in motivating workers, showing empathy, and gaining the trust of their subordinates. 

Fix: Improve management practices

If bad bosses kill productivity and drive employees out the door, then developing the right leadership should be an urgent need for every organization.

Provide regular people management training for your managers. Managers should treat team members with respect regardless of their position. Building trust and fostering open lines of communication should be a priority for managers. 

When your team feels like you respect them and they can talk to you without facing backlash, you’ll have a more engaged and satisfied workforce.

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5. Bad hiring process 

According to Inc., 80% of employee turnover results from poor hiring decisions. When you hire the wrong person, you’ll have to repeat the process again to refill the new vacancy. It results in wasted time, energy, and money (think $4000-$5000).

When a bad hire works below capacity, there’s a knockoff effect with the rest of the team. Employee efficiency suffers and some will be asked to pick up the slack without extra pay. This leads to conflict and tension in the office. 

Fix: Improve the hiring process

A great hiring process helps you attract and retain incredible employees.

A few tips to help you recruit the best fit include:

• Build a strong company image that attracts passive candidates who are not actively looking.
• Write better job descriptions that clearly describe the list of requirements, responsibilities, and perks of working with your organization. A study published in the Wall Street Journal revealed that candidates are more likely to respond to job ads where the company focuses on what they can do for potential employees.
• Streamline your interview process to prioritize interpersonal strengths like emotional intelligence, not just technical competence.
• Ask your employees for referrals and recommendations.
• Make it easy for candidates to apply.
• Build a talent pipeline to reduce the time it takes to hire, ensuring that you take the time to build relationships with partners, like historically-Black colleges and universities (HBCUs), Trans Can Work, and Lesbians Who Tech, that help ensure an inclusive recruitment program.

Fix: Improve the onboarding process

Employees who have a great onboarding process are 59% more likely to stay three years or more at your organization. Efficient onboarding makes a new employee feel like part of your team. 

All their fears about not getting the tools they need, not learning the role fast enough, or making new friends at work are taken care of with effective onboarding.

We advise HR and hiring managers to use an onboarding checklist to guide new hires through their first days and months at a new company. An onboarding checklist ensures you complete each stage of the new hire onboarding process and cut the time to train new employees.

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6. Lack of advancement opportunities 

The Retention Report from the Work Institute shows that lack of growth opportunities is a top reason why employees leave.

Employees leave when they feel stuck in a dead-end job without career advancement. They want to work for companies that prioritize training programs to build their resumes and skillset.

Fix: Creatively build paths and motivators

Money is a massive motivator. It’s the reason tech companies like Google, Facebook, and Salesforce attract the best talent in the world.

A competitive offer that leads a great employee to stay isn’t just a high salary alone. It could be other employee benefits like flexible hours, stock options, health insurance, paid family leave, unlimited PTO, paid holidays, and annual salary evaluation.

The trick is to understand what’s important to the potential employee and curate a benefits package around those needs and wants.

Similarly, managers can work with employees on non-traditional career path options within the company even if you can’t offer a big promotion. For example, you might enable strong performers to transfer to another department where they can grow or offer them the chance to take on stretch projects that provide them opportunities to build their skills and connect with company leadership.

Fix: Offer flexible schedules and work-life balance

A 2018 survey revealed that 80% of employees would choose a job with a flexible work schedule over any alternative. Employers that prioritize output rather than time spent on the job will get the most from their team.

Flexible work isn’t just for gig workers and freelancers anymore. Smart employers are offering their employees the freedom to choose their own hours as long as it doesn’t affect productivity.

In a flexible work environment, employees can choose where they work from and schedule their workday how they please.

As an employer, here are a few benefits you enjoy

• Higher retention rate which improves turnover
• The ability to attract top talent from anywhere in the world
• Improved diversity since you’re not limited to a single location
• Increased productivity because employees are more focused and spending less time commuting to work
• Higher employee engagement through remote working tools
• Save money on overhead costs
• Reduce your carbon footprint

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7. Toxic work culture 

Bullying, bad managers, and overworked employees. These are all reasons why employees leave but they only touch the surface of what happens in an unpleasant work environment. 

