How to calculate and improve your turnover rate

You may assume you're doing everything you can to keep employees with you long-term — offering competitive benefits, a supportive work environment, career development, and more. But is this really the case? Are you at risk of losing your high-performing employees to other companies?

Losing high-quality employees can cost your company both time and money: one in-depth study showed that it costs roughly a fifth of a departing employee’s salary to train their replacement. This high cost means it is crucial to keep an eye on your turnover rate, or the rate at which employees leave your organization.

Tracking your turnover rate and understanding why employees may be leaving your company can help you identify opportunities for improvement that will help you both attract and retain top talent.

What is turnover rate?

Turnover rate is the percentage of employees who leave your company, either voluntarily or involuntarily. Average turnover rates vary both by industry and role.

For example, turnover tends to be higher in entry-level retail positions (around 13% on average), since employees have opportunities to learn and quickly advance in their career, or may be working part-time while attending school. Because of this, it’s important to benchmark your own turnover rates with industry standards. If you work in an industry where higher turnover rates are the norm, you probably don’t need to worry if you’re struggling with employee retention.

In many industries, however, a high turnover rate is something your HR team should look closely at. Determining the causes of frequent employee turnover can help you identify opportunities to improve your company's structure, training, benefits, or culture. Ultimately, making improvements in these areas can help you retain more high-quality employees long-term, and possibly even attract new ones.

How do you calculate turnover rate, and why should you track it?

To track your employee turnover rate, you first need to know how to calculate it. Your human resources information system (HRIS) may have built-in turnover reporting and customizable reports, or you may choose to calculate it manually.

To calculate your turnover rate manually, follow these five steps:

1. First, choose a period of time (like a quarter, year, or the lifetime of your organization).
2. Add the number of employees at the start of this period to the number of employees at the end of it.
3. Divide this sum by 2. This is your average number of employees over this period.
4. Now divide the number of employees who left by the average number of employees.
5. Finally, multiply this number by 100.

This formula will give you your turnover rate as a percentage.

Once you've calculated your turnover rate, you should set up reminders to review it on a regular basis. Tracking your employee turnover will help you:

• Identify important trends: In some industries, turnover is seasonal: college-aged employees leave their jobs just before the end of summer so they can return to school full-time. You may find other trends in your own organization, like specific departments or roles with higher-than-average turnover. Identifying these trends is the first step toward making improvements and retaining more employees.

• Monitor how changes to your organization improve employee retention: If your organization adds new career paths, improves its benefits, or begins offering equity that vests over time, you may see an impact on employee happiness — and their willingness to stay with you. Monitoring the turnover rate before and after these changes can help you better understand just how meaningful each change has been.

• Save money: Reducing turnover can help you reduce the expenses associated with recruiting, hiring, training, and providing supplies to new employees.

• Improve your reputation as an employer: Making changes to your organization's benefits, policies, or culture can improve how employees think of you. Even if you do someday decide to part ways, the reviews your past employees share online or with friends will be much more positive if you’ve taken the time to improve the overall employee experience.

You may also find it helpful to benchmark your turnover rate against publicly available data from sources like the United States Bureau of Labor Statistics, or career websites like LinkedIn. Reports from sources like these can help you better understand how both your role-specific and your overall turnover rates compare to national averages, and whether you're providing an above-average work environment.

3 ways to improve your turnover rate

Once you understand what your turnover rate looks like, you'll probably want to start thinking about ways to improve it. Rather than blindly making changes, you should use data to find opportunities for improvement. Here are three ways to do that:

1. Ask for feedback

Since turnover rate can be caused by a number of factors, it's best to ask your employees directly rather than assume. You may think stress is the source of high turnover among your sales employees, but it might be another factor entirely.

You can ask for feedback a few different ways, some of which you may already be using:

• Send anonymized employee surveys: Collecting employee feedback allows you to learn what's already done well, as well as what could be improved. Be sure to ask specific, open-ended questions. For example, “What would you improve about your health care?” is much more actionable for your HR team than a simple yes/no question, like “are you happy with your benefits?”

• Look for reviews on sites like Glassdoor and Indeed: These reviews can highlight even more opportunities for improvement. Some employees don't feel comfortable sharing their feedback with HR directly, so these websites are another reliable source of honest, detailed feedback on everything from benefits to your CEO.

• Implement exit interviews: As part of your offboarding process, ask departing employees what, if anything, would have made them stay. Were they lacking support from their manager? Did they want higher pay or need more time off?

This feedback will give you details, in your employees' own words, about the things they do and don't like about your organization. With this detailed feedback, you can start planning improvements that will ultimately help reduce turnover.

2. Review your benefits

A lack of benefits is one of the biggest reasons employees leave an organization. These benefits may be obvious, like vacation time or health insurance, or they may be more subtle, like flexible start and end times or a work from home policy. One Gallup survey found that 51% of workers would switch jobs for flexible start times, and 37% would switch for part-time remote work options.

Ask yourself: Am I offering what employees want and need to succeed? If you've taken the time to collect feedback, you should have already uncovered some opportunities to improve your benefits package.

For example, if an employee is often late because they need to take their children to daycare, flexible working hours can help them. Or perhaps you could add on-site childcare services. Although employees may not directly ask for these changes, proactively offering them helps to improve overall employee satisfaction and reduce turnover.

3. Revisit the hiring process

Turnover is easier to avoid if you're hiring the right people to begin with. Rather than guess what the “right person” looks like, you can use your successful hires as a model for future ones, and for potentially improving your hiring process.

To find candidates that would be a good fit for your team, look at the traits of your top performers with the longest tenure at your company. For example, if employees who stay with you for five years or more are most likely to have stayed at previous companies for over three years before changing roles, you may ask your recruiters or HR team to consider:

• Prioritizing outreach to candidates that have longer tenures with previous employers
• Including one or more questions about previous experience (and why they’re looking to change roles) in interviews
• Circling back with previous applicants who have had longer tenures at previous companies

With this information, you can prioritize recruiting people who have the best chance of success in the future — and who are less likely to leave your organization.

One word of caution: when using successful employees as models for future hires, avoid choosing traits that will create any kind of hiring bias. The traits you choose should be based on data, not feelings. You should also be prepared to challenge your assumptions: if an otherwise stellar candidate has less than three years of experience, rejecting them could cause you to miss out on a fantastic hire.

Create a stronger organization by improving your turnover rate

A high turnover rate is tough on everyone at your company, from HR, to management, to employees stretched thin by an open role on their team. Focusing on insights from your own employee turnover data can help you make informed decisions on how to improve, making your company more attractive for high-quality candidates and top performing employees alike.