January 7, 2025

How to Calculate Employee Turnover and Why It Matters

Behind every employee’s departure — whether it’s a resignation or a termination — there lies a story. Together, these stories add up to your employee turnover rate, which offers a valuable window into your company's culture.

High employee turnover rates can signal deeper issues lurking beneath the surface of your company culture, hiring practices, or employee management strategies. But understanding turnover, its causes, and its costs can help you transform this challenge into an opportunity for growth and improvement.

In this article, we'll explain how to calculate your employee turnover rate and break down what these numbers reveal about your organization.

What is employee turnover?

Turnover is the rate at which people join and leave your company over a set period. By keeping an eye on turnover, you're taking the pulse of your entire organization.

Low turnover rates often signal a healthy work environment with high employee satisfaction, as employees don’t feel the need to leave. A high employee turnover rate might be waving red flags about deeper issues, like exposing cracks in your hiring process or revealing that your management practices aren’t fostering a supportive work environment.

What are the costs of a high turnover rate?

Employee turnover isn't just a headache for HR. It's a significant drain on your company's resources. The turnover costs associated with losing and replacing employees frequently can add up fast, both financially and in terms of overall workplace dynamics.

Turnover costs range from 50% to 200% of the departing employee’s annual salary, with managers and leaders at the higher end of that range. To put that in perspective, replacing someone who earns $80,000 a year could cost up to $160,000. This number’s so high because it covers recruitment costs and lost productivity, both in the form of the vacant position and the time spent onboarding new hires.

But the impact goes beyond dollars and cents. High turnover also takes a toll on team morale, productivity, and work quality. Although these non-financial costs are harder to quantify, they’re no less damaging. Consider the knowledge that walks out the door with each departing employee, the strain on the remaining staff who pick up the slack, and the time it takes for new hires to get up to speed.

Voluntary versus involuntary turnover: What’s the difference?

Not all employee departures are created equal. Turnover comes in two main types: voluntary and involuntary.

Voluntary turnover happens when employees choose to leave. Sometimes it's a neutral or positive move for your business, like retirement after years of dedicated service. Other times, it's less welcome, like losing a star performer to a competitor.

Involuntary turnover, on the other hand, is when the company initiates the split. This could mean showing the door to an underperforming new employee or someone who's broken company rules. While uncomfortable, these changes can actually boost team productivity and morale. Involuntary turnover doesn’t always have positive effects; economic downturns can lead to painful layoffs, resulting in the loss of valuable talent and institutional knowledge.

By analyzing both types of employee turnover, you can craft strategies to improve your employee retention rate and build a more stable, engaged team.

How to calculate employee turnover

Calculating your employee turnover rate means some data gathering and simple math. Here's how to do it:

Step 1. Gather your data

First, you’ll need to gather a few key pieces of information:

The number of employees at the start of your chosen period (commonly one year)
The number of employees at the end of that period
The total number of employees who left during that time

Step 2. Find the average number of employees

Add your starting and ending employee counts, then divide by two:

(Employees at start + Employees at end) ÷ 2

For example, if you started with 100 employees and ended with 120, your average number of employees for the period would be (100 + 120) ÷ 2 = 110.

Step 3. Calculate your turnover rate

Divide the number of departures by your average number of employees, then multiply by 100 to get a percentage:

(Number of departures ÷ Average number of employees) × 100

If 22 employees left during the year, your calculation would be: (22 ÷ 110) × 100 = 20%

Knowing that your turnover rate was 20%, you can better gauge your employee retention efforts and compare performance to industry benchmarks.

How to calculate voluntary versus involuntary turnover

While knowing your overall turnover rate helps you understand the rate at which employees leave, it’s also helpful to know how many are leaving on their own terms. If most of the turnover you’re seeing is voluntary, it might signal a low rate of job satisfaction.

