Employee Turnover: Causes, Measurement and Management

Employee turnover is a normal part of running a business. Employees leave organisations for different reasons, and replacing them is part of workforce management.

However, when turnover becomes consistently high, organisations may experience increased recruitment costs, loss of experience, disruption to teams and reduced productivity.

Understanding employee turnover allows businesses to identify patterns, investigate possible causes and make better workforce decisions.

What Is Employee Turnover?

Employee turnover refers to employees leaving an organisation and being replaced by new employees.

Turnover can occur when employees:

• Resign;
• Retire;
• Reach the end of an employment arrangement;
• Are dismissed;
• Are retrenched; or
• Leave for other reasons.

HR reporting should distinguish between different types of employee exits because they may have different causes and implications.

Why Does Employee Turnover Matter?

Employee turnover can affect several areas of a business.

Recruitment Costs

When employees leave, the organisation may need to advertise vacancies, screen candidates and conduct interviews.

Onboarding Costs

New employees require time and resources to become familiar with their roles and the organisation.

Productivity

New employees may need time before they reach the expected level of productivity.

Knowledge Loss

Experienced employees can take valuable knowledge and organisational experience with them when they leave.

Team Stability

Frequent departures can affect team relationships and workload distribution.

Management Time

Managers may spend significant time recruiting and training replacements instead of focusing on other responsibilities.

Is All Employee Turnover Bad?

No.

Some turnover can be healthy for an organisation.

Employees may leave because they:

• Retire;
• Relocate;
• Change careers;
• Accept development opportunities elsewhere; or
• Reach the natural end of their employment relationship.

An organisation may also decide to replace employees whose performance or conduct is not meeting expectations.

The objective is therefore not necessarily to achieve zero turnover.

The objective is to understand whether turnover is appropriate and manageable.

Voluntary Turnover

Voluntary turnover occurs when an employee chooses to leave the organisation.

Examples include resignations where employees:

• Accept another job;
• Pursue further education;
• Relocate;
• Change careers; or
• Decide to leave for personal reasons.

Voluntary turnover is particularly useful to analyse because organisations may be able to influence some of its causes.

Involuntary Turnover

Involuntary turnover occurs when the organisation initiates the employment separation.

This may include situations involving:

• Dismissal;
• Retrenchment;
• Certain contractual arrangements; or
• Other employer-initiated exits.

The reason for each departure should be recorded accurately.

Regrettable Turnover

Some organisations classify certain departures as regrettable turnover.

This generally refers to the loss of employees whom the organisation would have preferred to retain.

For example, a highly experienced employee with critical technical knowledge may resign.

Understanding which departures are considered strategically important can help management prioritise retention efforts.

Non-Regrettable Turnover

Other departures may have a lower operational impact.

For example, an employee may leave after consistently poor performance or because the organisation has determined that the role is no longer required.

This does not mean the departure is unimportant.

It means the organisation should distinguish between different types of turnover when analysing workforce data.

How Is Employee Turnover Measured?

One commonly used calculation is:

Employee Turnover Rate = Number of Employees Who Left During the Period ÷ Average Number of Employees During the Period × 100

For example:

A company has an average workforce of 100 employees during a year.

If 12 employees leave:

12 ÷ 100 × 100 = 12%

The organisation’s annual turnover rate would therefore be 12%.

Why Use Average Headcount?

Headcount can change throughout the year.

Using average headcount can provide a more representative basis for calculating turnover.

A simple calculation is:

Average Headcount = Opening Headcount + Closing Headcount ÷ 2

For example:

Opening headcount: 90

Closing headcount: 110

Average headcount:

90 + 110 ÷ 2 = 100

If 15 employees left during the period:

15 ÷ 100 × 100 = 15%

The turnover rate would be 15%.

Measuring Turnover Monthly

HR can monitor turnover monthly rather than waiting until the end of the year.

For example:

Month	Employees Who Left
January	2
February	1
March	3
April	2
May	1
June	4

A monthly dashboard can help HR identify changes more quickly.

However, monthly figures should be interpreted carefully because small workforces can produce large percentage changes from only one or two departures.

Analysing Turnover by Department

Overall turnover may hide important differences between departments.

For example:

Finance: 4%

Operations: 9%

Sales: 18%

Customer Service: 22%

The organisation may therefore have a much bigger retention challenge in particular departments.

HR can use this information to determine where further investigation is needed.

Analysing Turnover by Tenure

Employee turnover can also be analysed according to length of service.

For example:

• Less than 6 months;
• 6–12 months;
• 1–2 years;
• 3–5 years; and
• More than 5 years.

High turnover among employees within their first year may indicate issues with recruitment, onboarding, expectations or management.

