The employee turnover rate is the number of employees that leave an organization within a specific period, being replaced by new employees. In most instances, the turnover rate is measured over a year.
Turnover affects the organization’s ability to achieve business objectives and also impacts the company's reputation.
What is employee turnover?
Employee turnover describes the average number of employees that leave the workplace over a period, usually replaced by new hires.
Also known as separations of employment, employee turnover can indicate the level of employee satisfaction, burnout, workplace culture, and more.
Management usually measures employee turnover as the total number of employees who leave the organization, but it can also be calculated in subcategories such as individual departments and demographic groups.
A high turnover rate means more employees have left the organization than expected, exceeding the established turnover rate for the individual company and the industry.
In contrast, a low turnover rate describes fewer employees leaving the company when compared to the established turnover rate for both individual companies and the industry as a whole.
The desired turnover rate is determined by the industry, organization size, and region. While a high employee turnover rate can be costly and distracting, low employee turnover can reduce diversity and innovation.
How to calculate employee turnover?
The employee turnover rate is presented as a percentage, determined by three steps;
- Determine the total number of employees working within a specific period of time (X)
- Determine the total number of employees that leave within the same time frame (Y)
- Divide Y by X, and multiply the result by 100
For example, if your marketing agency hires 80 employees during the month of July and four employees leave during the month, then your monthly turnover rate is 5%.
The equation appears as: (4/80)*100 = 5.00
Don’t include temporary hires or temporary leave when calculating employee turnover as it will skew the results, leading to a false turnover rate.
Average employee turnover rate across industries
The desirable staff turnover rate will vary from industry to industry, and effective human resources management understands these trends.
The recent pandemic has had a notable impact on the average annual turnover rate as employees searched for new opportunities and better work-life balance.
The U.S. Bureau of Labor Statistics reports the annual total separations in 2021 to be 47.2%, a notable decrease from a 56.8% turnover rate in 2020.
Breaking these figures down further, the average turnover rate for each industry is as follows;
- Mining and logging - 36.2%
- Construction - 56.9%
- Manufacturing - 39.9%
- Trade, transportation, and utilities - 54.5%
- Information - 38.9%
- Financial activities - 28.5%
- Professional and business services - 64.2%
- Education and health services - 25.5 %
- Leisure and hospitality - 84.9%
- Government - 18.1%
Voluntary vs. involuntary turnover
There are two main types of employee turnover, namely voluntary and involuntary turnover.
Voluntary turnover describes an instance when an employee chooses to leave the organization or department. Employees may choose to leave for personal reasons, a negative employee experience, or choose to pursue career development elsewhere.
Involuntary turnover is determined by the employer terminating an employee or removing them from a group. The reason may be poor performance, failure to meet job expectations, committing misconduct, or as part of a company-wide layoff.
Working with an international team requires extra effort to monitor the international employees' experience and improve job satisfaction while reducing undesirable turnover.
Why does employee turnover happen?
While employee retention is the goal, turnover is a normal part of an organization’s growth and the employee life cycle.
The top causes of employee turnover, both positive and negative, include;
- Failure to provide an opportunity for career growth or development opportunities
- Career progression
- Internal promotion or transfer
- Burnout due to flawed work-life balance
- Toxic work environment
- A tension between boss and management
- Personal reasons such as family or life event
- Competitive offer from another company poaching top talent
- Involuntary departure
How to reduce your employee turnover rate
When an employee leaves, it’s important to ask why. Some reasons indicate a natural part of career progression, while others highlight an issue within the organization or company culture.
Offer competitive pay and benefits
Improve the retention rate and boost employee loyalty by compensating them for their work. Pay your employees a fair and competitive rate, and determine appropriate benefits for the industry and their work. Valuing your employee is a strategic business decision that improves motivation and reduces unnecessary turnover.
Support career growth
Ask employees to outline their career goals during the onboarding phase of the hiring process. Then, provide development opportunities that create a clear career path for the employee to follow. Make sure to check in with employees regularly to assess their progress, monitor their satisfaction, and maintain employee engagement.
Allow flexible work schedules
The modern working world demands more focus on remote work and flexibility. Hiring and managing remote workers requires a mental shift to keep employees happy. Consider paid time off, working different schedules, and asynchronous communication channels.
At Deel, we’ve built a platform for today’s world of work, helping management hire an international team — and manage them effectively to reduce turnover.