The Definition of High Turnover Rate (2024)

FAQs

What is a high turnover rate? ›

Typically, high turnover means 28% of your new employees quit within the first 90 days of their employment. (Again: this presents an enormous cost to companies because they have to constantly repeat a cycle of recruitment, hiring, and training new people.)

Many of the top reasons for turnover—poor compensation or work-life balance, little training and scant career advancement opportunities—hinge on the manager, so HR teams need to identify supervisors who flat out lack the competence to manage people and either transition them to new roles or provide support and training ...

Organizations should aim for 10% for an employee turnover rate, but most fall into the range of 12% to 20%. Certain industries report higher employee turnover rates due to the nature of the job.

According to Gallup, 10% turnover is healthy, but every industry and every organization is different.

A general rule of thumb for determining whether your practice is experiencing high turnover is to look at the percentage of staff your practice turns over in a five-year period. In my experience, 15 percent staff turnover in five years is reasonable; 20 percent or more is considered high.

To calculate turnover rate, we divide the number of terminates during the year by the number of employees at the beginning of that period. If we start the year with 200 employees, and during the year, 10 contracts are terminated, turnover is 10/200 = 0.05, or 5%.

A high turnover rate negatively affects the company's image. If employees leave due to poor compensation or lack of growth opportunities, it tells potential talent that it is not the best working environment. The image of a satisfied worker is a good way to attract and retain talent.

Alternate Synonyms for "turnover rate":

employee turnover; turnover; ratio.

Turnover is a problem for businesses because it can lead to lost productivity, high recruitment and training costs, and decreased morale among remaining employees. And finally, high turnover rates can reflect negatively on businesses, making it difficult to attract and retain top talent.

“<10% of turnover creates a healthy level of new ideas and experience into the business. Higher than 10% turnover suggests we have engagement or performance enablement issues within our teams.”

How much turnover is normal? ›

What is a good employee turnover rate? On average, every year, a company will experience 18% turnover in its workforce. A business can expect on average to lose 6% of its staff because of reduction in force or terminating them due to poor performance. This is known as involuntary turnover.

To get the percentage of turnover, you take the number of people who left your company during a period divided by the average headcount for that same period and multiply it by 100. It is possible for your turnover rate to be more than 100%. This means that you replaced your entire workforce during that time period.

As a general rule, employee retention rates of 90 percent or higher are considered good and a company should aim for a turnover rate of 10% or less.

A low workforce turnover is when a small number of employees leave your company in a set amount of time. There's no magic percentage that indicates a low worker turnover.

U.S. employee annual voluntary turnover is likely to jump nearly 20% this year, from a prepandemic annual average of 31.9 million employees quitting their jobs to 37.4 million quitting in 2022, according to Gartner, Inc.

Definition of turnover

noun. an act or result of turning over; upset. change or movement of people, as tenants or customers, in, out, or through a place: The restaurant did a lively business and had a rapid turnover. the aggregate of worker replacements in a given period in a given business or industry.

You can calculate involuntary turnover, voluntary turnover and total turnover. Example: Say you start off the year with 100 employees.

Turnover is a concept in accounting that shows how quickly a company runs its business. The most common ways to measure a company's turnover are the accounts receivable and inventory ratios. In investing, turnover is how much of a portfolio is sold in a given month or year.

To determine your rate of turnover, divide the total number of separations that occurred during the given period of time by the average number of employees. Multiply that number by 100 to represent the value as a percentage.

Employee turnover typically has a negative connotation, mainly due to the potentially high costs associated with replacing a departed worker. However, about 25 percent of turnover can actually be considered desirable, according to Ere.com.

How do you address a high turnover rate? ›

Effects of Employee Turnover

The impact of high staff turnover includes decreased productivity, increased recruitment costs, avoidable time spent on training new employees, and lost sales. Businesses with high staff turnover typically experience low employee morale and productivity rates.

When employee turnover happens, companies may lose employee productivity, be forced to recruit new employees, suffer from lower morale, miss out on sales opportunities, and have to deal with additional expenses that could have been avoided if they had just held onto the employee in the first place.

A good inventory turnover ratio is between 5 and 10 for most industries, which indicates that you sell and restock your inventory every 1-2 months.

To start your employee turnover calculation, you should divide the total number of leavers in a month by your average number of employees in a month. Then, times the total by 100. The number left is your monthly staff turnover as a percentage.

Also referred to as simply “income” or “gross revenue,” business turnover is the complete sum of sales made over a given period. Whereas profit measures overall earnings, turnover measures everything that's actually coming into your business on the top line before expenses have been deducted.

Turnover rate indicates how quickly you must replace workers in your organization. Employee turnover is a concern for many businesses as it can substantially impact financial performance. When employee turnover is high, employers have to spend more resources finding new people and orienting them.

Decreased Productivity

When companies experience employee turnover, they need to hire new employees to fill up the position and productivity shortage. However, new employees will need to go through the onboarding process, adjustment period, and training before contributing to the production process.

There you have it: you can absolutely get turnover rates of more than 100%. But remember that turnover numbers can vary substantially month to month. This is particularly important in the case of annualized turnover.

Why is turnover so high 2022? ›

The four main causes of turnover are lack of growth and progression, inefficient management, inadequate compensation, and poor workplace culture. These reasons for staff leaving are present at many organizations around the world.

When your turnover is low, you save money by avoiding unnecessary mistakes. Lower turnover can also have a beneficial effect on the payroll even if you pay your long-term employees well because you don't have to train new workers and you avoid losing efficiency while they get up to speed.

A new Payscale report published on Thursday ranked Massachusetts Mutual Life Insurance Company as having the highest turnover rate out of all of the Fortune 500 companies.

According to the U.S. Bureau of Labor Statistics, the average employee turnover rate in 2021 was 47.2%. The turnover rate includes employees who voluntarily quit, layoffs, retirements and discharges.

If a company has super high turnover rates, this is generally a signifier that the business needs to audit its processes, salaries, benefits, and culture, so don't walk into a burning building unless you are prepared to do so.

A high turnover rate negatively affects the company's image. If employees leave due to poor compensation or lack of growth opportunities, it tells potential talent that it is not the best working environment. The image of a satisfied worker is a good way to attract and retain talent.

The average turnover rate for all employment is 3.5 percent, but some industries have higher rates than others. If your company's turnover rate is higher than the average for your industry, then you may have a problem.

A higher turnover rate can reflect higher profitability, while a low turnover rate can reflect lower profitability. A turnover rate that equals 1 or less reflects the company has more inventory than current consumer market demands. A turnover rate that's over 1 shows a company sells products that match market demands.

Why is turnover good? ›

Improves Talent Potential

Employee turnover can sometimes be an indicator of moving towards success at an organization. When an organization fosters continual growth, there's a give and take.