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What is Employee Turnover?

By J. Beam
Updated May 16, 2024
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Employee turnover is the process of replacing one worker with another for any reason. A turnover rate is the percentage of employees that a company must replace within a given time period. This rate is a concern to most companies because employee turnover can be a costly expense, especially for lower-paying jobs, which typically have the highest turnover rates. Having an employee leave a company, either because of his or her choice or after being fired or otherwise let go, might require various administrative tasks to be performed and severance pay or other payments made to the employee. Replacing the employee might require such things as advertising the open position, using a so-called headhunter or other service to find potential job candidates, bringing in candidates for interviews and eventually training the new employee.

Importance to Businesses

Companies often take a deep interest in their employee turnover rates because replacing workers can be a costly part of doing business. When a company must replace a worker, it incurs direct and indirect expenses. All of the tasks that must be performed during the process cost money, take time or do both. In addition, there can be a loss of productivity during the time after the former employee leaves and the new employee has been fully trained. For some companies, replacing employees also could make it difficult to retain clients or customers with whom those employees worked.

Contributing Factors

Many factors play roles in the employee turnover rate of a company. These can stem from either the employer or the employees. Wages, benefits, attendance and job performance are all factors that play significant roles in employee turnover. The workplace environment and employee morale also are important aspects.

Calculating Turnover Rates

Turnover rates can be calculated for any time period, but they usually are referred to in terms of monthly or annual rates. If a company has 100 employees and must replace an average of 10 of them per year, its annual turnover rate is 10 percent. A company that has 150 employees and must replace 36 of them per year could be said to have an annual turnover rate of 24 percent or a monthly turnover rate of 2 percent. These rates also can be calculated based on specific departments within the company, specific types of jobs or other categories. They also can be calculated for entire industries.

Employee Retention

Although lower-paying roles experience a higher average of employee turnover overall, they tend to cost companies less per replacement employee than higher paying jobs do. Companies typically incur these costs more often, however. For this reason, most companies focus on employee retention strategies regardless of pay levels.

Most companies find that employee turnover is reduced when they address issues that affect the morale of employees. By offering employees benefits such as reasonable schedule flexibility that allows them to balance their work and family life, performance-based incentives and traditional benefits such as paid holidays or sick days, companies are able to reduce their employee turnover rates. The extent to which a company will go in order to retain employees depends not only on the costs of replacing its employees, but also on the company's overall performance. If a company is not getting the performance it is paying for from its employees, the replacement costs might be considered a small price to pay over the long term.

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Discussion Comments

By anon329197 — On Apr 08, 2013

I do also think that for reducing employee turnover rate, an organization should work on its morale so that employees feel they are being treated right in the workplace. They must focus on salary,wages and job performance.

By SarahSon — On Nov 17, 2012

My husband works for a company that is known to have low employee turnover. This is a local company that has a very good reputation for being a great place to work. They have high morale and also offer great benefits. It is hard to get a job at this company because they have such low employee turnover.

They have a gym and fitness instructors on site which is free for employees and their spouses. They also offer incentives such as trips and products for people who work out regularly. Because of the way they treat their employees I think they get a lot more out of them than they would if they felt like they were being treated poorly.

By LisaLou — On Nov 16, 2012

If jobs are hard to find employees can put up with low morale and unfavorable working conditions for quite awhile. Someone may not like their job and be tempted to quit, but unless you have another job lined up, there has to be some way to pay the bills.

When jobs are hard to come by, there could be low employee turnover. This might save the employer some money, but doesn't usually help with employee morale.

At my last job the company morale was pretty low. They expected us to work so many hours of overtime every week, and this really wears on you after awhile. Even though the extra money was nice, it wasn't worth giving up that time with your family. Fortunately I was able to find a different job before I left. I know several other people in my department who were also looking for a new job.

By sunshined — On Nov 16, 2012

I think one of most important things that needs to be considered when a company wants a low turnover rate is the morale of the employees. If morale is low and employees don't feel like they are being treated right, that usually coincides with a high turnover.