There’s office politics, in-fighting, and tension. It spreads like wildfire, making the environment undesirable. 

You might have the best people for the job, but if your workplace is toxic, your retention rate will suffer and your employees will leave faster than they came in. No thanks to eroding motivation, increased stress, and mental health issues.

Fix: Commit to a culture of respect

Organizational leaders have a disproportionate impact on encouraging either culture of respect or one of incivility and politics. Anonymously asking those who report to them is a quick way to cut through the confusion. Consider including a company value focused on discouraging work politics, and learn more about what you can do to build a culture of civility.

At Guru, our values include this one, which does a great job of this:

Assume good intent. Leave your ego at the door. Remember that everyone is working towards the same goals. Choose curiosity, because a lesson learned is more important than being right. We get things done while building relationships, and we build relationships on trust and humility.

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8. Poor workplace communication 

80% of the US workforce is stressed out over poor communication. Poor communication leads to friction, confusion, frustration, and an extremely tense work environment. Your employees are not motivated to collaborate or be productive. It spills over to how your team interacts with potential customers and clients which is bad for business.

While the water cooler may have been supplanted by the Keurig — or the keg, if we’re talking tech — the office meetup space has no true remote equivalent. Whether one person on your team is remote or all of them are, the impact is the same: even with the best of intentions, asynchronous chat communication just isn’t the same as in-person, real-time interactions. 

Fix: Encourage open communication

Open communication is the key. It leads to improved employee engagement, internal collaboration, better customer relationships, and positive workplace culture.

Here are a few tips to improve workplace communication

• Build a foundation of trust
• Consider using an internal communication software like Guru to send personalized messages, collect feedback and encourage knowledge sharing
• Create a safe environment where employees feel comfortable to speak up and share ideas
• Ask and give constructive feedback
• Clarify roles from day 1
• Encourage asynchronous communication to allow employees to respond in their own time
• Ask managers to check in regularly with their team
• Keep workflows transparent
• Avoid making assumptions about your employees, instead, ask questions
• Listen when they speak and follow up with the required action

To see how we encourage open communication here at Guru, check out our Golden Rule of Internal Communications.
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What is a healthy turnover rate? 

In America, a healthy turnover rate is around 38% per year. According to a study by ADP. Here’s a look at the average turnover across America by industry:

However, averages don’t show the big picture. To understand employee turnover rate, you have to look at the factors contributing to the data:

• Type of industry: Each industry has a different retention rate. Hospitality, retail, and wholesale has a high churn rate. Meanwhile, jobs in financial services, manufacturing, life sciences, and energy are more stable.
• Employee age: Workers under 26 are 5 times more likely to leave voluntarily than those over the age of 56-65. If younger workers leave for better opportunities elsewhere, you need to revamp your professional development planning to make your organization more attractive.
• Demographics: If you have a high turnover rate with a particular race, it‘s reflective of a cultural issue.
• Tenure: Most employees leave in the first year. Hence businesses with more longer-term employees should have a lower turnover rate than those who recently went on a hiring spree. However, you could fix this problem by offering a better benefits package. It should be on par with competitors who are luring away employees that you spent a lot of money to onboard and train.
• Voluntary or involuntary: If you have more involuntary separations, then it’s a problem with your demand planning or hiring process. If you have more voluntary separations, then it could be a problem with your performance as an employer or company ethics.

How to reduce employee turnover rate

1. Improve your hiring process 
2. Offer a competitive benefit package 
3. Improve your onboarding process 
4. Encourage open communication
5. Offer flexible schedules for a good work-life balance 
6. Improve management practices

Promote an employee-first culture to reduce turnover rate and improve retention

All the causes of a high turnover rate can be addressed by prioritizing the needs of your employees and factoring them into decision making. An employee-first culture is built on the belief that your team is your best asset. When employees feel appreciated and valued, the quality of work goes up, people are happy and they are more likely to stay.

Employee onboarding software like Guru can help you build a feedback culture, improve employee engagement, and streamline the hiring and onboarding process.