How Do You Calculate Employee Turnover Rate and Reduce It?

When your employee turnover rate starts climbing, HR feels it first. Another two weeks’ notice hits your desk, and now you’re at square one, restarting the hiring process and reopening a role you just filled. You’ll also have to find someone to temporarily cover that person’s work.

When turnover trends up, it’s a signal that something bigger may be going on. Here’s how to get your exact employee turnover rate and what to do with it once you have it.

 

What Is Employee Turnover Rate?

Employee turnover rate is the percentage of your workforce that leaves during a set period, including people who quit, are let go or retire. It also represents the workload the rest of the team absorbs until the seat gets filled again.

For example, at a 1,000-person company, a 20% turnover rate means 200 people, 200 exit interviews, and up to 200 teams running short until someone new is trained up.

Voluntary Turnover Rate vs. Involuntary Turnover Rate

Once you have your overall turnover rate, take a minute to separate voluntary turnover from involuntary turnover. Voluntary turnover includes employees who choose to leave or retire, while involuntary turnover includes employees the company lets go. Tracking both can help you see whether your turnover problem is mainly about retention or other workforce challenges.

How Can You Calculate Employee Turnover Rate for Your Company?

Turnover rate equals the number of employees who left during a period, divided by your average number of employees during that same period, multiplied by 100.

Turnover rate: (employees who left ÷ average number of employees) x 100

Say your company had 1,200 employees at the start of the year and 1,000 by the end. Your average headcount is 1,100. If 165 people left over that year, the math looks like this: 165 divided by 1,100, multiplied by 100. That’s a 15% annual turnover rate.

It’s a good idea to calculate employee turnover quarterly (to catch problems early) and annually (for board-level reporting and year-over-year comparison). You can also break it down by location, department or team to spot problems a company-wide average might hide. A 15% overall rate could be masking a 40% turnover rate in one area.

How Can You Calculate the Real Cost of Employee Turnover?

Replacing an employee can cost anywhere from 40% of their salary (for frontline workers) to 200% (for leaders).¹ At a company of 1,000 employees with a 20% employee turnover rate, those exits can add up. Here’s how those numbers can play out:

• Frontline employee ($50,000 salary) at 40% cost = $20,000 per departure
• Business leaders ($150,000 salary) at 200% cost = $300,000 per departure

Since most companies have far more frontline staff than leaders, let’s assume a realistic mix. Here’s an example with 180 frontline exits and 20 leadership exits out of the 200 total.

Role	# Who Leave	Cost to Replace Each	Total Cost
Frontline employees	180	$20,000	$3.6 million
Business leaders	20	$300,000	$6 million
Total	200	--	$9.6 million

Run you own numbers. This might be tough to see, but knowing the real cost gives you something concrete to tackle and leadership a clear reason to act.

What Is Considered a High Turnover Rate?

Based on Bureau of Labor Statistics (BLS) data, the national average turnover rate comes to about 39.6% for 2025. Government, finance and insurance, and manufacturing run lower, in the 18% to 29% range. Retail sits around 46%. Leisure and hospitality are much higher, at about 67%. ²

Sector	Average Annual Turnover Rate
National average	39.6%
Government	18%
Finance and insurance	25.2%
Manufacturing	28.8%
Retail	45.6%
Leisure and hospitality	67.2%3

But you’re not trying to build an average company, right? So don’t let the national average become your goal. If “normal” companies in your sector have a 25% turnover rate, then be weird and shoot for 20% (or less!). Every point you shave off turnover means fewer roles to fill and less disruption for your team.

How Can Companies Reduce Their Turnover Rate?

Turnover is preventable when companies catch problems early and act on them. Gallup found that 42% of employees who voluntarily left their jobs said the manager or company could have done something to keep them. Meanwhile, 51% of employees are watching for or actively seeking a new job.⁴

If you’re the kind of HR leader who takes every departure personally, those numbers might sting a little. That doesn’t mean every resignation was yours to stop. But it does mean there may be more opportunities to step in before an employee reaches the exit interview. Here’s where to start, in order:

1. Benchmark employee pay against your local market and industry, not just last year’s budget. If you haven’t compared salaries with market data in the past 12 months, start there. However, while competitive pay matters, the reality is that no company can keep raising salaries at will. Pay people fairly, then look for other ways to help employees make the most of what they earn and stick around.

2. Encourage managers to have conversations before employees start heading for the door. Remember, 42% of people said a manager could have done something to keep them on board. Gallup also found that 45% of voluntary leaves said no manager or leader proactively discussed their job satisfaction, performance or future with the company in the three months before they left.⁵ Regular connections with your team can help you spot and solve issues before an employee makes the choice to leave.

3. Audit what exit interviews are actually telling you. If “better opportunities” keep showing up, that’s rarely the whole story. Look across the exits for patterns and see where your company can act earlier.

4. Look at the stress your people carry into work. Some retention issues don’t start with the job itself. Money stress follows employees through the door and can show up as distraction and a lack of focus. Employees can even miss work due to money issues. It’s one of the most common reasons good employees leave, yet it’s rarely talked about.

What Can a Financial Wellness Benefit Do to Your Employee Turnover Rate?

A true financial wellness benefit supports retention by helping employees make progress with the money they already earn, instead of leaving for an extra dollar an hour somewhere else. Companies offering SmartDollar—the financial wellness program from Ramsey Solutions—saw 27% less turnover among employees who used it versus employees who didn’t at the one-year mark. At a 1,000-person company with 20% turnover, a 27% reduction would mean about 54 fewer employees to replace.

Money stress doesn’t stay contained to someone’s personal life. It shows up in the distracted employee, the one who takes on a second job and burns out, or the one jumping at the first offer with a $2-an-hour raise. But according to the SmartDollar Impact Study, 43% of SmartDollar users reported spending less time at work dealing with personal finance issues after they started using SmartDollar.

SmartDollar users average $16,200 in debt paid and dollars saved in their first year. That progress shapes how employees feel about where they work: 63% of clients reported an increase in employee benefit satisfaction, while 81% of SmartDollar users said they were likely to recommend their employer to a friend looking for a job.

Financial wellness gives HR another way to support retention besides asking leadership for a bigger payroll budget. And the business case goes beyond retention: 66% of clients reported a positive ROI from offering SmartDollar.

Give your people a real plan for their money and another reason to build their future right where they are. You can be the one who brings in a benefit that delivers measurable results for your business.

How Does Turnover Connect to Engagement and Productivity?

Turnover doesn’t fluctuate on its own. It’s closely related to employee engagement and employee productivity. A team that’s checked out and running slower is usually a team that’s already halfway out the door. If you’re working on turnover, pull your engagement and productivity numbers too. Fixing turnover by itself rarely sticks.

If you’d like to get a deeper look at strengthening retention and keeping your best people, you can explore our employee retention strategy.