Staff turnover: What is employee turnover and how to calculate it

What is staff turnover?

Staff turnover, also known as employee turnover or churn, is the total number of staff who leave an ongoing role in your business — voluntarily or involuntarily — over a certain period. Most businesses measure employee turnover annually. 

If your business has high staff turnover, many of your workers have left during the year or given period. In contrast, low turnover indicates people are staying in their jobs longer. 

Different types of staff turnover

There are four types or categories of staff turnover:

Voluntary turnover

Voluntary turnover is when staff leave by choice. They may be retiring, experiencing a significant life change, or seeking more pay, career progression, better benefits or improved work-life balance.

Undesirable turnover 

Undesirable turnover is a sub-category of voluntary turnover. It refers to the loss of good employees who leave to take on a new job with a different business. 

Involuntary turnover

Involuntary turnover happens when the business makes the decision to end the appointment of a staff member. This may be due to underperformance, misconduct, as part of seasonal or business-wide restructuring or because they aren't a good fit for their role. 

Desirable turnover 

Desirable turnover is a sub-category of involuntary turnover. It refers to employees terminated from their roles because they're not meeting performance or job expectations. These layoffs are desirable because you can hire more skilled and diligent people to replace them. 

Employee turnover versus attrition rate

Staff turnover includes voluntary and involuntary turnover of employees you plan to replace, keeping your workforce at its current level. 

Attrition refers to roles that you aren't intending to fill when staff retire or leave, reducing your workforce over time by transferring duties to other staff, or removing the role altogether. 

How to calculate staff turnover 

Use this formula to calculate your annual staff turnover:

Annual turnover rate % = (number of employees who left / average number of employees) / 2 × 100

Step 1: Work out your total number of employees

Most businesses calculate staff turnover annually. To do this, you must first calculate how many employees have left in the past year. Then, to find the average number of employees, add the number of employees from the beginning of the year to the number at end of the year and divide by two. Remember to exclude temporary hires from your equation. 

For example, you may have an average of 50 employees throughout the year and 5 who left (not including seasonal or on-leave workers.)

Step 2: Calculate your annual turnover rate

Divide the number of employees who left by the average number of employees. Multiply the result by 100 to get your annual staff turnover rate. 

For example, the equation would be: (5/50) * 100 = turnover rate of 10%. This indicates that approximately 30% of your employees left the business in one year.

Calculating voluntary and involuntary turnover rates

You can also calculate turnover types, including:

Involuntary turnover = (number of involuntary employees who left / average number of total employees) × 100

Voluntary turnover = (number of voluntary employees who left / average number of total employees) × 100

What are healthy staff turnover rates? (by industry)

Healthy staff turnover rates vary based on industry, location and economic-related factors. For specific sectors like hospitality and retail, employee churn is traditionally much higher because of seasonal demand and high levels of temporary employment. So, when benchmarking your turnover rate, compare your business with others within your industry and with a similar-sized workforce. 

Data report that these industries have higher than the average turnover rate of 10.6% across all industries:

• Professional services: 13.4%

• Tech: 12.9%

• Entertainment: 11.8%

• Hospitality: 11.8%

• Retail: 11.4%

Another global study found these jobs have the highest annual voluntary turnover rates:

• Contact centre/customer service – 17%

• Manufacturing and operations – 15%

• Sales – 14%

Importance of maintaining healthy staff turnover rates

Maintaining healthy staff turnover rates is important because replacing employees is expensive. In Australia, replacing an employee costs approximately 1.5 x their annual salary. Above and beyond that expense, high turnover can also result in:

• Lower staff morale

• Shortage of skilled and knowledgeable workers

• Decrease in a team’s perceived capabilities

Common causes of high staff turnover

There are many causes of high staff turnover, including:

• More competitive offers elsewhere

• Lack of career progression or professional development

• Inflexible working arrangements

• Poor work-life balance – feeling overworked or experiencing burnout

• Poor relationship with a manager or a toxic work environment

• Family or other life commitments

• Internal promotion or transfer

Understanding which causes are present in your business can help you make the necessary changes to lower staff turnover and increase retention and loyalty.

Retention strategies: how to improve your staff turnover rates

There are lots of ways you can improve your staff turnover rates. These strategies address some of the common causes of higher staff turnover:

Keep employees engaged

Engaged team members tend to stay with a business longer. To increase employee engagement, praise and reward them for their hard work, ask staff for feedback on how you can do things better, implement changes, and send frequent updates on what’s happening with the business.

Focus on career development

Schedule regular one-on-one and team catch-ups to discuss performance and business goals. Ask your employees how you can help them develop their skills and support their career progression goals.

Offer flexible working arrangements

Whether flexible hours, remote work or job sharing, offering employees different working arrangements can help them manage childcare more easily or find a better work-life balance.

Pay competitive salaries

Compensation is arguably the biggest reason why employees leave a business. To analyse your compensation strategy, do competitor research to ensure you’re paying your employees the market rates and the salaries they deserve. Also, consider other benefits or incentives you can add that might be attractive. 

Staff turnover FAQs 

Which jobs have the highest turnover rates? 

Some jobs have higher turnover rates than others, usually because of their industry or because the roles are seasonal or temporary. Skills shortages leave specific roles empty due to a lack of people with the right skills to fill open positions. 

Here are some examples of high-turnover jobs in Australia:

• Customer service representative

• Retail sales assistant

• Hospitality workers

• Machinery operators and drivers

• Labourers

How does high staff turnover affect your business? 

A high staff turnover can affect your business in multiple ways:

Low productivity

Losing an employee means less staff to do the same work and, therefore, lower productivity. 

Team morale

Gaps in teams or a skills shortage can have a negative effect on overall team morale.

Revenue and profitability

The cost to recruit and train new employees is estimated to be 1.5x their annual salary, which can leave a big hole in your cash flow.

Attracting talent

If staff turnover is high, you might find attracting and keeping quality team members challenging. 

How does low staff turnover affect your business? 

Low staff turnover means your employees are staying in their jobs longer. Most of the time, this indicates high satisfaction, loyalty and engagement — all good things that positively affect business. However, it can also mean your workforce is stagnant and lacking innovation, diversity or growth. 

Who's responsible for reducing staff turnover in business?

Most employees choose to leave for multiple reasons. HR, whether a person or team, is responsible for tracking turnover. However, direct managers have the most power to prevent voluntary turnover. Good managers who provide the right balance of direction and support help create work environments that people don't want to leave. 

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