Employee Turnover Rate: How to Calculate It, Types, Benchmarks and Costs

Employee turnover rate is one of the most important HR metrics and one of the most frequently miscalculated. Different denominators, missing categories and inconsistent periods make comparisons meaningless. This guide gives you the standard formula with worked examples, explains the variants that matter — voluntary, involuntary, regretted, first-year and retention rate — shows how to estimate the cost of turnover and explains how to report the numbers so they lead to action.

What is employee turnover rate?

Employee turnover rate is the percentage of employees who leave an organisation during a given period, relative to the average number of employees in that period. It includes resignations, dismissals, redundancies and retirements unless you specify a narrower measure such as voluntary turnover.

Turnover is not inherently bad. Some turnover brings in new skills and removes poor fits. The goal is not zero turnover but the right turnover: low loss of people you want to keep, healthy movement elsewhere. That is why the breakdowns discussed below matter more than the single headline number. Our guide to employee retention strategies covers how to influence the rate once you understand it.

How do you calculate employee turnover rate?

Divide the number of employees who left during the period by the average headcount for the same period, then multiply by 100. Average headcount is usually headcount at the start plus headcount at the end, divided by two — or, more accurately, the average of monthly headcounts.

Worked example (monthly): on 1 March you had 250 employees and on 31 March 260. Eight people left during March. Average headcount = (250 + 260) ÷ 2 = 255. Monthly turnover = 8 ÷ 255 × 100 = 3.1%.

Worked example (annual): over the year, 42 people left. Monthly headcounts averaged 248. Annual turnover = 42 ÷ 248 × 100 = 16.9%.

To estimate an annual rate from a shorter period, you can annualise — for example multiplying a quarterly rate by four — but seasonality can make this misleading. Rolling twelve-month turnover, recalculated each month, is usually the most reliable trend measure.

What are the main types of turnover you should track?

Track voluntary turnover (employees who choose to leave), involuntary turnover (dismissals and redundancies), regretted turnover (leavers you wanted to keep), first-year turnover (leavers within 12 months of joining) and internal mobility. Each tells a different story and needs a different response.

Regretted turnover is the measure leadership should care about most. Losing a poor performer is not a problem; losing the best engineer on a critical project is. Ask managers to classify each leaver as regretted or non-regretted at the time of departure, using agreed criteria such as performance rating and criticality of skills.

High first-year turnover is a specific warning sign. It usually points to mismatched expectations during recruitment or weak onboarding — areas covered by our 30-60-90 day onboarding plan guide.

What is the difference between turnover rate and retention rate?

Turnover rate measures how many people left relative to average headcount, including people hired during the period. Retention rate measures what share of a fixed starting group is still employed at the end of the period, ignoring new hires. They answer different questions and are not simply inverses of each other.

Example: you start the year with 200 employees, hire 60 and lose 40 — 25 of whom were in the original group and 15 of whom were new hires. Retention rate = (200 − 25) ÷ 200 × 100 = 87.5%. Turnover rate = 40 ÷ average headcount (say 210) × 100 = 19%. The difference shows that a large part of turnover comes from new hires leaving quickly — an onboarding problem that retention rate alone would hide.

What is a good employee turnover rate?

There is no universal good rate. Turnover varies widely by industry, role type, country and labour market. Hospitality and retail typically see much higher turnover than public administration or utilities. Compare yourself with organisations in the same sector and region, and focus on your own trend and on regretted turnover.

When using external benchmarks, check how they were calculated: whether they include involuntary leavers, how headcount was measured and which period they cover. A benchmark of voluntary turnover is not comparable with your total turnover. Internally, compare teams with similar roles — a contact centre and an engineering team will never have the same rate, but two contact centres should be close.

How do you calculate the cost of employee turnover?

Add direct costs — recruitment fees, advertising, interview time, background checks, onboarding and training — to indirect costs such as vacancy time, lost productivity while the new hire ramps up, overtime for colleagues and lost knowledge or customer relationships. Multiply the average cost per leaver by the number of avoidable departures.

A simple model for a single role:

• Recruitment: advertising, agency fees or recruiter time, interviewer hours.
• Vacancy cost: weeks the role is empty multiplied by lost output or the cost of cover.
• Onboarding and training: trainer time, materials, equipment, manager time.
• Ramp-up: the gap between new-hire and full productivity over the first months.
• Knock-on effects: colleagues’ overtime, errors, customer impact.

Even rough estimates are persuasive. Showing that reducing regretted turnover by a few percentage points saves the equivalent of several salaries is often what secures budget for development programmes, manager training or pay adjustments.

How should you report turnover to leadership?

Report a short dashboard: rolling twelve-month voluntary and regretted turnover, first-year turnover, a breakdown by department and tenure, the top reasons for leaving from exit interviews, and the estimated cost. Add one or two recommended actions so the report leads to decisions.

Combine turnover with leading indicators — eNPS, engagement-survey results, absence rates and themes from stay interviews — so leadership can see risks before they become resignations. Turnover is a lagging indicator; by the time it rises, the underlying problems have usually existed for months.

What causes high employee turnover?

The most common causes of avoidable turnover are poor management, limited career progression, uncompetitive pay, excessive workload, poor onboarding, weak recognition and a culture or values mismatch. External factors — a tight labour market, competitors hiring aggressively — amplify these internal issues rather than replace them.

The pattern of turnover usually points to the cause. Spikes concentrated under particular managers suggest leadership issues. Departures clustered in the first year suggest recruitment or onboarding problems. Losses among three-to-five-year employees often indicate a career ceiling. Turnover concentrated in one job family, where leavers report moving for higher salaries, points to pay. Departures from overloaded teams are often linked to burnout — see our burnout prevention guide.

Understanding the cause requires combining numbers with listening. Exit interviews explain why people left; stay interviews and surveys show who might leave next and why.

How can you reduce employee turnover?

Reduce turnover by targeting its specific causes: improve manager capability, create visible career paths, benchmark and adjust pay where it is uncompetitive, fix onboarding, manage workloads, strengthen recognition and act on survey and interview feedback. Focus first on the teams and roles with the highest regretted turnover.

Prioritisation matters more than the number of initiatives. A company-wide programme that addresses generic engagement themes will have less effect than targeted action in the three teams responsible for most regretted departures. For each hotspot, agree the likely cause, a specific action, an owner and a date, and track the turnover rate for that group quarterly.

Many effective retention actions are not expensive: better one-to-ones, clearer promotion criteria, regular recognition and genuine development conversations. Our guides to employee retention strategies, recognition and rewards and career development cover these levers in detail, and the Learning & Development guide shows how development investment supports retention.

How do you calculate turnover in a spreadsheet or HRIS?

In a spreadsheet, keep one row per employee with start date, leave date, leave reason, regretted flag and department. Count leavers in the period with a date filter, calculate average headcount from monthly snapshots, and divide. Most HRIS platforms automate this, but you should still check their definitions.

A simple monthly process works well: on the first working day of each month, record headcount by department; at month end, count separations by type and department; then calculate monthly and rolling twelve-month rates. Store the monthly snapshots — reconstructing historical headcount later is difficult and error-prone. If you use an HRIS, confirm how it treats transfers between entities, rehires, interns and contractors so its figures match the definitions in your reports.

For deeper analysis, add tenure bands, performance ratings and manager to each record. Cross-tabulating these fields reveals patterns — such as high-performing employees leaving one department in their second year — that a single company-wide number would never show.

Whatever system you use, document the formula and definitions on the report itself, so that anyone reading the figure knows exactly what it includes and can compare it fairly over time.

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