If company morale is high, you can expect the opposite and there is much less turnover. I have been going to the same dentist for over 25 years. He has three hygienists who have all been there for at least 20 of those years. I think that is a great example of low employee turnover. You can tell from talking to them they enjoy their job and love where they work. If they didn't, they would probably be out looking for work somewhere else.

By julies — On Nov 16, 2012

I think most people expect a high employee turnover in fast food restaurants. Many of these employees are teenagers who only work part-time and are going to school. There are always exceptions though, and I have an aunt who has worked the early morning shift at a fast food restaurant for 20 years. I don't know how she does it, but she says she really enjoys the contact with the people and has made some great friendships with some of the customers over the years.

By seag47 — On Nov 15, 2012

I understand the need for employee retention programs. I saw firsthand how turnover affected my department negatively.

In just one year, we went through four different people in our department. Two of them had the same job as I did, and I had to take time out from my work to train them. They were very slow at getting the hang of things, and it took them months to get up to speed enough to keep the flow of the work going steadily.

The two other people who left and were replaced were sales representatives. This was bad, because the old employees had already formed relationships with the clients, and twice in one year, they all had to be introduced to new sales reps and try to develop a rapport with them.

I think it hurt business. Ad sales dropped after that year, and many clients just stopped advertising with us. After that, the company started an employee retention program.

By shell4life — On Nov 14, 2012

@anon129918 – It all depends on the reason for the turnover. If people are seemingly randomly being singled out and replaced, then the attitude of the remaining employees would probably be one of fear.

However, if the employees being replaced are the ones who are laziest and worst at their jobs, then the general attitude in the office might improve. Employees appreciate it when management does something about slackers who make the rest of them work harder.

Then again, there's the issue of how the employees feel about the people being replaced. If the ones leaving have been there for many years and are loved by everyone, then the attitude could be one of depression. I was very depressed for months after my best friend got replaced, and I didn't click with the new hire.

By feasting — On Nov 14, 2012

Retention of employees is sometimes important to managers because they know that it will be hard to find someone else who will work for as little pay as the current employee receives. This was the case at my job.

I was making just barely above minimum wage, and I had been there for three years. Even though I messed up several times and should have been fired, they kept me on. I suspect this is because of how little I was willing to work for.

By Perdido — On Nov 13, 2012

I am a graphic designer at a newspaper, and the annual employee turnover rate here is high. Wages are pretty low, and so is morale.

I think the issue at my workplace is that things never change. Even though management listens to our concerns, they don't do anything to improve situations.

In the past few years, hours have been cut in order to save money. That has resulted in several people leaving because they found full-time work elsewhere.

If a company can't pay its workers enough, it will lose employees. This is a simple truth.

By anon164725 — On Apr 02, 2011

our current turnover rate is 38 percent. In terms of affecting employees that remain, the impact is huge. The remaining employees are nervous and also very frustrated with management. The morale is spiraling downward as a result which of course will lead to more turnover. Any thoughts on how to turn this around?

By anon129918 — On Nov 26, 2010

please tell me the effects of turnover on the job attitudes of remaining employees of an organization.

By anon117895 — On Oct 12, 2010

anyone could define how to calculate the turnover ratio. i mean any formula or like, if the ratio comes to 2.3 then what does it mean?

By anon89878 — On Jun 13, 2010

we had 250 employees in December 2009 and we had 240 employees in December 2008 and 45 employees left during this year 2008-2009. what is the turn over ratio. I got a result of 18 percent, but please check. also please specify if this ratio is high or low or in the middle.

By anon55850 — On Dec 10, 2009

thank you so much.

By anon52196 — On Nov 12, 2009

i need scope, objective and questionnaire for employee turnover.

By anon31281 — On May 02, 2009

I need information about the effects of job turnovers on the workers, families, companies and the society in general.

By anon20400 — On Oct 30, 2008

OK, all of this is interesting, but how do you calculate it? That's critical, don't you agree?

By bigmetal — On Feb 21, 2008

my husband has worked in sales for quite some time, and even in some of the best positions, turnover is extremely high. i wonder why employers in these situations spend so much time and resources trying to hire new employees, when they could make the position profitable in order to retain the best employees? i hear that it can be incredibly expensive to recruit and train new employees.

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