What is Turnover Rate?

Turnover rate, in the context of human resources, is a percentage that shows how many employees left a company over a specific period. It includes both voluntary departures (resignations) and involuntary ones (terminations or layoffs).

Think of it as a health metric for your company’s workforce. A high turnover rate can be a red flag, often indicating underlying issues like a poor work environment, low employee morale, insufficient compensation, or a lack of growth opportunities. A certain amount of turnover is normal and even healthy—for example, when a low-performing employee leaves—but a consistently high rate is a costly problem that can harm productivity and damage your company’s reputation.

How to Calculate Turnover Rate

To get an accurate number, you’ll need three pieces of information for the period you’re measuring (e.g., a quarter or a year):

1. The number of employees who left the company.
2. The number of employees at the beginning of the period.
3. The number of employees at the end of the period.

The formula is:

• Step 1: Calculate your average number of employees. (Beginning Employee Count + Ending Employee Count) / 2
• Step 2: Calculate the turnover rate. (Number of Employee Separations / Average Number of Employees) x 100

For example, if you had 50 employees at the start of the year and 60 at the end, and 5 people left, your average headcount would be 55. Dividing the 5 separations by 55 and multiplying by 100 gives you a turnover rate of about 9.1%.

What’s a “Good” Turnover Rate?

There’s no single perfect number, as a healthy turnover rate varies significantly by industry, job type, and company size. High-turnover industries like retail and hospitality will naturally have higher rates than more stable fields like accounting or tech.

However, a good rule of thumb is to aim for a rate that is below your industry average and to focus on trends. A sudden spike in turnover could signal an immediate problem you need to address, while a low and stable rate suggests you’re doing a good job retaining your people.