Early Employee Turnover

Employees leaving shortly after joining can be particularly useful to investigate.

Possible reasons may include:

• The job was different from what the employee expected;
• Poor onboarding;
• Inadequate training;
• Management problems;
• Compensation expectations;
• Workload;
• Workplace culture; or
• Better opportunities elsewhere.

The reason should be established rather than assumed.

Exit Interviews

An exit interview is a discussion with an employee who is leaving the organisation.

It can provide information about the employee’s experience.

Questions may explore:

• Why are you leaving?
• What did you enjoy about working here?
• What challenges did you experience?
• How was your relationship with your manager?
• Did you have sufficient development opportunities?
• What could the organisation improve?

Exit interviews should be structured enough to produce useful information while allowing employees to provide honest feedback.

Exit Interview Data

One exit interview does not necessarily establish a trend.

However, repeated feedback can reveal patterns.

For example:

Five employees leave over six months and three independently mention limited career development.

This may indicate an issue worth investigating.

HR should analyse themes rather than relying on individual comments alone.

Stay Interviews

A stay interview takes place while an employee is still working for the organisation.

The objective is to understand what encourages the employee to stay and what could cause them to consider leaving.

Questions might include:

• What do you enjoy about working here?
• What would make your job better?
• Do you feel supported?
• What would encourage you to stay?
• Are there development opportunities you would like to pursue?

Stay interviews can provide information before an employee decides to resign.

Common Causes of Employee Turnover

Employees leave for many different reasons.

These can include:

• Better career opportunities;
• Compensation;
• Management;
• Workplace culture;
• Lack of development;
• Workload;
• Location;
• Working arrangements;
• Personal circumstances; and
• Career changes.

The same employee may have several reasons for leaving.

Compensation and Turnover

Compensation can influence retention.

If employees believe their remuneration is significantly below comparable opportunities, they may become more likely to explore alternatives.

However, compensation is not the only factor.

Employees may leave well-paying jobs because of:

• Poor management;
• Limited development;
• Excessive workload;
• Lack of recognition; or
• Workplace culture.

Retention strategies should therefore consider the complete employee experience.

Management and Turnover

Managers have a significant influence on employees’ daily experiences.

Poor management may involve:

• Inconsistent communication;
• Micromanagement;
• Lack of feedback;
• Unclear expectations;
• Unfair treatment; or
• Failure to address workplace problems.

If a department experiences unusually high turnover, management practices should be considered as part of the analysis.

Career Development and Turnover

Employees may leave when they cannot see a future within the organisation.

Career development can include:

• Training;
• Mentoring;
• Coaching;
• Internal promotions;
• Job rotation; and
• Expanded responsibilities.

Not every employee wants promotion, but many employees value opportunities to develop.

Workplace Culture and Turnover

Culture influences how employees experience an organisation.

A workplace characterised by:

• Poor communication;
• Lack of trust;
• Unresolved conflict;
• Inconsistent treatment; or
• Poor leadership

may experience retention challenges.

Culture is difficult to measure through a single metric, so HR should consider several sources of information.

Workload and Turnover

Sustained excessive workload can contribute to employee dissatisfaction.

Management should consider whether employees have:

• Realistic workloads;
• Appropriate resources;
• Adequate staffing;
• Clear priorities; and
• Sufficient management support.

High turnover can sometimes increase workload further, creating a cycle where employees leave because of pressure and the remaining employees experience even more pressure.

The Cost of Employee Turnover

The cost of turnover extends beyond recruitment advertising.

Potential costs include:

• Recruitment;
• Interviewing;
• Onboarding;
• Training;
• Lost productivity;
• Management time;
• Temporary staffing; and
• Loss of organisational knowledge.

The actual cost will differ between organisations and positions.

A highly specialised position may take considerably longer to replace than an entry-level role.

Critical Roles and Turnover

Not all vacancies carry the same operational impact.

An organisation should identify roles that are:

• Difficult to replace;
• Critical to operations;
• Highly specialised;
• Customer-facing; or
• Responsible for important organisational knowledge.

Retention efforts can then be prioritised according to business impact.

Turnover and Succession Planning

High turnover can expose organisations that have no succession plans.

If a key employee leaves unexpectedly, the organisation may struggle to identify someone capable of taking over their responsibilities.

Succession planning helps organisations identify potential future talent and development needs.

Employee Turnover and Workforce Planning

Turnover data can support workforce planning.

HR can use historical information to estimate:

• Expected vacancies;
• Recruitment requirements;
• Staffing risks;
• Skills shortages; and
• Future workforce needs.

For example, if an organisation consistently loses a certain number of employees each year, recruitment planning can account for expected replacement requirements.

How Can Organisations Reduce Unnecessary Turnover?

