Here’s How I Calculate Employee Turnover Rate in 3 Steps

Every time I’ve needed to make a hiring decision, one of the first metrics I pull up is employee turnover rate. It tells you how many people are leaving your company over a specific period. It also forces you to ask why.

I’ve built and scaled SaaS companies, hired over 100 people, and had seasons where turnover was high and seasons where it was close to zero. The math itself is easy. The hard part is knowing what to do with the result.

In this post, I’m going to walk you through the exact 3-step process I use to calculate employee turnover rate. I’ll also cover how to interpret the numbers, what a healthy rate looks like, what turnover costs your company, and how to bring it down if your numbers are too high.

Okay, let’s get into it.

Step-by-Step Procedure for Employee Turnover Rate Calculation

Employee turnover rate is the percentage of employees who leave a company during a specific time period, divided by the average number of employees, then multiplied by 100. It includes both voluntary departures, such as resignations, and involuntary departures, such as terminations or layoffs. It is calculated on a monthly, quarterly, or annual basis.

That’s the textbook definition. In practice, calculating your turnover rate is something you can do in about 5 minutes with a calculator. You just need three numbers: how many people left, how many you started with, and how many you ended with.

Here’s the step-by-step breakdown.

Step 1: Select Which Departures to Include

The first step is deciding which types of employee departures you’re counting. This sounds obvious, but it trips up a lot of HR teams because not every departure means the same thing.

Common departure types include:

• Resignations (voluntary)
• Terminations (involuntary)
• Layoffs
• Retirements
• Contract expirations
• Job eliminations

Most companies focus on resignations and terminations when calculating the turnover rate. Layoffs and retirements are excluded because they reflect organizational decisions rather than employee dissatisfaction.

If you’re tracking key HR KPIs, I’d recommend calculating two versions: one that includes all departures (total turnover) and one that focuses on voluntary turnover only. Voluntary turnover is the number leadership cares most about because it signals whether your people want to stay.

Once you’ve decided what counts, tally up all qualifying departures during your chosen time period, whether that’s a month, a quarter, or a full year.

Step 2: Calculate the Average Number of Employees

This is where people sometimes get confused, but it’s straightforward.

You need the average number of employees during the time period you’re analyzing. The formula is:

Average Number of Employees = (Employees at Start of Period + Employees at End of Period) / 2

For example, if you had 150 employees on January 1st and 140 on March 31st, your average for Q1 would be: (150 + 140) / 2 = 145.

Why use the average instead of a fixed number? Because your workforce fluctuates. People join and leave throughout the period. Using just the start or just the end would skew your results.

If you’re doing people analytics at a more granular level, you can calculate the average using monthly headcounts and then average those for the full year. But for most teams, the start-and-end method works just fine.

Step 3: Apply the Turnover Rate Formula

Now you just plug in the numbers:

Turnover Rate = (Number of Departures / Average Number of Employees) x 100

Let’s say 12 employees left during Q1, and your average headcount was 145: (12 / 145) x 100 = 8.28%. That’s your quarterly turnover rate.

For an annual rate, use the full year’s departures and the full year’s average headcount.

Here’s a quick monthly example: if 3 employees resigned in March and your average headcount was 200, your March turnover rate is (3 / 200) x 100 = 1.5%.

Simple. The challenge isn’t the math. It’s what comes next, understanding what the number means.

How to Interpret Employee Turnover Rates

Calculating your turnover rate is the easy part. Interpreting it is where the real value lives.

A single turnover number in isolation doesn’t tell you much. You need context. Here’s how I think about it after years of tracking this across my own companies.

Compare against your industry. A 15% annual turnover rate might be great for a restaurant chain (where averages hit 70%+), but alarming for a tech company. The Bureau of Labor Statistics publishes Job Openings and Labor Turnover Survey (JOLTS) data that gives you industry benchmarks worth checking on a regular basis.

Track the trend over time. Your turnover rate last quarter matters less than the direction it’s heading over 6 to 12 months. If it’s climbing steadily, you have a problem even if the absolute number still seems reasonable. Building an HR metrics dashboard helps you spot these patterns before they spiral into full-blown crises.

