Employee turnover rate – how to calculate it and effectively reduce it?

You may find this controversial, but if you don’t measure employee turnover in your company, you will never be able to assess the effectiveness of HR activities. Without checking how many employees remain in the organization over a given period of time (because this allows you to examine this parameter), it is difficult to say whether all the actions and processes undertaken are effective. And when turnover increases, so do costs.

In this article, we will show you how to calculate the turnover rate, how to interpret it, and what actions will help prevent turnover.

What is employee turnover rate?

The employee turnover rate is the percentage of people who left their jobs during a given period. Among important HR indicators, this is one of the most significant, as it raises questions about the stability of competencies, the quality of management, and the hidden costs of recruitment and onboarding.

In HR language, you will encounter synonyms. These include employee turnover in a company, staff turnover, employee fluctuation, and the fluctuation rate. The meaning is the same: it is about the flow of people through an organization, combined with an attempt to understand whether this is a natural course of events or whether something disturbing is happening.

The basis of the analysis is the distinction between voluntary and forced turnover:

• voluntary – the employee leaves of their own accord (change of employer for any reason),
• forced – the decision lies with the employer (job reduction or non-renewal of contract).

Both types of turnover usually have different causes and require different actions.

Why is it worth measuring employee turnover?

The employee turnover rate provides information about competency stability, leadership quality, and the effectiveness of HR processes. In organizations with extensive HR and L&D structures, turnover should be analyzed in parallel with:

• engagement,
• absenteeism,
• periodic assessment results,
• and MBO goal achievement.

High, persistent employee turnover destabilizes teams. New people need time to settle into their roles, others take on additional responsibilities, and managers focus on recruitment rather than team development. This affects the quality of customer service, prolongs projects, and increases the risk of errors.

Turnover is also an indicator of competency risk. If people covered by succession plans, experts, or employees with short seniority leave, the problem is different than in the case of natural turnover in positions with a large supply of candidates. It is important to know how many people are leaving and who we are losing.

How to calculate employee turnover rate?

The most commonly used formula is as follows:

Employee turnover rate (%) = (Number of departures in a given period / Average employment in that period) × 100

To calculate this correctly, you need to clearly define the period of analysis (e.g., month, quarter, year). In organizations with high employment dynamics, it is recommended to calculate the rate at least once a quarter.

Secondly, the number of departures should be broken down into voluntary and involuntary turnover. If 80% of departures are voluntary, the diagnosis and actions will be different than if involuntary departures predominate.

What is average employment?

The safest way to calculate them is as the arithmetic mean of employment at the beginning and end of the period or (in larger organizations) as the average for each month in the analyzed period.

Calculation of the turnover ratio – example

Let’s assume that in an organization:

the average employment in 2024 was 480 people,
and 72 employees left during that time.

Then:

(72 / 480) × 100 = 15%

This means that the annual employee turnover in the company was 15%. However, the number itself does not answer the question of whether this is a safe level.

How to interpret the employee turnover rate?

Ask yourself a few questions:

• Does turnover mainly affect operational or expert positions?
• Is it increasing among employees with short tenure?
• Does it affect specific teams or managers?
• Does it correlate with a decline in performance, engagement, or absenteeism?

Managing employee turnover begins when you combine quantitative and qualitative data. The percentage is a signal, and segmentation and trends will allow you to assess the scale of the problem.

What are the most common causes of employee turnover?

When employee turnover rates start to rise, the first instinct is often to point to the market as the main cause. However, data shows that in many cases, the source of the problem lies within the organization. Before implementing further retention measures, a thorough analysis of employee turnover is needed, preferably based on data from exit interviews, engagement surveys, and periodic evaluations.

The McKinsey report Great Attrition or Great Attraction? The choice is yours shows that the most frequently cited reasons for leaving include:

• lack of appreciation by the organization – 54%
• lack of appreciation by managers – 52%
• lack of belonging – 51%.

In turn, the Gallup State of the Global Workplace: 2023 Report proves that low engagement significantly increases the risk of departure. Employees who do not feel connected to the organization and do not see the meaning of their work are more likely to actively seek new employment.

At the operational level, the most common causes of employee turnover can be grouped into several categories.