Track the reasons why employees leave throughout the year. Then, when calculating turnover, use the figures for voluntary or involuntary to see how they differ. The formulas would look like this for the period you’re considering:

Voluntary turnover rate = (Number of voluntary departures ÷ Average number of employees) x 100

Involuntary turnover rate = (Number of involuntary departure ÷ Average number of employees) x 100

What is considered a high turnover rate?

Context is key for this metric. What's considered a high turnover rate in one industry might be par for the course in another. While the average turnover rate across all industries in 2024 hovered around 13.5%, every company has unique circumstances that support a higher or lower number. When you’re looking at your turnover rate — whether voluntary, involuntary, or both — make sure you’re comparing to the industry average.

Here's a breakdown of above-average and below-average turnover rates by industry from 2022:

Above-average turnover rates

Industry	Turnover rate
Professional services	13.4%
Tech and media	12.9%
Entertainment	11.8%
Accommodation	11.8%
Retail	11.4%

Below-average turnover rates

Industry	Turnover rate
Government administration	8.4%
Construction	9.2%
Real estate	9.3%
Transportation	9.3%
Manufacturing	9.3%

You can’t necessarily tell whether your turnover rate might be a problem by looking at the overall statistics. For example, an 11% employee turnover rate is below average in retail but a red flag in government. That’s why it’s important to assess your organization holistically.

Common causes of employee turnover

If you don’t know why employees are leaving, it’s tough to know how to solve the problem. So, what causes high staff turnover, exactly? A few key factors are the biggest contributors to voluntary departures:

Financial stress. Research shows that 73% of financially stressed employees are drawn to companies that prioritize their financial well-being, and these employees are twice as likely to be job hunting.
Lack of recognition. When employees feel undervalued or their efforts go unnoticed, they're more inclined to seek appreciation elsewhere.
Desire for new challenges. Many employees crave growth and learning opportunities. Without them, boredom sets in, prompting a search for more stimulating roles.
Limited career advancement opportunities. When clear career paths are absent, voluntary turnover often follows as ambitious employees seek progression elsewhere.
Insufficient benefits offerings. Inadequate health coverage or lackluster financial perks can drive staff to competitors offering more comprehensive benefits.

How to analyze and address your organization’s turnover rate

Tackling employee turnover is more than tracking numbers and plugging them into formulas. By examining your turnover rates from multiple angles, you can uncover the root causes and develop targeted strategies to boost employee retention.

Start by asking these critical questions:

Who's leaving? Are you losing fresh talent or experienced employees? Each scenario calls for a different approach.
What's driving their departure? Unfulfilled expectations, job dissatisfaction, or limited growth opportunities are common factors.
Do you notice any patterns? For example, do exits spike after performance reviews or during specific seasons?
Are certain departments or managers experiencing higher turnover? This could indicate localized issues that need addressing.
Do you implement upward feedback? Do employees have any opportunities to express frustrations with or shortcomings of processes or management?

Armed with these insights, you can craft more effective employee retention strategies. If new employees are leaving, you might need to revamp your hiring and onboarding processes. If this trend is among seasoned employees, it might be time to reassess your career development programs or look into improving your benefits package.

Remember, addressing turnover isn't just about keeping seats filled — it's about creating an environment where settled and new employees alike want to stay and grow.

Boost employee well-being with EarnIn

To stand out as an employer, it’s important to prioritize financial wellness opportunities. Nearly 80% of working Americans live paycheck-to-paycheck, and offering on-demand access to earned wages with EarnIn allows you to meet your employees where they’re at, whether it’s for everyday expenses like gas and groceries or unexpected costs. With EarnIn, your employees can access a portion of their pay when they need it most. The impact is clear: 75% of employees report fewer unplanned absences,¹ and 87% feel more motivated at work.¹

Please note, the material collected in this post is for informational purposes only and is not intended to be relied upon as or construed as advice regarding any specific circumstances. Nor is it an endorsement of any organization or services.

EarnIn is a financial technology company not a bank. Banking Services are provided by Evolve Bank & Trust, Member FDIC.

¹Survey conducted in February 2020 with 889 participants