Employee Turnover: What It Is, the Formula, and How to Calculate the Rate
Employee turnover is one of the key concepts in human resource management that directly affects the stability, efficiency, and development of any organization. Therefore, employee turnover is a very important detail for organizing one's own business.
A high turnover rate may indicate internal problems within the company—from an imperfect motivation system to an unfavorable climate in the team. On the other hand, a certain level of turnover is a natural process that allows a company to refresh its workforce and bring in new ideas and approaches.
It is important to understand that there is a formula for calculating turnover under various conditions. It is from these that one can understand how to calculate employee turnover in order to use this metric effectively. Therefore, when dismissals become mass and uncontrolled, businesses face the risks of reduced productivity, losing experienced specialists, and increased recruitment costs. This is why analyzing turnover, its causes, and consequences is an important part of strategic HR management.
What is Employee Turnover
Before delving into how to calculate turnover correctly, it is important to start with what employee turnover actually is. Employee turnover is a metric that reflects the number of employees who have left the company over a certain period as a percentage of the average number of employees. In other words, it is the ratio of the number of employees who have left to the total number of employees over the selected time frame. This turnover indicator allows for assessing the stability of the labor collective, employee satisfaction, and the quality of human resource management.
Next, it is essential to consider how to calculate the employee turnover rate. The formula for calculating turnover is simple: Turnover Rate = (Number of Departures / Average Number of Employees) × 100%, where Turnover Rate is the employee turnover coefficient, Number of Departures is the number of dismissals during the period, and Average Number of Employees is the average number of employees.
The optimal level of turnover depends on the industry, type of activity, and corporate culture. For example, in the IT sector, a 10–15% turnover rate per year is considered normal, while in retail, it can go up to 30%. It is important not just to calculate the figure, but also to analyze why employees are leaving the company.
How Employee Turnover Differs from Layoffs and Redundancies
Although the terms “employee turnover,” “layoffs,” and “redundancies” are often used together, they are not identical. A layoff can be voluntary (when the initiative comes from the employee) or involuntary (initiated by the employer due to disciplinary violations or qualification mismatches). Redundancies are an administrative process related to structural changes within the company, where certain positions are eliminated.
Employee turnover encompasses all these processes but has a broader meaning. It is an integrated indicator that demonstrates changes in the workforce composition and the level of employee loyalty to the company. Therefore, even if layoffs occur for objective reasons, they will also impact the turnover rate.
Thus, turnover is an analytical indicator, while layoffs and redundancies are specific personnel actions.
Main Types of Employee Turnover
Employee turnover can be divided into several types depending on the reasons and context. The most common classification includes the following types:
- Voluntary turnover—when an employee decides to leave the company on their own. This may be related to low wages, lack of career growth, or burnout.
- Involuntary turnover—when the employer initiates the dismissal due to disciplinary breaches or failure to meet obligations.
- Functional turnover—has a positive effect as weak or ineffective employees leave the company.
- Dysfunctional turnover—a negative phenomenon when highly qualified specialists leave, who are hard to replace.
- Internal turnover—movement of employees between departments or positions within the company.
Understanding the types of turnover helps HR specialists more accurately determine whether a situation is problematic and what measures should be taken.
Causes of Employee Turnover
The causes of turnover are diverse, and they can be both external and internal. External causes include general economic conditions, unemployment rates, and labor market competitiveness. Internal causes are specific to the company:
- low salary levels or delayed payments;
- lack of professional growth opportunities;
- ineffective motivation systems;
- toxic leadership or conflicts within the team;
- excessive workload or lack of work-life balance;
- lack of recognition of employees' achievements.
Experience shows that even minor problems in internal communication or leadership style can significantly increase turnover levels. This is why regular employee surveys and monitoring of team morale should be standard practice.
Impact of Employee Turnover on Corporate Culture and Company Effectiveness
Employee turnover directly affects corporate culture. When employees frequently change, the collective loses cohesion, the atmosphere of trust deteriorates, and team effectiveness declines. The constant introduction of new employees creates additional burden for senior colleagues who must train newcomers.
Additionally, high turnover increases company costs—on recruitment, adaptation, and training of staff. Ultimately, this also impacts customer experience: service becomes unstable, and the quality of work decreases.
On the other hand, controlled turnover can be positive if a company consciously refreshes its team by attracting new talents. The main thing is that the process does not exceed the planned level.
Examples of Approaches to Reduce Employee Turnover in Well-Known Companies
Global companies pay great attention to reducing employee turnover through systematic work on corporate culture. For example, Google has created an environment where employees have the freedom for self-realization, comfortable working conditions, and flexible hours. This has helped the company retain the best specialists in the field.
Netflix employs the principle of “high responsibility”—employees are entrusted with making decisions independently but are expected to deliver high results. This approach fosters professional development and increases loyalty.
Toyota uses a “kaizen” system—continuous improvement, in which every employee is involved in the improvement processes. This creates a sense of belonging and reduces the desire to change jobs.
For Ukrainian companies, effective tools also include developing mentoring programs, a transparent career growth system, flexible working conditions, and timely feedback from employees.
Mistakes in Managing Employee Turnover
One of the most common mistakes in working with employee turnover is ignoring the deep-rooted causes of dismissals. Often management tries to react only to the consequences, for example, urgently seeking a replacement for an employee, but does not investigate why they actually left. The absence of regular exit interviews or internal surveys leads to the company not seeing systemic problems within its organization—whether it’s overload, a toxic atmosphere, or inadequate compensation.
Another typical error is focusing exclusively on quantitative indicators. When the HR department simply attempts to “reduce turnover percentage” without analyzing which specific employees are leaving the company, this can lead to wrong decisions. For example, if weak employees are leaving, that isn't always bad; worse is when the best specialists depart unnoticed by management.
Moreover, it is dangerous to underestimate the role of corporate culture. Even with competitive salaries and comfortable working conditions, people will leave if they do not feel trust, support, or fair treatment. When management neglects internal communications, team atmosphere, or the development of leadership skills among managers, turnover levels inevitably rise.
A common mistake is also the absence of a system for adapting new employees. Often newcomers leave the company within the first three months because they do not understand their tasks, feel unsupported, or cannot quickly integrate into the team. Without quality onboarding, any company risks losing even the most promising candidates.
Equally harmful is reacting too late. If the HR department notices a rise in turnover only when the figures are critically high, any measures become too late. Effective workforce management requires constant monitoring of employee sentiments and proactive actions—before people start looking for new jobs.
Separately, it should be noted the mistake of companies trying to “buy” employee loyalty solely by raising salaries. Money may temporarily reduce the risk of resignations, but it does not solve problems in the long term. Employees stay where there is respect, development, stability, and the ability to influence outcomes. These intangible factors are what often keep a team together.
Another critical error is the lack of a personalized approach. Universal HR solutions do not work the same for everyone. For Generation Z, flexible schedules and development are important, while older employees value stability and social guarantees. Ignoring these differences can lead a company to lose different groups of employees for various reasons.
Finally, a mistake is inadequate communication during changes. If a company reorganizes, changes its policies, or introduces new rules without explanations, it creates tension and uncertainty. People who do not understand where the organization is headed begin to search for stability elsewhere.
Therefore, effective management of employee turnover is not just about controlling numbers, but about in-depth work with people, culture, and trust. Companies that systematically analyze their weaknesses, invest in personnel development, and maintain transparent communication obtain not only stability—they form a strong team that grows with the business.
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