How to calculate employee turnover – and reduce it?

If you’ve ever felt frustrated by how often employees leave your company, you’re not alone. Employee turnover has become a real headache for HR teams everywhere. In the U.S., the average turnover rate sits at about 18% a year – and in certain industries, the number is far higher [Source: U.S. Bureau of Labor Statistics, 2023]. That kind of churn can be expensive, exhausting, and disruptive. But what exactly does employee turnover mean for your business? And more importantly, what can you do about it? Before tackling solutions, let’s take a closer look at how to calculate employee turnover and why understanding it makes such a difference.

Teaser

This article explores what employee turnover really means, how much it costs, how to calculate it, why employees leave, and what organizations can do to reduce it. Drawing on data from Gallup, Deloitte, Oxford Economics, SHRM, and others, we’ll highlight practical strategies and industry insights that help HR teams not just count departures – but prevent them.

What is employee turnover, and why does it matter?

Employee turnover definition in short? It is the rate at which employees leave a company and are replaced by new hires, calculated as a percentage of the total workforce over a specific period. It includes both voluntary departures, driven by factors like better opportunities or low pay, and involuntary separations, such as firings or layoffs. High turnover often signals issues with work conditions, compensation, or management, while low turnover suggests a healthy workplace and effective retention strategies.

But while the definition sounds technical, the impact is deeply human. Every time someone leaves, the company isn’t just losing a worker – it’s losing skills, experience, and often a piece of team morale. Workloads shift, projects slow down, and recruitment teams scramble to fill the gap.

In this sense, turnover is more than a percentage. It’s a mirror reflecting your company culture, leadership quality, and how valued employees feel day to day. High turnover often signals deeper issues such as poor engagement, weak management, or lack of career growth [Source: Gallup, 2023, State of the Global Workplace].

How much does turnover actually cost?

The cost of losing employees hits harder than many organizations expect. In the UK, the average cost of replacing an employee can reach £30,614 when recruitment, training, and lost productivity are factored in [Source: Oxford Economics, 2014, The Cost of Brain Drain]. In the United States, total national turnover costs are estimated in the hundreds of billions of dollars annually [Source: Work Institute, 2023 Retention Report].

Some estimates suggest replacing a single employee can cost between half and double their annual salary [Source: SHRM, 2022, The High Cost of Turnover]. And the hidden costs – loss of institutional knowledge, disruption of team dynamics, and reduced morale – can be just as damaging as the financial hit.

How can you calculate your employee turnover rate?

The math is straightforward. Here’s the basic formula:

Turnover Rate = (Number of employees who left ÷ Average number of employees) × 100

Example: Suppose you started the year with 200 employees and ended with 220. Over that year, 30 people left. Your average workforce size is (200 + 220) ÷ 2 = 210. Plugging the numbers in: (30 ÷ 210) × 100 = 14.3% turnover rate.

Step by step:

Decide on your time frame (monthly, quarterly, or yearly).
Count the employees who left during that period.
Work out the average headcount for that period.
Apply the formula.

This calculation helps you compare your numbers against industry averages and spot trends in your own business [Source: CIPD, 2023, Labour Market Outlook].

Why do employees choose to leave?

Compensation is a common driver, but rarely the only one. Reports reveal that employees often resign due to:

Lack of career growth opportunities
Poor relationships with managers
Inadequate pay and benefits
Cultural mismatch with the organization
Stress, burnout, or lack of work-life balance

Deloitte’s research shows that while pay is important, culture and belonging strongly influence whether employees stay or leave [Source: Deloitte, 2023, Global Human Capital Trends]. For younger generations, especially Gen Z, purpose, and flexibility are as significant as salary [Source: WWT.com, 2024, Ready or Not Gen Z is Transforming the Workplace].

Can companies prevent employees from leaving?

The encouraging answer is yes. A Gallup study found that 52% of employees who left said their manager or organization could have done something to prevent their departure [Source: Gallup, 2023, State of the Global Workplace].

Some of the most effective prevention strategies include:

Regular check-ins and transparent communication
Clear career development paths
Recognition and appreciation of work
Stronger leadership support

Companies that focus on engagement and employee growth consistently report lower turnover rates.

Do demographics and industries make a difference?

Turnover is not evenly distributed across the workforce. Younger employees are statistically more likely to change jobs, with millennials switching roles nearly twice as often as older generations [Source: Pew Research Center, 2021]. Gender also plays a role: women in male-dominated industries leave at higher rates due to inclusivity and progression challenges [Source: McKinsey, 2022, Women in the Workplace].

Industry differences are stark. Retail, hospitality, and technology see some of the highest turnover rates, while healthcare and education often retain staff longer [Source: LinkedIn, 2023, Global Talent Trends].

What practical strategies can reduce turnover?

Reducing turnover takes a layered approach, but there are proven actions:

Hire for both skills and culture – ensure new hires align with your company’s values and working style.
Invest in employee growth – training, promotions, and lateral moves all build loyalty.
Strengthen leadership and communication – poor management is one of the top reasons people leave.
Reevaluate pay and benefits – competitive salaries still matter, but flexible work and wellness programs can make a big difference.
Monitor patterns with data – track turnover by role, department, or demographic to catch issues early.

How can technology support HR teams?

Manual spreadsheets make tracking turnover tedious. HR software allows companies to calculate turnover, monitor workforce trends, and flag problem areas in real time. With the right tools, HR teams can shift from reactive firefighting to proactive retention strategies [Source: Gartner, 2023, HR Tech Trends].

What can organizations learn from these insights?

The key lesson is that turnover is not inevitable – it can be managed. While pay is a factor, building a culture of trust, recognition, and growth is far more sustainable. Businesses that treat retention as a proactive strategy rather than a reactive issue are more likely to keep their talent, protect their culture, and save millions in hidden costs.

The sooner you start measuring and addressing turnover, the stronger your organization will become. So why not run the numbers today and see where you stand?

How does Calamari help organizations address turnover?

Automated leave management – makes it easy to monitor patterns in sick leave and vacations.
Overtime monitoring – helps managers spot when employees are overworked.
Employee self-service tools – empower staff to manage their own time and requests, reducing frustration.
Clear workload insights – give HR teams and leaders a better understanding of engagement levels.
Early risk detection – highlights stress points before they lead to resignations.
Data-driven decisions – user-friendly reports allow organizations to respond quickly and effectively.
Healthier workplaces – proactive management supports well-being and improves retention.

FAQ: understanding and reducing employee turnover

Employee turnover is one of the most common challenges HR teams face. Below you’ll find answers to the most frequently asked questions.

What does employee turnover mean?

It refers to the number of employees leaving an organization and being replaced within a certain period. Both voluntary resignations and involuntary exits count.