What is employee turnover and why does it matter for businesses?

Employee turnover tracks how many people leave a company during a set time frame, usually over the course of a year. It’s one of the most common ways organizations measure workforce stability. Turnover shows up in two ways—voluntary and involuntary. Voluntary turnover is when an individual chooses to move on, whether for a better opportunity, a career change, or personal reasons. Involuntary turnover, on the other hand, occurs when the employer makes the call for reasons such as restructuring and performance issues.

Let’s take a closer look at what employee turnover is and its impact on an organization. 

What are the causes of employee turnover? 

People leave jobs, or are let go, for a number of reasons. Here are some of the most common causes of turnover: 

• Payroll problems: Late, inaccurate, or difficult-to-track paychecks quickly erode trust in the company. When pay feels unreliable, people start looking for employers who handle compensation more consistently. 
• Lack of appreciation: Contributions that go unnoticed or unrewarded make work feel thankless. In these situations, individuals seek out organizations that actively recognize and celebrate achievements. 
• Few advancement opportunities: Limited promotions and career development programs can make growth feel out of reach. This lack of progress pushes people to companies that invest in long-term success. 
• Poor benefits packages: Weak benefits, like health coverage and retirement options, may leave workers feeling unsupported. Better perks elsewhere often convince them to make a career change. 
• Work-life imbalances: When people work consistently long hours with little flexibility, they typically begin to feel burnt out. To protect their well-being, employees may choose to leave and find a company that respects personal time. 
• Damaging workplace culture: Toxic management and unhealthy team dynamics create disconnection and stress. People in these environments usually search for healthier and more supportive organizations. 

How to calculate employee turnover: 3 steps

Turnover can affect morale, productivity, and even profits, so leaders often want a clear number to track. The good news is that calculating turnover isn’t complicated. Here’s how to do it step by step. 

1. Count employee departures

Start by adding up the number of employees who left your organization during the time period you’re measuring. This includes both voluntary resignations and involuntary departures, like layoffs and terminations.

2. Calculate the average workforce

Next, figure out the average size of your workforce during the same period. Add the number of employees you had at the beginning to the number at the end, then divide by two. This keeps your calculations fair even if your headcount fluctuates. 

Formula: Average number of employees = (beginning headcount + ending headcount) ÷ 2

3. Determine the turnover percentage

Take the number of employees who left and divide it by the average workforce size. Multiply the result by 100 to express the turnover rate as a percentage. Here is the formula: 

Turnover rate = (employees who left ÷ average number of employees) × 100

For example, if a company starts the year with 50 employees and ends with 100, the average workforce size is 75. If 15 employees left during that year, the turnover rate would be 20%.

(15 ÷ 75 = 0.2 → 0.2 × 100 = 20%)

Tips to analyze your organization’s turnover rate 

Once you calculate your turnover rate, the real insight comes from interpreting what it says about your workforce. A good starting point is asking what a high turnover rate is in your industry, since numbers that seem elevated in one field may be typical in another. Tracking the figure over time to see whether it's increasing, decreasing, or holding steady will give you a better sense of long-term patterns. 

You can also break the figure down by department or location to uncover areas that may need closer attention. It also helps to distinguish between voluntary and involuntary departures, since employees leaving on their own often point to issues with pay, culture, and advancement. On the other hand, company-driven exits can reflect challenges with hiring and performance expectations. 

3 ways to reduce employee turnover

Employees want to feel connected, supported, and motivated to grow. Here are three practical ways to build that kind of environment. 

1. Start retention early

Retention isn’t something to think about after an employee has been with you for years — it should begin on their very first day. A strong onboarding experience sets the tone for how people see the organization. Done well, it goes beyond paperwork by clarifying the company’s mission, showing where each role fits in, and highlighting the impact new hires can make from day one.

2. Recognize and reward often

People want to know that their contributions matter, and recognition plays a huge part in keeping morale high. When managers take the time to call out wins and say thank you, it creates a culture where people feel valued and supported. In turn, they’re more motivated to do their best work than those who feel overlooked.

3. Support work-life balance 

Competitive pay and strong benefits matter, but people also weigh whether they can balance their personal and professional lives. Flexible schedules and perks like travel stipends and wellness allowances are just some of the ways companies can encourage loyalty. When individuals feel cared for both at work and at home, they’re more likely to stay engaged and grow with the company. 

Attract and retain top talent around the world with Oyster

Building a great team starts with attracting standout talent and creating the conditions that make them want to stay. This often looks like offering competitive pay, meaningful benefits, and long-term career support that reflect local expectations. 

Oyster makes this possible on a global scale by helping organizations design country-specific salary, equity, and benefits packages that appeal to new hires and keep existing ones engaged. Learn how you can strengthen attraction and retention strategies with Oyster today. 

FAQ

What is a health turnover rate?

A healthy turnover rate is usually in the single digits or low teens each year, but it depends on your industry. Some movement is normal, but constant churn is a red flag.

Is employee turnover good or bad?

Turnover isn’t bad at all. It can bring in fresh ideas and different skills. But if too many people leave at once, it disrupts teams, slows progress, and raises costs.

What are the causes of employee turnover?

Turnover often happens when pay is unreliable, recognition is missing, or work-life balance is off. Management style and overall culture can also play a big role.