What Is Turnover Rate?

Turnover rate refers to the percentage of employees who leave a company over a given period. This may include employees who resign, retire, are terminated, are laid off, or otherwise separate from the organization.

The standard turnover rate formula is:

Turnover rate = Number of separations ÷ Average number of employees × 100

For example, if a company had 20 employees leave during the year and an average headcount of 200 employees, its annual turnover rate would be:

20 ÷ 200 × 100 = 10%

This means 10% of the organization’s workforce left during that year.

Turnover rate can be calculated monthly, quarterly, annually, or over another time period. Many organizations track annual turnover rate to evaluate long-term retention trends, while monthly or quarterly turnover can help identify sudden changes or emerging problems.

What Counts as Turnover?

Turnover typically includes employees who leave an organization for any reason. However, many HR teams break turnover into categories to understand what kind of employee movement is happening.

Voluntary turnover happens when an employee chooses to leave. This may include resignations, retirements, employees accepting another job, or employees leaving because of dissatisfaction, burnout, lack of growth opportunities, compensation concerns, or personal reasons.

Involuntary turnover happens when the employer initiates the separation. This can include terminations, layoffs, performance-related dismissals, or role eliminations.

Both types of turnover matter, but they can point to different issues. High voluntary turnover may suggest problems with compensation, management, culture, career development, workload, or employee engagement. High involuntary turnover may point to issues with hiring, onboarding, performance expectations, training, or workforce planning.

Organizations may also track new hire turnover, which measures how many employees leave within a certain period after being hired, such as the first 30, 60, 90, or 180 days. High new hire turnover can be a sign that the hiring process is not accurately identifying job fit or that the employee experience does not match what candidates were told during recruitment.

Why Turnover Rate Matters

Turnover rate matters because employee departures can be expensive and disruptive. When an employee leaves, the organization may lose productivity, institutional knowledge, customer relationships, team momentum, and role-specific expertise.

There are also direct costs. Employers may need to spend money on job advertising, recruiting tools, background checks, assessments, interviews, onboarding, training, and temporary coverage. Managers and team members may also spend time filling gaps while the position is vacant.

Turnover can also affect morale. When employees see coworkers leave frequently, they may feel uncertain about the company’s direction, frustrated by heavier workloads, or more likely to consider leaving themselves.

However, turnover is not always bad. Some turnover is normal and even healthy. Employees may retire, relocate, move into better-fit opportunities, or leave roles where they were not successful. In some cases, turnover can create room for new talent, fresh ideas, and better team alignment.

The goal is not necessarily to eliminate turnover. The goal is to understand whether turnover is expected, manageable, and concentrated in the right places — or whether it signals a deeper problem.

Turnover Rate vs. Retention Rate

Turnover rate and retention rate are closely related, but they measure opposite sides of employee movement.

Turnover rate measures the percentage of employees who leave during a period. Retention rate measures the percentage of employees who stay.

For example, if a company starts the year with 100 employees and 10 leave, its turnover rate is 10%. Its retention rate, depending on the exact formula used, may be roughly 90%.

Both metrics are useful. Turnover rate helps organizations identify how many employees are leaving, while retention rate shows how well the company is keeping employees over time.

Employers often use both metrics together to understand workforce stability.

How to Calculate Turnover Rate

To calculate turnover rate, employers need two numbers: the number of separations during the period and the average number of employees during that same period.

The average number of employees is often calculated by adding the number of employees at the beginning of the period to the number of employees at the end of the period, then dividing by two.

For example:

Beginning headcount: 180 employees
Ending headcount: 220 employees
Average headcount: 200 employees
Separations during the year: 30 employees

The turnover rate would be:

30 ÷ 200 × 100 = 15%

This means the company’s turnover rate for the year was 15%.

The most important thing is to be consistent. Organizations should clearly define what counts as a separation, what time period is being measured, and which employee groups are included. Without consistent definitions, turnover rate can be difficult to compare across departments, locations, or years.

What Is a Good Turnover Rate?

A “good” turnover rate depends on the industry, role type, labor market, company size, and workforce structure. Some industries naturally have higher turnover because of seasonal work, part-time roles, entry-level positions, or high-volume hiring needs. Other industries may expect lower turnover because roles require specialized training, certifications, or long-term customer relationships.

For this reason, turnover rate should not be evaluated in isolation. A 20% turnover rate may be alarming for one organization but normal for another. HR teams should compare turnover against internal history, industry benchmarks, role expectations, and business goals.

It is also useful to look at where turnover is happening. High turnover among top performers, new hires, managers, or hard-to-fill roles may be more concerning than turnover in roles where attrition is expected.

How to Reduce Turnover Rate

Reducing turnover starts with understanding why employees are leaving. Exit interviews, employee engagement surveys, stay interviews, manager feedback, and workforce data can help organizations identify patterns.

Common ways to reduce turnover include improving onboarding, offering competitive compensation, creating clearer career paths, training managers, recognizing employee contributions, supporting work-life balance, and making sure employees have the tools and support they need to succeed.

Hiring also plays an important role. When employees leave shortly after being hired, the issue may be poor job fit. Employers can reduce early turnover by setting realistic expectations during the hiring process, using structured interviews, and evaluating candidates with job-relevant skills assessments.

Skills testing can help employers identify candidates who are more likely to succeed in the role by measuring the abilities that matter for job performance. This can help reduce mismatches between what a candidate appears to know and what the job actually requires.

The Bottom Line

Turnover rate is an important HR metric that measures how many employees leave an organization during a specific period. It helps employers understand retention trends, identify workforce issues, and evaluate the effectiveness of hiring, onboarding, management, and employee engagement strategies.

While some turnover is normal, consistently high or poorly understood turnover can create major costs for an organization. By tracking turnover rate and using that data to improve hiring and retention, employers can build a more stable, productive, and engaged workforce.