Employee turnover meaning: Key causes + how to calculate it

Employee turnover is more than just a staffing metric—it reflects your company’s culture, stability, and long-term success. When employees leave and need to be replaced, it disrupts operations, increases costs, and affects team morale. 

While a low employee turnover can be positive in some cases, a high turnover rate can lead to inefficiencies and impact the bottom line. Gallup estimates that replacing leaders and managers costs around 200% of their salary, professionals in technical roles 80%, and frontline employees 40%. These costs add up quickly, making retention a critical business priority. 

In this post, we’ll cover what employee turnover means, why it matters, and how to manage it effectively.

Employee turnover definition

It’s a key workforce metric that impacts costs, productivity, and company culture. High turnover can signal deeper issues, such as poor management, low engagement, or uncompetitive compensation.

People often confuse turnover with attrition, but the two have important differences. Turnover occurs when employees leave and need to be replaced, while attrition happens when employees leave but their roles remain unfilled, often due to downsizing or restructuring. 

For example, if a company replaces a departing sales associate, that’s turnover—but if a retiring executive’s position is eliminated, that’s attrition. Understanding this difference helps you assess workforce stability and plan for long-term staffing needs.

Types of employee turnover

Not all turnover is the same—some departures are expected and even beneficial, while others signal deeper issues. Understanding the different types of turnover helps you assess their impact on your business and develop strategies to manage them effectively.

Voluntary vs. involuntary turnover

Voluntary turnover happens when an employee chooses to leave, whether for a better opportunity, personal reasons, or dissatisfaction with their current role. Involuntary turnover, on the other hand, occurs when the employer initiates the separation due to poor performance, layoffs, or restructuring. 

What these say about your business: High voluntary turnover can indicate issues with job satisfaction, company culture, or career growth opportunities. If top performers frequently leave, it may signal uncompetitive compensation, poor management, or a lack of development paths. 

On the other hand, involuntary turnover—especially when frequent—may point to hiring mismatches, unclear performance expectations, or deeper organizational instability.

Desirable vs. undesirable turnover

Some turnover benefits your business, while some can be costly and disruptive. Desirable turnover occurs when low-performing or disengaged employees leave, making room for stronger talent. Undesirable turnover happens when high-performing employees leave due to issues like poor management or lack of growth opportunities. 

What these say about your business: Desirable turnover can help improve workforce quality by naturally filtering out disengaged or underperforming employees. 

However, if undesirable turnover is high—especially among top performers—it suggests deeper problems like weak leadership, lack of recognition, or limited career advancement. Addressing these factors can improve retention and overall team performance.

How to calculate employee turnover

Calculating turnover regularly allows you to spot trends and take action before staffing challenges impact operations. Employee turnover is typically measured using a simple formula:

For example, if your company had 200 employees at the start of the month and 190 at the end, that means 10 employees left during that time. 

The average number of employees would be (200 + 190) ÷ 2 = 195. Using the formula, the turnover rate would be (10 ÷ 195) × 100 = 5.1% for the month.

You can calculate turnover monthly or annually, depending on your needs. Monthly turnover helps track short-term trends, while annual turnover provides a big-picture view. A healthy turnover rate varies by industry—tech and retail often see higher rates, while professional services tend to have lower turnover. 

Comparing your rate to industry benchmarks can help you determine whether your turnover is a red flag or within a normal range.

Causes of high employee turnover

Employees leave when they feel undervalued—due to low pay, inadequate benefits, or a lack of recognition. Competitive compensation is a baseline requirement, but it’s not enough. Employees who don’t see a future with your company will look elsewhere for better opportunities.

Career stagnation is a major driver of turnover. Without clear paths for growth, employees disengage and seek roles where they can develop their skills. Poor management and a toxic workplace culture only make things worse, creating an environment where employees feel unsupported or unmotivated.

Burnout is another key factor. Heavy workloads, unrealistic expectations, and a lack of work-life balance push employees toward the exit. If turnover is high, it’s a sign to evaluate whether your organization meets employees’ needs and provides an environment where they can thrive.

The cost of employee turnover

Employee turnover is more than just a staffing issue—it’s a major expense that disrupts operations. Recruiting, hiring, and training new employees require time and money, with costs rising for specialized or senior roles. 

Studies show that replacing an employee can cost anywhere from 50% to 200% of their annual salary, depending on the role and industry. For example, losing an employee with a $75,000 salary could result in up to $150,000 in hiring expenses, lost productivity, and training costs.

For a mid-sized company with 200 employees, an average salary of $60,000, and a 15% turnover rate, the price of replacing departing staff could climb to $1.8 million per year. These costs add up fast, making employee retention essential to financial stability and operational efficiency.

But the impact goes beyond budget concerns.

How turnover impacts operational efficiency

Every departure slows down workflows. When employees leave, their institutional knowledge goes with them, leading to errors, missed deadlines, and inefficiencies as new hires ramp up. This knowledge gap forces teams to work harder to maintain productivity, often leading to duplicated efforts and miscommunications.

Another consequence of high turnover is that it strains the remaining employees. As workloads increase to cover gaps, burnout rises, engagement drops, and overall performance suffers. In roles requiring collaboration—such as finance, operations, and customer service—constant turnover disrupts cross-functional workflows, delaying key business processes.

Frequent turnover can also erode consistency in service and quality. When new employees constantly cycle in, it’s harder to maintain standardized processes, leading to inefficiencies and operational bottlenecks. And if turnover is high enough, it can even impact your ability to attract top talent, compounding the problem.

Reducing turnover isn’t just about saving money—it’s about maintaining stability, protecting institutional knowledge, and ensuring your business runs efficiently.

How to reduce employee turnover

Reducing employee turnover starts with hiring the right people. A strong hiring process ensures candidates align with your company’s culture, values, and long-term goals. Once hired, a structured onboarding process helps new employees integrate quickly, setting them up for success and increasing their likelihood of staying.

Engaged employees are more likely to stay, so fostering a positive work environment is key for recruitment and retention. Regular recognition, open communication, and opportunities for career growth keep employees motivated. Competitive pay and benefits also play a major role—top talent will look elsewhere if your compensation package isn’t attractive.

Technology can help you stay ahead of turnover risks. HR software and analytics track key trends, allowing you to identify red flags early. AI-powered solutions go even further, predicting potential turnover and helping you take proactive steps to retain your best employees.

Boost productivity and enhance profitability

High turnover can disrupt productivity and increase costs, but with the right strategies—such as competitive compensation, strong leadership, and career development opportunities—you can improve retention and boost long-term profitability. 

Reducing turnover starts with having the right tools in place. Intuit Enterprise Suite helps you automate HR processes, track workforce costs, and make data-driven decisions to improve retention. Explore how our solutions can support your business and build a stronger, more resilient team.