Employee turnover is often treated as an unavoidable cost of doing business. In reality, many of the factors that drive employee turnover are measurable, predictable, and within an organization's control.
Gallup estimates that voluntary employee turnover costs U.S. businesses approximately $1 trillion each year. More recently, Gallup found that 42% of employees who voluntarily left their organization said their manager or employer could have done something to prevent their departure.
That does not mean every exit can be avoided. Some turnover is healthy. Some is necessary. But high employee turnover is usually a signal that something needs attention, whether that is hiring quality, role clarity, manager effectiveness, employee development, workload, compensation, or culture.
In this guide, we'll cover what employee turnover is, what causes employee turnover, how to calculate your employee turnover rate, what employee turnover costs, and practical strategies organizations can use to reduce preventable turnover.
What is Employee Turnover?
Employee turnover is the rate at which employees leave an organization and are replaced over a specific period of time. Typically shown as a percentage, employee turnover includes all employees who leave, whether due to termination, retirement, resignation, or redundancy. Employee turnover can offer important insights into workplace culture, training effectiveness, and employee satisfaction.
Voluntary vs. Involuntary Turnover
Voluntary employee turnover happens when an employee chooses to leave the organization. This may include resignations, retirements, or employees leaving for another opportunity.
Involuntary employee turnover happens when the organization initiates the separation. This may include layoffs, role eliminations, terminations, restructuring, or performance-related dismissals.
Functional vs. Dysfunctional Turnover
Not all employee turnover has the same impact.
Functional turnover happens when an employee's departure is neutral or beneficial to the organization.
Dysfunctional turnover happens when a high-performing or high-potential employee leaves. This is the type of employee turnover that organizations should pay closest attention to because it can affect productivity, morale, customer relationships, and institutional knowledge.
What Causes Employee Turnover?
Understanding the causes of employee turnover is the first step toward reducing it.
Most employees don't leave because of a single issue. More often, turnover is the result of several factors building over time. An employee may feel underpaid, unsupported by their manager, unclear about their future, disconnected from the team, or burned out by their workload.
Understanding what causes employee turnover matters because the wrong diagnosis often leads to the wrong solution. Improving compensation won't solve a manager effectiveness problem, and a stronger onboarding program won't address a lack of career growth opportunities.
Compensation and Benefits
Compensation is often one of the first factors discussed when organizations examine employee turnover. While pay is rarely the only reason employees leave, compensation that falls below market expectations can increase turnover risk and make it more difficult to retain top talent.
Employees also evaluate the broader value of their employment experience, including benefits, flexibility, career opportunities, and work-life balance.
Lack of Career Development
Employees are more likely to stay when they can see a future within the organization. When development opportunities are limited or career paths are unclear, employees may begin looking elsewhere for growth.
Career development doesn't always mean promotion. It can include skill development, stretch assignments, mentoring, internal mobility, and opportunities to take on new responsibilities.
Poor Manager Relationships
Managers play a significant role in the employee experience. Employees who don't receive clear expectations, meaningful feedback, coaching, or support may become disengaged over time.
Strong manager-employee relationships help build trust, improve engagement, and strengthen employee retention.
Burnout and Workload
Burnout remains one of the leading causes of employee turnover. Employees are more likely to disengage when workloads become unsustainable, priorities are unclear, or resources are limited.
Organizations that support sustainable performance and employee wellbeing are often better positioned to retain talent over the long term.
Ineffective Onboarding
The employee experience begins on day one. When onboarding is rushed, inconsistent, or overly generic, employees may struggle to understand expectations, build relationships, or connect with the organization.
Strong onboarding helps employees build confidence and can reduce early-tenure employee turnover.
Culture and Role Fit
Even highly qualified employees may leave if there is a disconnect between their expectations and the reality of the role or organization.
When employees feel aligned with the work they do, the team they work with, and the organization's values, they are more likely to stay engaged and committed over time.
How to Calculate Employee Turnover Rate
Once you understand the factors driving employee turnover, the next step is measuring it.
Tracking your employee turnover rate helps you identify retention trends, compare turnover across teams or locations, and evaluate whether your retention efforts are working over time.
While turnover rates vary by industry, role type, and labor market conditions, consistently measuring turnover can help organizations spot potential issues before they become larger workforce challenges.
Employee Turnover Rate Formula
One standard method for calculating employee turnover involves dividing the number of employees who leave during a specific period by the average number of employees during that same period, then multiplying by 100.