There is no universal solution.

Organisations can consider:

Improve Management

Managers should receive appropriate support and development.

Strengthen Onboarding

New employees should understand their responsibilities and receive appropriate support.

Provide Development Opportunities

Employees should have opportunities to develop relevant skills.

Review Workloads

Persistent workload problems should be investigated.

Improve Communication

Employees should understand important organisational decisions and expectations.

Recognise Contributions

Good work should be appropriately acknowledged.

Analyse Exit Data

HR should identify recurring themes among departing employees.

Do Not Assume Every Resignation Can Be Prevented

Some employees will leave regardless of what the organisation does.

People change careers, relocate, pursue opportunities and experience changes in their personal circumstances.

The goal should therefore be to reduce avoidable and harmful turnover, rather than attempting to prevent every employee departure.

Common Turnover Management Mistakes

Looking only at the overall turnover rate

The overall number can hide departmental or tenure-specific problems.

Treating all departures equally

Different exits have different operational implications.

Ignoring exit interview information

Repeated feedback can provide valuable insight.

Assuming salary is always the reason

Employees leave for many reasons.

Focusing only on recruitment

Replacing employees does not address why they are leaving.

Ignoring managers

Management behaviour can influence the employee experience.

Failing to track trends

One resignation may not be significant, but repeated patterns may be.

A Practical Turnover Analysis

HR can ask:

How many employees left?

Establish the overall number.

Who left?

Review departments, roles and tenure.

Why did they leave?

Analyse available information.

Is there a pattern?

Compare the information across periods.

What is the business impact?

Identify critical roles and operational consequences.

What can we influence?

Separate controllable issues from unavoidable departures.

What action should management take?

Develop targeted interventions.

Employee Turnover Dashboard

A useful HR dashboard may include:

• Total headcount;
• Number of exits;
• Turnover rate;
• Voluntary turnover;
• Involuntary turnover;
• Turnover by department;
• Turnover by tenure;
• Key reasons for leaving; and
• Critical-role turnover.

The dashboard should focus on information that supports decision-making.

Employee Turnover Checklist

☐ Track employee exits

☐ Calculate turnover regularly

☐ Separate voluntary and involuntary exits

☐ Analyse turnover by department

☐ Review turnover by tenure

☐ Conduct appropriate exit discussions

☐ Identify recurring reasons for leaving

☐ Monitor critical roles

☐ Review management-related trends

☐ Consider career development

☐ Review workload concerns

☐ Use turnover information in workforce planning

☐ Develop targeted retention actions

☐ Review whether actions are producing results

Final Thoughts

Employee turnover is not automatically a sign that an organisation is failing.

People leave organisations for many legitimate reasons, and some turnover is unavoidable.

The challenge for HR and management is determining whether turnover is occurring at a level or in areas that create a meaningful business problem.

Effective turnover management starts with reliable data.

Organisations should understand who is leaving, how frequently they are leaving, where turnover is occurring and what reasons are being identified.

From there, management can determine which issues can realistically be addressed.

The strongest approach is not simply to replace employees as they leave.

It is to understand why people leave, identify avoidable problems and create an employee experience that encourages the right people to remain.

Frequently Asked Questions

What is employee turnover?

Employee turnover refers to employees leaving an organisation and being replaced by other employees.

Is high employee turnover always bad?

Not necessarily. Some turnover is expected and can be beneficial. The important issue is whether turnover is excessive, unexpected or affecting important areas of the organisation.

How do you calculate employee turnover?

A common calculation is the number of employees who left during a period divided by the average number of employees during that period, multiplied by 100.

What is voluntary turnover?

Voluntary turnover occurs when an employee chooses to leave the organisation, such as through resignation.

What is involuntary turnover?

Involuntary turnover occurs when the organisation initiates the employment separation.

Why do employees leave?

Reasons can include career opportunities, compensation, management, workplace culture, development opportunities, workload and personal circumstances.

What is an exit interview?

An exit interview is a discussion with an employee who is leaving, intended to understand their experience and reasons for departure.

Can employee turnover be reduced?

Organisations can reduce some avoidable turnover by addressing issues such as management, communication, development, workload and employee experience.

Why should HR analyse turnover by department?

Department-level analysis can reveal areas where turnover is significantly higher than elsewhere in the organisation.

Disclaimer

This article is provided for general informational and educational purposes and does not constitute legal, financial or professional advice. Employee turnover should be analysed according to the circumstances and workforce characteristics of each organisation. Organisations should consider appropriate professional advice when addressing complex employee-relations or workforce-management matters.

Devhulon Business & People Solutions provides HR consulting and people-management support to businesses seeking practical assistance with workforce planning, employee retention, HR strategy, employee relations and broader people-management processes.