In this article, find out more about the types of employee turnover, what's causing them, and how HR leaders can address underlying issues
Turnover happens in every organization, but not all of it is bad. For HR leaders, it’s no longer just about the rate at which people leave. It's also about understanding why they do.
In this article, we’ll go over the types of employee turnover and what causes employees to leave. We’ll look at ways to manage employee turnover, focusing on company culture. We’ll also share insights from one of the top HR leaders in the world.
Employee turnover describes the rate at which employees leave an organization and are replaced by new hires. It's a percentage of the total number of employees in a given period.
In general, there are four different types of employee turnover:
This is the most common type of turnover seen in organizations. It happens when an employee leaves a company of their own choice.
Voluntary turnover can be either positive or negative for a company, depending on the circumstances. For example, if an employee leaves to pursue a better opportunity, it may be seen as a positive outcome for both the employee and the company.
In some cases, an employee may become disengaged or unhappy in their role. When efforts to re-engage them aren’t successful, their departure can be a healthy outcome for the team and the business.
Conducting exit surveys or exit interviews sheds light on the true reason an employee is leaving. It helps employers identify areas for improvement to make the workplace better for everyone.
Involuntary turnover happens when a company lets go of an employee. This can happen for a variety of reasons, such as:
Involuntary turnover can be disruptive for a company, as it may require the organization to find and train a new employee to replace the one who left. It can also be costly, as it may involve severance pay or other expenses associated with terminating an employee's employment.
Internal turnover refers to the movement of employees within a company or organization, rather than the loss of employees through departure. This can include:
This type of movement can be a positive development for an organization. Internal turnovers can provide opportunities for employees to develop new skills and advance their careers within the company. These can also help to fill vacancies and address staffing needs within the organization.
High levels of internal turnover can also lead to a loss of institutional knowledge and expertise, as experienced employees leave their current positions. On the upside, the arrival of new talent – whether internal or external – can bring new perspectives to the job. It can also offer opportunities for promotion for junior members of staff.
Retirement is a normal stage in an employee’s professional career. It does not cause that many problems compared to the other three types.
Retirement age varies by country and can be influenced by factors such as:
Just like internal turnovers, retirement can lead to internal promotions for more junior employees. Recruitment and training can be done early to lessen disruption and manage workloads better.
To calculate the monthly turnover, divide the number of employees who have left in a month by the average number of employees the company has in that month. Multiply the result by 100.
To find the average number of employees: add the number of employees at the start of the month to the number of employees at the end of the month. Divide this figure by two.
For the annual turnover, divide the total number of employees who left in a year by the average number of employees in a year. Multiply the result by 100.
The turnover rate can be calculated for a specific period, such as a month or a year, or as an average over a longer timeframe.
It can also help to calculate turnover rates for specific departments or job roles within your organization. This should give you a better understanding of employee retention patterns.
Traditional HR professionals might have viewed a 20 percent turnover as worrying. According to an HR expert, that shouldn’t always be the case.
“Context is everything,” says Tahnee McWhirter, one of HRD's top HR leaders in the world for 2024. “Twenty percent could be alarming, or it could be healthy churn depending on the industry and strategy.”
Let’s look at some industries with the highest turnover rate averages:
the tech industry has a turnover rate of around 60 percent due to massive layoffs in the past few years
retail has a turnover rate of 33 percent – no surprise there, as customer-facing jobs can be quite stressful. Limited career options and poor management are other factors
healthcare has a high turnover rate too, with nursing homes reaching 53 percent. Some factors are the demanding nature of the job, health risks, and poor well-being support
So, what’s a good turnover rate? It’s all relative. A 20 percent turnover rate might sound horrible in any other industry, but good in tech or healthcare.
When looking at turnover rates, another point to consider is the company’s long-term goals and strategies. “What’s the company trying to achieve: are we growing, shrinking, repositioning? Are we replacing poor fits or losing high performers?” McWhirter says. “The key is whether turnover aligns with business intent and people strategy and whether leaders can explain it without the spin.”
There are many reasons why employees decide to leave their jobs – here are some of them:
Compensation and benefits were among employees’ top priorities in 2024. Workers are likely to leave their current jobs for a pay rise somewhere else.
A study from the American Psychological Association (APA) showed that 23 percent of employees did not have enough development opportunities at work. Employees whose careers remain stagnant will leave for an organization that offers better opportunities for growth.
A lack of respect in the workplace is a key driver of turnover. Employees who feel respected are happier at their jobs. They are also more loyal and grateful toward their employers.
These first three points – low pay, no opportunities to advance, lack of respect – are the top reasons Americans quit their jobs in 2021, according to the Pew Research Center.
We've all heard of or worked with toxic and narcissistic managers – they’re abusive, take credit for other people’s ideas, and play favorites. And worse, they can cause even the best-performing employees to jump ship.
There are also managers who are simply incompetent at their jobs. This type of boss, while not as abrasive as their toxic counterparts, can likewise cost companies great talent.
“People don’t leave bad companies, they leave bad bosses," McWhirter says.
A flexible work arrangement helps achieve work-life balance. Companies that don’t have flexible work options (e.g., remote work and/or telework, hybrid, or flexible hours) may lose employees to organizations that do.
Burnout results from a disconnect between job demands (workloads and deadlines) and job resources (tools and support). A McKinsey study shows that those who experience burnout are six times more likely to quit in the next three to six months.
If your employees dread going to work, it’s a sign that your company has a toxic culture. This often results from the factors listed above. This can cost companies huge sums of money, especially if the reason for employees leaving was preventable.
We asked McWhirter how HR can best address these turnover issues. “First, HR has to actually know what’s going on – proximity to people and insight into team dynamics is key.
“Then it’s about building capability in people leaders, not just promoting technical experts and hoping for the best.”
McWhirter makes an important point there. A 2023 study from the UK’s CIPD highlights the impact a manager has on their employees’ performance, engagement levels, and well-being. In the study, employees with managers in the top quartile:
Managers and team leaders play an important role in an employees’ performance, engagement, and well-being. Making sure that these leaders have the skills to train, support, and engage their team is a big factor in employees’ choice to stay.
Here are other approaches to managing employee turnover:
Recognizing employees is one of the most effective ways of keeping them engaged. Make sure your program offers them true, real-time employee recognition that celebrates their achievements and efforts.
Workers who feel valued and appreciated also feel more connected to your organization and are less likely to leave.
Employees value career development. They also value learning opportunities that allow them to strengthen existing skills and build new ones.
Offer a robust training program to build on your employees’ skills. Develop clear pathways to promotion. Have a mentorship or coaching program to identify and grow leaders from within.
A workplace culture that cultivates respect goes a long way in retaining staff and bringing out the best in every employee. A good starting point is having a code of conduct outlining which behaviors are acceptable and which ones cross the line.
Make sure that your organization’s code of conduct is familiar to everyone. Share that through different channels:
Everyone, leaders especially, should model the right behavior. If they fall short of standards outlined in the code of conduct, have a reporting mechanism in place. Make sure this is anonymous so that people are not afraid to come forward.
Share feedback right away with the person concerned. If you’re dealing with a hostile employee, here are some approaches to take.
What role does company culture play in efforts to keep employees? A huge one, says McWhirter. “Pay, perks and job scope are the cost of entry – they get you in the game. Culture is what keeps people or sends them packing.”
Building your company culture is an ongoing practice. It’s done through everyday behavior, leadership consistency, and shared values in action, according to McWhirter. “When culture is done well, it’s a strategic differentiator: it makes good roles feel great and average days feel meaningful.”
How does your organization deal with employee turnover? Let us know in the comments below