To do this, you need three pieces of information:
Number of employees at the start of the period
Number of employees at the end of the period
Total number of employee separations that occurred during that period
Let's consider a retail company with 200 employees to calculate a monthly employee turnover rate. In June, four employees left the company.
The formula is (number of employees who left in a month / Average number of employees in a month) x 100 = Monthly employee turnover rate.
This gives you the following equation: (4 / 200) x 100 = 2%.
This means that in June, the company had a 2% employee turnover rate.
Track More Than Just Your Overall Turnover Rate
Your overall employee turnover rate is a useful starting point, but it doesn't tell the whole story.
Organizations should also track voluntary and involuntary turnover separately. A rising turnover rate driven by retirements or restructuring may require a different response than turnover driven by employees voluntarily leaving for other opportunities.
Looking at turnover by department, role, tenure, and location can also help identify patterns and retention risks before they become larger workforce challenges.
What Is a Good Employee Turnover Rate?
There is no universal benchmark for a "good" employee turnover rate. Turnover varies significantly by industry, role type, and labor market conditions.
Instead of focusing only on industry averages, organizations should monitor trends over time. If turnover is increasing, concentrated within specific teams, or primarily voluntary, it may indicate underlying issues related to management, development opportunities, workload, compensation, or role fit.
For a deeper look at benchmarks across industries, see our guide to the average employee turnover rate by industry.
Understanding the Overall Cost of Employee Turnover
Calculating your employee turnover rate tells you how often employees are leaving. Understanding the cost of employee turnover helps you understand the business impact behind those departures.
Turnover creates both direct and indirect costs. Direct costs include recruiting expenses, hiring fees, onboarding, training, equipment, and administrative work associated with replacing an employee. Indirect costs can be even more significant and often include lost productivity, institutional knowledge, customer relationships, and the additional workload placed on remaining team members.
Employee turnover is expensive, and the true cost goes well beyond recruiting. According to SHRM, replacing an employee can cost anywhere from 50% to 200% of their annual salary, depending on the role and level of specialization.
A simple way to estimate turnover costs is:
Turnover Cost = Number of Departures × Replacement Cost Per Employee
While this provides a useful starting point, the true cost of turnover often extends beyond recruiting and hiring expenses.
Reducing employee turnover starts with understanding why employees leave. While some turnover is unavoidable, many of the factors that influence employee retention are within an organization's control.
The most effective organizations don't rely on a single retention initiative. They create an environment where employees feel supported, challenged, connected to their work, and confident about their future within the organization.
The following employee retention strategies focus on the areas that have the greatest influence on turnover, including career development, manager effectiveness, compensation, workplace culture, and the overall employee experience.
Career Growth and Development
Build clear career development paths
Employees are more likely to stay when they can see opportunities to grow within the organization. Clear career paths help employees understand what skills they need to develop, what opportunities are available to them, and how they can continue progressing without leaving the company.
A lack of growth opportunities is one of the most common causes of employee turnover, making employee development a critical part of any retention strategy.
Clarify expectations for every role
Employees perform best when they understand what success looks like. Clearly defined responsibilities, performance expectations, and goals help reduce confusion and create stronger alignment between employees, managers, and organizational priorities.
Invest in learning and upskilling
Training, mentoring, stretch assignments, and internal mobility opportunities help employees continue building new skills while contributing value to the organization. Investing in employee development demonstrates a commitment to long-term growth and can help improve employee retention.
Leadership and Management
Strengthen manager effectiveness
Managers play a significant role in employee engagement and retention. Strong managers provide clear expectations, consistent feedback, support, and coaching that helps employees succeed.
Because manager relationships are one of the leading causes of employee turnover, improving manager effectiveness can have a meaningful impact on retention outcomes.
Improve communication and psychological safety
Employees are more likely to stay when they feel comfortable asking questions, sharing ideas, and raising concerns. Open communication helps build trust and strengthens relationships between employees and leaders.
Conduct stay interviews
Exit interviews can explain why someone left. Stay interviews help organizations understand what may cause someone to leave before it happens.
These conversations provide valuable insight into employee concerns, career goals, and workplace experiences, helping organizations identify employee turnover risks earlier and take proactive action.
Compensation and Recognition
Pay fairly and communicate compensation clearly
Compensation is often one of the first factors discussed when organizations examine employee turnover. While pay is rarely the only reason employees leave, compensation that falls below market expectations can increase turnover risk and make it more difficult to retain top talent.