Segment by department. I learned this one the hard way. Company-wide turnover can look healthy while one specific team is bleeding talent. Break the numbers down by department, manager, role level, and tenure to get the real picture.

Separate voluntary from involuntary. A 20% turnover rate, where 18% is voluntary, tells a different story than one where 15% is involuntary. Voluntary turnover reveals what’s happening with your culture and compensation. Involuntary tells you about hiring quality and performance management.

Look at who’s leaving. Losing underperformers isn’t always bad. Losing your top 10% is a five-alarm fire. This is where predictive analytics in HR can help you identify flight risks before they hand in their notice.

What is a Healthy Employee Turnover Rate?

There’s no universal “good” turnover rate, but there are useful benchmarks to compare yourself against.

According to the Bureau of Labor Statistics, the average total turnover rate in the U.S. hovers around 3.5 to 4% monthly, or in the neighbourhood of 40 to 45% per year when you include all separations (quits, layoffs, firings, and retirements). That number is higher than most people expect because it includes industries like retail and food service that churn through staff.

For voluntary turnover, most industries fall between 10 and 20% per year. Here’s a rough breakdown by sector:

• Technology: 13-15%
• Healthcare: 19-22%
• Retail: 60%+
• Finance and Insurance: 12-15%
• Professional Services: 12-14%
• Manufacturing: 25-30%

If your voluntary turnover rate is under 10%, you’re in great shape. Between 10 and 20% is normal for most industries. Above 20% (outside of high-churn sectors) and you have work to do.

One thing I’ll say from personal experience: the right turnover rate isn’t zero. Some turnover is healthy. It brings in fresh perspectives, lets you upgrade talent, and keeps your culture from getting stale. When I’ve seen teams with no turnover for years, they sometimes get complacent. If you’re focused on strategic workforce planning, a small amount of managed attrition can be a good thing.

What are Employee Turnover Costs?

This is the part that makes CFOs pay attention.

Employee turnover is expensive. The Society for Human Resource Management (SHRM) estimates that replacing an employee costs 6 to 9 months of their salary on average. For a mid-level employee earning $60,000, that’s $30,000 to $45,000 per replacement. Scale that across multiple departures, and the numbers get staggering fast.

The costs break down into a few categories:

Direct costs include job postings, recruiter fees, background checks, and onboarding expenses. These are the ones you can quantify.

Indirect costs are harder to measure but often much larger. Lost productivity during the vacancy, reduced output while the new hire ramps up, and the time managers spend interviewing and training instead of doing their actual jobs.

Knowledge loss is the hidden killer. When experienced employees leave, they take institutional knowledge with them. Processes, client relationships, internal context, all the things that never got written down. This is damaging in technical roles or client-facing positions.

Team impact is real, too. When a teammate leaves, morale dips. The remaining team absorbs extra work. If departures become a pattern, other people start considering their own options. It’s a domino effect I’ve watched play out more than once.

If you’re tracking employee compensation metrics, factor in turnover costs as part of your total cost-of-workforce analysis. A higher salary that retains talent is almost always cheaper than constant replacement cycles.

How to Prevent Employee Turnover

Understanding what causes turnover is the first step to reducing it. Here’s what I’ve seen work across my own companies and the teams I’ve advised.

Hire for fit, not just skills. A lot of early turnover happens because the job or the culture wasn’t what the employee expected. Better employee onboarding and honest job previews during the recruiting process make a real difference. When people know what they’re walking into, they’re far less likely to walk back out.

Pay well. I know this sounds basic. However, compensation is still the number one reason people leave. You don’t have to be the highest payer in your market, but you can’t be much below it either. Benchmark your salaries and adjust when the data tells you to.

Invest in growth and development. People leave when they feel stuck. Create clear career paths, offer meaningful development opportunities, and have regular conversations about where employees want to go. When people can see a future at your company, they’ll be less inclined to look elsewhere.

Fix bad management. The old saying holds: people don’t quit companies, they quit managers. If you notice high turnover concentrated under certain leaders, look at those managers first. Conduct thorough exit interviews to find out what’s driving departures.

