Companies measure employee turnover by calculating the percentage of staff who leave over a specific period (monthly or annually) relative to the average total workforce. The standard formula is: (Number of Separations / Average Number of Employees) x 100. This metric helps assess retention, company culture, and management effectiveness.
Turnover is how often employees leave and new ones are hired. So if a company had 5 employees out 100 leave each month and replaced them with 5 new workers that would be 60% annual turnover (5% per month x 12 months).
A 20% turnover rate means that 20% of the workforce left the organization during a given period. Whether this is a high or low rate can depend on the industry, company size, and specific circumstances. Still, it generally indicates that one out of every five employees left the company during that time period.
To calculate your annual business turnover, add your total sales from all 12 months in the last financial year. If you're a product-based business, this means the total money you received from the products you sold. Likewise, for a service-based company, your turnover is the total amount you charged for these services.
How to Calculate Employee Turnover Rate
Pro tip: It's important to note that turnover rates vary significantly from industry to industry. However, turnover rates should (ideally) be lower than 10%, which is a very healthy turnover rate across the board.
To calculate the financial turnover rate, add up the total revenue generated by a company over a specific time frame, such as a fiscal year. The total includes the company's income without deducting any expenses.
High staff turnover is often seen as a sign of an unhealthy organisation – a red flag that indicates low morale, poor management, or other serious problems. And in many cases, that assessment is absolutely correct.
The Retail and Wholesale industry in the US has the highest turnover rate at 26.7%. Meanwhile, the Insurance/Reinsurance industry enjoys the lowest turnover rate at just 8.2%.
Average turnover of micro and small businesses
Micro businesses with 1-9 employees reported an average turnover of £446,872 per year, while small companies with 10 or more employees reported an average turnover of £2,802,670 in 2022.
Usually, the time period is a year, but it could be a month, a quarter, or any other time span. Generally, the calculations include both voluntary and involuntary turnover. For example: employees who quit or resign as well as those who were fired or laid off.
Gross profit is your turnover minus your cost of sales. Cost of sales refers to how much it costs you, directly, to make the sale. For most businesses this will be the cost of your stock or raw materials required to make products.
The most commonly used rule of thumb is simply a percentage of the annual sales, or better yet, the last 12 months of sales/revenues.
Here's a quick breakdown of common warning signs, what they may signal, and how to respond:
Tesla, Goldman Sachs, Netflix, Mastercard and Alphabet (Google) are all among the bottom 20. And the three worst performers — Apple, Amazon and Meta (Facebook) — all struggle to hold employees for more than two years.
In general, a 10% turnover rate is considered good for a company; at the time of this writing, most companies fall between 12% and 20%. One place to look for benchmark reports are SHRM and the Bureau of Labor Statistics (you can also search for Employee Tenure Summary at BLS).
4 central pillars: Employee retention is based on a clear corporate culture, fair remuneration, targeted development opportunities and a good work-life balance. These factors work together to strengthen employee loyalty and satisfaction in the long term.
The five main drivers of employee retention are strong leadership, frequent feedback, including recognition, opportunities for advancement, competitive compensation packages, and a good work/life balance. For retention strategies to be successful, they should be crafted with these five drivers in mind.
Today's playbook for retaining high-performing employees is pretty straightforward: more money, a fancier title, better benefits and a greater sense of “purpose.”