An HR Glossary for HR Terms
Glossary of Human Resources Management and Employee Benefit Terms
What Is Employee Turnover?
Employee turnover measures the number of employees who leave an organization during a specified time period, typically in one year. While an organization usually measures the total number of employees who leave, turnover can also apply to subcategories within an organization, such as individual departments or demographic groups.
Employee turnover includes employees who leave a position voluntarily and those who were involuntarily separated from the company through layoffs, reduction in force, or termination, whether or not those roles were filled by another person. High turnover means that many people are leaving the company, while low turnover means that people tend to stay in their jobs longer.
The employee turnover rate is a way to measure how often employees leave a company and are replaced by new ones. It is calculated by dividing the number of employees who leave during a specific period by the average number of employees in the company during that same time. The turnover rate is usually expressed as a percentage.
Employee turnover is natural for any organization. However, high turnover can be challenging as a company spends time and money finding and training new employees. While low employee turnover is the goal for most organizations, what determines low vs. high turnover is how actual turnover compares to a typical or expected rate, which can change depending on the industry, job type, company size, region, and more—and that rate is very rarely zero.
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How to Calculate Employee Turnover Rate
Step 1: Find Your Total Number of Employees
Nearly all types of employees should be included in the calculation; however, do not include temporary hires or employees who go on temporary leave in either factor of the equation. Incorporating temporary shifts in workforce numbers will skew your turnover rate higher than it really is.
Determine the period for which you want to calculate the turnover rate. Most companies calculate this annually or by quarter. Next, find both the average number of employees in that time period and the number of employees who left, regardless of whether or not their position has been filled yet.
For example, you may have an average of 140 employees throughout Q1 and 26 who left during that period, none of whom were seasonal workers or going on leave.
Step 2: Divide and Multiply
Divide the number of employees who left (26) by the average number of employees (140). Then, multiply the result by 100 to get the turnover rate.
For example, the equation would be: (26/140) * 100 = 18.57. The turnover rate is 18.57%
This number indicates that approximately 18.6% of the employees left the company during this quarter.
Labor Turnover Statistics: What Is Considered a High Turnover Rate?
While the exact threshold for what is considered a high turnover rate varies depending on the industry and region, LinkedIn data suggests that the average turnover rate across industries and sectors is 10.6%. If your turnover is higher than this rate, it could suggest you have a higher-than-average departure of employees.
Turnover rates can also be affected by larger economic forces, like a recession or the recent COVID-19 pandemic. According to Bureau of Labor Statistics data, turnover rates reached a decade high during the Great Resignation from the end of 2021 and into 2022. Since then, turnover rates have normalized.
It's important to note that high turnover can also be relative to industry standards. For example, certain sectors, like hospitality or retail, may naturally experience higher turnover rates because of seasonal demands or the availability of temporary employment. Therefore, it is crucial to consider industry-specific norms and compare the turnover rate within the context of similar businesses to determine whether it is high or falls within an expected range.
While numbers can vary depending on the source, according to LinkedIn, industries with higher-than-average turnover include:
- Professional services: 13.4%
- Tech: 12.9%
- Entertainment: 11.8%
- Hospitality: 11.8%
- Retail: 11.4%
Voluntary Turnover vs. Involuntary Turnover: What's the Difference?
Voluntary turnover is any instance in which an employee actively chooses to leave. This can happen because of better job opportunities elsewhere, conflict within the workplace, disengagement, and more. If you are calculating turnover within a single team or department, turnover doesn’t have to mean employees who leave the organization—just the group you’re analyzing.
Involuntary turnover is when an employer chooses to terminate an employee or remove them permanently from the group in question, possibly because of poor performance, toxic behavior, layoffs, or other reasons.
What Causes High Employee Turnover?
There are many reasons why employees leave a department or an organization, and while some reasons for turnover are negative, some turnover is expected and perfectly normal. What’s bad is when turnover happens for negative reasons or at an unexpected rate.
High turnover rates can indicate underlying issues within the company. In a recent SHRM report, 74% of employees said they left because of inadequate compensation in their current role.
Other common reasons for turnover include:
- Lack of opportunities for hybrid or remote work
- Lack of opportunity for growth or career development
- Natural career progression
- Internal promotion or transfer
- Feeling overworked or experiencing burnout
- Negative feelings towards boss or management
- Toxic work environment
- Family or life events
- Competitive offers
- Lack of work-life balance
- Involuntary departure
Understanding the causes of employee turnover can help businesses make the necessary changes to keep their workforce at the desired level. Due to the many variables affecting turnover, benchmarks for acceptable or ideal turnover vary. It’s important for organizations to take individual and industry-related factors into account as they pinpoint their target turnover rate, study the reasons behind voluntary and involuntary turnover, and make changes to impact the employee turnover rate for their own workforce.
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