Employee Turnover: What It Is, Why It Happens & How to Reduce It

Employee turnover is a major challenge for HR managers, business owners, and recruiters, but it doesn’t have to be beyond your control. By understanding what turnover is, why it happens, and how to tackle it, you can improve retention rates, reduce hiring costs, and build a more engaged, productive team. This blog covers the causes, types, and actionable strategies to reduce turnover, plus a simple guide to calculating it so you can track your progress over time.

What is Employee Turnover?

Employee turnover refers to the rate at which employees leave an organisation and are replaced by new hires within a specific period. These departures can be voluntary (resignations) or involuntary (dismissals or redundancies). High turnover often signals issues with team dynamics, company culture, or policies, while low turnover reflects satisfaction and stability.

Unmanaged turnover disrupts productivity, morale, and increases costs, as constant hiring drains resources and weakens team cohesion. Analysing turnover and addressing its root causes is essential for maintaining a strong, efficient workforce.

Main Causes of High Employee Turnover

Understanding why employees leave is key to preventing it. High employee turnover isn’t always due to poor management—sometimes it’s influenced by external factors. Here are some of the most common causes:

• Work Environment: A neglected workplace culture, lack of team cohesion, or even toxic colleagues can lead employees to seek opportunities elsewhere.
• Insufficient Compensation: Feeling underpaid is a major reason employees leave their roles, especially when they’re aware that competitors offer better salaries or benefits.
• Lack of Career Growth: Employees who don’t see opportunities for development or promotions often don’t stick around.
• Burnout: Excessive workloads, long hours, or consistently high pressure can lead high performers to walk away.
• Management Issues: Poor leadership or strained relationships with direct managers can drive dissatisfaction.
• Mismatched Expectations: Employees may leave if their job turns out to be vastly different from the role they signed up for.
• Inflexible Working Arrangements: A lack of work flexibility, such as remote or hybrid options, can prompt employees to look for roles offering better work-life balance.

By identifying and addressing these factors, businesses stand a much better chance of retaining their top talent.

How to Calculate Employee Turnover

Measuring turnover is an important first step in tackling it. To calculate the employee turnover rate, you’ll need three key pieces of data and use the following labour turnover formula:

1. The number of employees who left during a specific period.
2. The average number of employees during that same period (calculated as the sum of the starting and ending headcount, divided by 2).
3. A standardised time frame, typically monthly or annually.

Turnover Rate (%) = (Number of Employees Who Left ÷ Average Number of Employees) × 100

Example Calculation:

If 12 employees left over the course of a year, and your average headcount was 150, the formula would look like this:

(12 ÷ 150) × 100 = 8% turnover rate

What is an Acceptable Employee Turnover Rate?

An acceptable turnover rate can vary significantly depending on the industry. For instance, hospitality and retail sectors often experience high turnover rates, sometimes reaching 30-40%, largely due to the prevalence of seasonal employment in these fields. On the other hand, industries like education or scientific research typically see much lower rates, usually under 10%.

Benchmarking your turnover rate against industry standards helps determine what’s normal in your field. An ideal turnover rate is typically 5-10%, balancing fresh ideas and team stability. Unusual patterns or significant changes may signal underlying issues that need attention.

Types of Employee Turnover

Not all turnover is created equal. Classifying it ensures you can better understand its root causes and implications.

Voluntary Turnover

This happens when employees leave by choice, often due to dissatisfaction, personal reasons, or better external opportunities. It’s the most critical type of turnover to address.

Involuntary Turnover

This occurs when employees are dismissed or laid off due to performance issues, restructures, or budget cuts.

Internal Turnover

Refers to employees transferring to other departments or roles within the company. While this doesn’t leave a vacancy, it still impacts team continuity.

Desirable Turnover

Sometimes, losing employees is beneficial—for instance, when low performers resign or roles are eliminated to align with business goals.

Undesirable Turnover

This includes the departure of top talent and key contributors, which can significantly impact the organisation.

Understanding these categories allows HR professionals to tailor their strategies and focus on reducing undesirable turnover rates.

Strategies to Reduce Employee Turnover

Reducing employee turnover requires a combination of proactive measures and workplace improvements. Here’s how to boost retention and satisfaction:

1. Invest in Employee Development: Offer structured training programs, upskilling opportunities, and internal promotions to keep employees engaged. Encourage mentoring and coaching to align personal goals with career paths.
2. Foster a Positive Work Environment: Build a collaborative, respectful and inclusive culture through regular team activities and strong leadership. Address toxic behavior promptly and foster open communication channels.
3. Competitive Compensation and Benefits: Ensure salaries, holiday packages, and benefits are aligned with—or exceed—industry standards. Include perks such as wellness programs, flexible working arrangements, or childcare support to attract and retain talent.
4. Show Recognition: Celebrate wins—big or small. Publicly recognize employees’ efforts, creating a sense of value and belonging.
5. Provide Work-life Balance: Offer reasonable workloads, flexible hours, and remote working options. Overworked employees are the fastest to burn out.
6. Optimise Physical Space: Design a workspace that boosts productivity and comfort with ergonomic furniture, natural lighting, or quiet zones. For more flexibility, try coworking spaces with modern amenities and collaborative environments.
7. Exit Interviews: Conduct exit interviews to gain insights from leaving employees. Use these findings to identify patterns and areas for improvement.

Small, consistent actions in these areas can go a long way toward reducing the overall staff turnover rate and improving retention.

Conclusions: Turning Employee Turnover into a Strategic Advantage

Employee turnover doesn’t have to be a constant headache. With the right tools, strategies, and mindset, it becomes an opportunity to strengthen your team and adapt for better success. By understanding its causes, accurately calculating its impact, and implementing proactive measures, you can turn turnover into a competitive advantage.

Creating a comfortable, flexible work environment can make a big difference. Coworking spaces and flexible offices enhance comfort, support work-life balance, and help boost satisfaction while reducing turnover.

And remember, monitoring your labour turnover rate consistently can help you plan future HR strategies more effectively. It’s all about continuous improvement.