Build a culture worth staying for. Culture isn’t ping pong tables and free snacks. It’s how people treat each other, how decisions get made, how conflict gets handled, and whether employees feel valued. Focus on those fundamentals, and the retention numbers tend to follow.

Use data to get ahead of problems. Don’t wait for resignation letters to land on your desk. Track engagement survey results, monitor employee performance metrics, and watch for warning signs. Understanding the full employee life cycle helps you identify the moments where employees are most at risk of leaving.

Employee Turnover Statistics

Here are some turnover statistics that I find useful for putting your own numbers in perspective:

• The U.S. average quit rate has settled around 2.2 to 2.4% monthly since 2023, down from the 3%+ rates during the Great Resignation (Bureau of Labor Statistics, 2025).
• The average cost to hire a new employee is approximately $4,700, according to SHRM. That doesn’t include lost productivity or training time.
• Employees who go through a structured onboarding process are 58% more likely to stay for three years or more.
• About 33% of new hires look for a new job within their first 6 months, often because of poor onboarding or mismatched expectations.
• Companies with strong employee engagement programs see 59% less turnover than those without.
• Organizations that conduct stay interviews report 15 to 25% lower voluntary turnover compared to companies that don’t.
• The highest turnover industries remain hospitality, retail, and food service, all exceeding 60% annually.
• Remote and hybrid workers report lower voluntary turnover rates compared to in-office workers, though this varies by industry and role.

Calculating your employee turnover rate takes about 5 minutes. Understanding what it means and doing something about it, that’s the real work.

Final Thoughts

I’ve found that the companies that track turnover and dig into the reasons behind it are the ones that improve. The math is just the starting point. What matters is the conversations and the changes that come after the number shows up on your dashboard.

If your turnover rate is higher than you’d like, don’t panic. Focus on understanding the patterns first: who’s leaving, when they’re leaving, and why. Then prioritize the fixes that will have the biggest impact. In my experience, that means better hiring, better management, and competitive compensation, in that order.

FAQ

Here, I answer the most frequently asked questions about how to calculate employee turnover rate.

What is the formula for employee turnover rate?

The employee turnover rate formula is: (Number of employees who left during a period / Average number of employees during that period) x 100. To find the average headcount, add the number of employees at the start and end of your period and divide by 2. This works the same way for monthly, quarterly, or annual calculations.

What is a good turnover rate for a company?

It depends on your industry, but a voluntary turnover rate under 10% is considered strong. Most industries fall between 10 and 20% annually. High-churn sectors like retail and hospitality see rates above 60%. The most important thing is tracking your rate over time and comparing it to your specific industry benchmark rather than chasing a single universal number.

How do I calculate the monthly vs. the annual turnover rate?

The formula is identical for both time periods. For monthly turnover, use the number of departures in that single month and the average headcount for that same month. For annual, use the total departures for the full year and the average headcount across all 12 months. You can also add up your monthly rates, though this may differ from the annual calculation due to averaging differences.

What is the difference between voluntary and involuntary turnover?

Voluntary turnover happens when employees choose to leave on their own, such as through resignations and retirements. Involuntary turnover is when the company initiates the separation, such as terminations and layoffs. Most HR teams track both separately because they indicate very different things. High voluntary turnover points to culture or compensation issues, while high involuntary turnover may signal problems with hiring quality or performance management.

Why is employee turnover rate important to track?

Turnover rate directly impacts your bottom line. Every departure costs an estimated 6 to 9 months of the employee’s salary to replace. Beyond cost, it affects team morale, productivity, and institutional knowledge. Tracking it helps you spot trends before they become the norm, identify problematic departments or managers, and measure whether your retention initiatives are working.

Does employee turnover rate include internal transfers?

No, employee turnover rate counts employees who leave the organization. Internal transfers, promotions, and department changes are not considered departures. They should be tracked as internal mobility metrics. Some companies calculate an internal turnover rate to understand movement between teams, but that’s a different metric from traditional employee turnover rate calculations.