What is the employee turnover rate, and how do you calculate it properly for your company?
What the employee turnover rate is, how to calculate it with a formula and worked examples, when it is high, its types and causes, and how to reduce it.
In short
- Calculate turnover as employees who leave divided by average headcount for the same period, multiplied by 100.
- Compare turnover with your company's history and sector, and break it down by department and departure type.
- Investigate why employees leave, then review pay, development, management and workload to improve retention.
The employee turnover rate is one of the most important indicators of how stable a workplace is and how well human resources (HR) is managed in a company. It shows how well the company keeps its employees, and reflects how satisfied they are with the working environment, pay and development opportunities. A high rate means repeated recruitment and training costs and experience walking out of the door, while a low rate usually points to a stable working environment. Calculating it accurately and reading it in context helps a company spot a problem before it grows.
What is the employee turnover rate?
The employee turnover rate is an HR indicator that expresses the share of employees who left the company during a set period, such as a month or a year, compared with the average number of employees in that period. It includes those who left voluntarily (such as by resigning) and involuntarily (such as by dismissal, the end of a contract or retirement).
How do you calculate the employee turnover rate?
The employee turnover rate is calculated with this formula:
Turnover rate = (number of employees who left during the period ÷ average number of employees in the period) × 100
The average number of employees is calculated like this:
Average number of employees = (employees at the start of the period + employees at the end of the period) ÷ 2
The two steps can be combined into one formula: (number of leavers × 2) ÷ (employees at the start + employees at the end) × 100. The average is used instead of the starting headcount alone because the number of employees changes during the period as people join and leave.
Steps:
- Choose the period: a month, a quarter or a year.
- Count the employees who left during the period, for every reason.
- Record the headcount on the first and last day of the period, and work out the average.
- Divide the number of leavers by the average and multiply by 100.
Worked example: annual
A company starts the year with 100 employees and ends it with 95, and 5 employees left during the year:
- Average number of employees = (100 + 95) ÷ 2 = 97.5
- Turnover rate = (5 ÷ 97.5) × 100 = 5.13% (rounded)
Worked example: monthly
A company starts the month with 200 employees and ends it with 198, and 7 employees left during the month:
- Average number of employees = (200 + 198) ÷ 2 = 199
- Monthly turnover rate = (7 ÷ 199) × 100 = 3.52% (rounded)
The monthly calculation spots problems early, and the annual one gives the overall picture. What matters is comparing a monthly rate with monthly rates, and an annual rate with annual rates.
Sub-rates worth calculating
With the same formula, you can calculate:
- Voluntary turnover rate: counting only those who resigned. It is the closest measure of employee satisfaction.
- Early turnover rate: counting only those who left in their first year. It indicates how well recruitment and onboarding work.
- Turnover rate by department or branch: to find where the problem is concentrated.
When is the employee turnover rate high?
There is no single threshold that suits every company, because the rate varies widely between sectors. Official data shows how large that difference is. In the United States, for example, the Bureau of Labor Statistics (BLS) publishes the monthly separations rate for each sector, covering resignations, dismissals, retirements and other separations. The average of this monthly rate in 2025 was:
- 3.3% across all jobs.
- 5.6% in leisure and hospitality.
- 3.8% in retail trade.
- 2.8% in information.
- 2.1% in finance and insurance.
- 1.5% in government.
These figures come from a different market, so they are not a target for a company in Saudi Arabia or Bahrain, but they show that a monthly rate that is high in one sector can be normal in another. A rate is therefore usually high when:
- It is rising compared with your own company's rate in earlier periods.
- It is above the rate of companies in your sector that calculate it the same way.
- It is concentrated in one department or branch, or among employees under one manager.
- Most of it is strong performers resigning, or new employees leaving.
Types of employee turnover
Voluntary turnover
This happens when an employee chooses to leave the company, for example resigning for a better opportunity or for personal reasons. It often means losing experience and paying to replace it.
Involuntary turnover
The company ends the employee's contract because of poor performance or a reduction in the workforce. It may improve overall performance, but when it is frequent it affects the morale of those who stay and the company's reputation.
Functional turnover
Weak performers leave and are replaced by stronger ones, which is in the company's interest.
Dysfunctional turnover
Strong employees are lost through voluntary departure. This is the most damaging type for the company's stability.
Internal turnover
Employees move between departments without leaving the company, for example through job rotation to develop their skills. It does not count towards the turnover rate, but it keeps experience inside the company.
What are the main causes of high employee turnover?
- Uncompetitive pay: when pay does not match the effort or the market, employees look for a better-paid opportunity.
- Poor management: an unfair manager or favouritism pushes employees to leave and weakens trust in the company.
- No path to grow: too little training and too few chances of promotion leave employees feeling they are not progressing.
- Work pressure: long hours and too few resources lead to exhaustion and upset the balance between work and life.
- Little recognition and poor hiring: failing to recognise achievements weakens loyalty, and hiring people who do not suit the job raises early departures.
See also: Employee burnout: causes, signs and how companies can spot it early
How do companies reduce employee turnover?
Improve pay and benefits
Review your salaries against the market regularly, link bonuses to performance, and look after the benefits your employees value, such as medical insurance and leave.
Offer professional development
Set up training programmes and clear promotion paths, and promote from within before hiring externally when the right candidate is available.
Build a positive work culture
Recognise achievements, keep communication open and train managers to lead, because poor management is one of the most common reasons people leave.
Support work-life balance
Watch for recurring overtime and unused leave balances, and offer flexible working arrangements where the work allows it.
Improve recruitment and onboarding
Choose employees who suit the job and the company culture, plan their first weeks well, and listen to employees through regular surveys and exit interviews. Then analyse the data and adjust your plan.
Read more: Recurring overtime: what does it tell you about your workforce?
How Dawmt helps you track employee turnover
No system stops an employee from leaving, but organised data helps you calculate the rate accurately and spot its causes early. In Dawmt, this includes:
- Employee files and end of service: each employee's details are recorded, and their end-of-service settlement is recorded when they leave, so you have the headcounts and leaver numbers the formula needs.
- Reports and dashboards: workforce reports, and "Analysis by AI", which helps you read trends.
- Attendance, overtime and leave: tracking of working hours, overtime and leave balances, which are early signs of pressure that may end in a resignation.
- Performance appraisal and training: appraisal cycles and training paths that give employees a clearer picture of their progress.
- The employee app: surveys, requests and self-service that let employees be heard before they decide to leave.
- Recruitment: a recruitment portal and AI CV parsing, to organise selection and reduce early departures.
Conclusion
The employee turnover rate is simple to calculate, but its value lies in how you read it: compare it with your company's history and your sector, break it down by department and type of departure, and find the cause before choosing the fix. To see how Dawmt brings this data together in one system, contact the Dawmt team.
Read more: HR departments in companies and their strategic roles
Sources
Frequently asked questions
What is a normal employee turnover rate for a company?
There is no single figure that suits every company, because the rate varies widely between sectors. The most accurate comparison is with your own company's rate in earlier periods, and with companies in the same sector that calculate it the same way and over the same period (monthly or annual).
What is the difference between employee turnover and attrition of key staff?
Employee turnover covers every case of an employee leaving, voluntary or not, while attrition of key staff usually means losing strong employees voluntarily and without planning for it.
What signs show that a company has a turnover problem?
The main ones are: a rate that is rising compared with earlier periods or with the sector average, leavers concentrated in one department or branch, or under one manager, many people leaving in their first year, rising recruitment costs, and the same complaints coming up again in exit interviews.