A complete guide to understanding employee turnover
In recent years, UK organisations have seen significant staff movement, and turnover remains a major concern. Per a CIPD report, close to half of organisations have difficulty retaining new recruits past their first 3 months. Another report finds that UK employers' hiring intentions are at their lowest since the pandemic, putting additional pressure on businesses to keep the staff they already have.
For HR professionals and business leaders, understanding how to calculate and interpret employee turnover rate is essential. High turnover can drive up recruitment costs, disrupt team continuity and chip away at institutional knowledge. A low turnover rate may signal stability, but it can also signal stagnation.
This article will explain the meaning of employee turnover, walk through how to calculate staff turnover rate (or staff turnover percentage), explore common drivers behind turnover in UK workplaces and suggest how employers can respond strategically to retain talent and reduce unwanted churn.
Key takeaways
- Measuring employee turnover helps HR teams understand retention trends, identify issues and make informed workforce decisions.
- Frequent departures can increase costs, reduce productivity, erode morale and weaken organisational culture.
- Competitive pay, strong benefits, flexible working, effective onboarding and professional development can help reduce turnover and retain top talent.
What is employee turnover?
Employee turnover refers to the number of employees who leave an organisation over a set period, most commonly measured annually as a turnover rate. This turnover rate shows the percentage of staff who have exited the business, whether through resignation, retirement or dismissal.
Turnover is often used as a key indicator of organisational health because it highlights patterns in retention, workplace culture and employee engagement. A high staff turnover rate can signal deeper issues affecting morale or management, while a lower rate may indicate stability.
Understanding turnover helps HR teams plan workforce needs and reduce unnecessary recruitment costs.
What is an acceptable employee turnover rate?
An acceptable employee turnover rate varies widely depending on the organisation, industry and even specific teams. A single company-wide figure rarely gives the full picture. Instead, HR professionals should calculate staff turnover for different departments, job levels and time periods to identify potential problem areas.
For example, a 20% annual turnover rate might seem reasonable overall, but if most of those departures occur within the same role or under the same manager, it signals a targeted issue that requires attention.
Monitoring patterns like these helps organisations take informed, proactive steps to improve retention rather than applying broad, unnecessary changes.
How to calculate employee turnover?
Calculating staff turnover is a key part of workforce planning for organisations, helping HR teams understand retention trends and identify areas that may need attention. Turnover is usually measured over a 12-month period, but you can calculate it for any timeframe, such as quarterly or even monthly, depending on your reporting needs.
To calculate your turnover rate, follow these steps:
- Identify how many employees left your organisation during the chosen period. This typically includes voluntary resignations, dismissals, retirements and other permanent leavers.
- Work out the average number of employees over that same period. Add your headcount at the start of the period to your headcount at the end, then divide by two.
- Divide the number of leavers by the average headcount to get your turnover ratio.
- Multiply the result by 100 to convert it into a percentage—this is your turnover rate.
Employee turnover formula:
(Employees who left ÷ [(starting headcount + ending headcount) ÷ 2]) × 100 = turnover rate (%)
Example:
If a company starts the year with 50 employees and ends with 100, the average headcount is 75. If 15 people left during the year, the turnover rate is 20% (15 ÷ 75 = 0.2; 0.2 × 100 = 20%).
How does employee turnover impact an organisation?
High employee turnover can affect nearly every part of an organisation’s performance.
Increased costs and financial pressure
Replacing employees is costly. Hiring costs are rising for UK employers, meaning high turnover can quickly inflate budgets. Beyond recruitment fees, organisations must invest time in onboarding and training new hires. Productivity drops during handover periods also adds indirect financial pressure.
Loss of skills and knowledge
When experienced employees leave, they take essential knowledge—including systems expertise, customer relationships, and operational history—with them. The Institute for Employment Studies (IES) emphasises that the loss of organisational memory weakens decision-making and hinder long-term projects, as new employees often need months to reach full productivity.
Reduced productivity and increased workload
Unfilled vacancies or repeated turnover can mean that remaining employees must absorb additional responsibilities. Workload pressure is a leading driver of stress in workplaces. When turnover increases pressure, teams may struggle to meet deadlines, lowering overall productivity and potentially fuelling further resignations.
Declining morale, trust and engagement
Consistent departures can shake employees’ confidence in the organisation. Concerns about management, culture or job security can reduce trust and engagement. Lower engagement is strongly linked with poorer performance.
Cultural impact and employer reputation
A revolving door of staff makes it difficult to maintain a cohesive culture. High turnover can also harm an organisation’s employer brand, making it harder to attract high-quality candidates.
How to improve your employee turnover rate
Reducing employee turnover starts with understanding what your people need—then creating an environment where they feel supported, rewarded and motivated to stay. Here are practical steps UK organisations can take to improve their turnover rate:
- Review your compensation strategy: ensure salaries are competitive within your industry and region. Pay transparency and regular salary benchmarking can strengthen trust and reduce preventable resignations.
- Enhance your benefits package: go beyond the basics by offering benefits employees genuinely value, such as enhanced annual leave, wellbeing allowances, flexible working or even four-day week trials where appropriate.
- Improve onboarding and training: a strong start helps new employees feel confident and capable. Provide structured onboarding, clear role expectations and early support to increase retention during the crucial first year.
- Strengthen your employee experience: look at workplace culture, communication practices and leadership style. Regular feedback, recognition programmes and opportunities for autonomy can help keep morale high.
- Invest in learning and development: employees are more likely to stay when they see a path for growth. Offer coaching, mentoring, professional development courses or internal mobility opportunities.
- Support work-life balance: flexible hours, remote or hybrid work options, and manageable workloads can significantly reduce stress and burnout.
- Conduct regular exit and stay interviews: these conversations help identify why employees leave—and why they choose to stay—giving HR valuable data for future improvements.
By taking a proactive, people-centred approach, organisations can build stronger retention, reduce costly turnover and create a workplace where employees can thrive.
Next steps: work out your employee turnover rate
Understanding your employee turnover rate is the first step toward improving retention and strengthening your workforce. Use the formulas and guidance in this guide to calculate your staff turnover rate, identify trends, and spot areas of concern.
From there, you can implement targeted strategies—such as revisiting compensation, enhancing benefits or improving onboarding—to reduce turnover, retain top talent and build a more engaged, stable team.