• Leadership quality – manager availability, feedback methods, and clarity of expectations influence the decision to stay with the company. Therefore, if you see in the data that employee turnover in the company is concentrated in specific teams, this may be a sign of a leadership problem.
• Lack of development – the lack of a clear career path, unclear promotion criteria, and a lack of connection between goals and competencies cause employee turnover to increase even with stable salaries.
• Mismatched onboarding – high turnover in the first 3-12 months of employment (so-called early attrition) often means a discrepancy between the recruitment promise and the organizational reality. In addition, this is one of the most costly scenarios because it generates double turnover costs: recruitment and re-onboarding.
• Workload and well-being – task overload, work-life imbalance, and chronic stress translate into increased staff turnover.
• Market factors – employee mobility increases during periods of economic prosperity, but even in such conditions, organizations with high levels of engagement and mature leadership experience lower than average turnover.

High turnover rarely has a single cause, but is most often a combination of organizational and market factors.

How to effectively reduce employee turnover?

Below are a few ways to reduce turnover that, in organizations with mature HR and L&D structures, bring satisfactory results in working on employee turnover rates.

Onboarding

The quality of an employee’s first experiences strongly correlates with their subsequent job stability. Effective onboarding should:

• combine operational goals with development goals,
• clearly define expectations and responsibilities,
• include regular checkpoints (30-60-90 days),
• include induction into the organization’s culture.

If you want to reduce employee turnover, start by analyzing turnover in the first year of employment. This will allow you to assess the quality of the onboarding process and take further steps.

Pulse Check surveys

Organizations that only respond to exit interview data are acting too late. Pulse check surveys allow you to pick up warning signs well in advance. Regular, short mood surveys allow you to:

• identify declines in engagement,
• analyze differences between teams,
• link results to employee turnover rates within the company.

The most important thing here is what happens after the survey. A lack of feedback and corrective action undermines trust and can even increase staff turnover.

Clear goals and development (MBO and e-learning)

One of the most frequently cited reasons for leaving is a lack of career prospects. The aforementioned McKinsey report confirms that a lack of professional development opportunities is one of the key reasons for voluntary departures.

To prevent this, it is worth designing links between:

• individual goals and organizational goals,
• periodic assessment results and development plans,
• competencies and training offerings (LMS, e-learning paths).

A well-designed MBO system and learning management system (LMS) allow for the development of competencies and give a sense of moving in a specific direction.

Feedback (rating and feedback system)

The lack of regular feedback is one of the silent factors that increase turnover, both voluntary and involuntary. Employees who do not know how they are being evaluated and what is expected of them are more likely to lose their sense of security and agency.

To be beneficial, a periodic evaluation system should:

• be repeatable and transparent,
• be based on clear competency criteria,
• combine evaluation with development, not just control.

A culture of feedback acts as a risk buffer and allows tensions to be corrected before they translate into departures.

HRcode tools supporting employee retention

If you want to effectively prevent turnover, you will need tools that combine analysis, development, and feedback in one environment. Here are the HRcode modules that support employee retention and allow you to better interpret the employee turnover rate.

• Survey creator (exit interview, pulse check, engagement surveys) – enables systematic analysis of employee turnover by collecting qualitative data on the reasons for departures and team morale. It allows you to combine departure data with survey results broken down by department and manager.
• Periodic evaluation and 360° feedback system – standardizes feedback and allows you to identify areas of risk before employee turnover increases. Evaluation data can be compared with the level of turnover in teams.
• Goal management (MBO/OKR) – linking individual goals to organizational goals strengthens the sense of direction and impact.
• Learning management system (LMS) – enables the creation of development paths linked to competency models. It supports closing the competency gap and reduces the risk of voluntary departures resulting from a lack of development.
• Process-based onboarding with progress monitoring – a properly designed implementation will reduce early turnover and lower its costs.
• Dashboards and HR indicator reporting – enable ongoing monitoring of trends, data segmentation, and proper interpretation of employee turnover rates in the context of departments, seniority, or job level.

If you want to see how to organize data, reduce high turnover, and strengthen employee retention in your organization, schedule a meeting with the HRcode team.

Bibliography:

https://www.mckinsey.com/capabilities/people-and-organizational-performance/our-insights/great-attrition-or-great-attraction-the-choice-is-yours;
https://www.gallup.com/workplace/349484/state-of-the-global-workplace.aspx.