Just as important as compensation itself is transparency. Employees should understand how pay decisions are made, what opportunities exist for advancement, and how compensation aligns with their role, performance, and contributions.
Offer meaningful recognition
Recognition helps employees feel valued for the work they do. When employees consistently contribute without acknowledgment, engagement can decline over time.
The most effective recognition is timely, specific, and tied to meaningful contributions. Whether it's manager feedback, peer recognition, career opportunities, or formal reward programs, recognizing employees' efforts can strengthen employee retention and reinforce positive performance.
Culture and Wellbeing
Create flexible work policies employees actually trust
Flexibility continues to influence how employees evaluate current and future opportunities. Whether flexibility means remote work, hybrid schedules, flexible hours, or greater autonomy, employees are more likely to stay when workplace policies support how they work best.
Organizations that create flexibility while maintaining accountability can improve the employee experience and help reduce employee turnover.
Upgrade onboarding so new hires stay past 90 days
A strong onboarding experience helps employees build confidence, understand expectations, and develop relationships early in their tenure.
When onboarding is rushed, inconsistent, or overly generic, new hires may struggle to connect with the role or organization. Investing in onboarding can help reduce early-tenure employee turnover and improve long-term retention outcomes.
Support wellbeing and sustainable performance
Burnout remains one of the leading causes of employee turnover. Employees are more likely to disengage when workloads become unsustainable, priorities are unclear, or resources are limited.
Organizations can support employee retention by creating realistic workloads, encouraging time off, providing adequate support, and helping employees maintain sustainable performance over time.
Strengthen team connection and belonging
Employees who feel connected to their colleagues, managers, and organizational mission are often more engaged and more likely to stay.
Building a culture of inclusion, collaboration, and belonging helps employees feel supported and can reduce the likelihood of voluntary employee turnover.
Systems and Measurement
Create a retention plan for critical roles
Not every position carries the same turnover risk or business impact. While organizations should strive to improve retention across the board, some roles are particularly difficult to replace because of their specialized skills, institutional knowledge, or influence on business outcomes.
Identifying critical roles and proactively developing retention plans can help organizations reduce disruption and better protect their most valuable talent.
Reduce friction across the employee experience
Day-to-day frustrations can have a cumulative impact on engagement. Inefficient processes, unclear workflows, unnecessary administrative tasks, and disconnected systems can make it harder for employees to focus on meaningful work.
Organizations that regularly evaluate and improve the employee experience are often better positioned to improve employee retention and reduce avoidable turnover.
Measure retention risks before employees leave
Many organizations don't realize they have a turnover problem until employees start resigning. By then, valuable talent may already be walking out the door.
Tracking employee turnover rates, engagement data, development activity, manager effectiveness, and employee feedback can help organizations identify employee turnover risks earlier and take action before turnover occurs.
The goal isn't simply to measure employee turnover. It's to understand what's driving it and use that insight to make better workforce decisions.
How Wonderlic Helps Reduce Employee Turnover
Reducing employee turnover starts long before an employee decides to leave. It begins with hiring people who are aligned with the role and continues through development, coaching, and ongoing employee growth.
Improve Job Fit Before the Hire
Many turnover challenges can be traced back to poor role fit, unclear expectations, or hiring decisions made with limited information.
Wonderlic Select helps organizations make more informed hiring decisions by providing insights into abilities, motivation, and personality against role requirements, so you know who's most likely to succeed and stay. Better hiring decisions can help reduce early-tenure turnover and improve long-term employee success.
Support Growth After the Hire
Hiring the right person is only the first step. Employees are more likely to stay when they have opportunities to grow, receive meaningful coaching, and understand how to succeed in their role.
Wonderlic Develop helps employees and managers better understand strengths, development opportunities, and workplace behaviors. These insights support more productive coaching conversations, stronger development plans, and a more personalized approach to employee growth.
By helping organizations improve job fit, strengthen manager effectiveness, and support employee development, Wonderlic helps address several of the most common causes of employee turnover.
When organizations identify retention risks early and take a proactive approach to hiring, development, and employee growth, they're better equipped to improve employee retention, reduce preventable turnover, and build a stronger workforce over time.
Ready to reduce employee turnover? Learn how Wonderlic helps organizations improve job fit, support employee development, and make better talent decisions across the employee lifecycle.
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