Employee Turnover Explained: Ideal, Good, and Healthy Rates

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Key Elements to Know about Employee Turnover

Team AdvantageClub.ai

March 28, 2025

EMPLOYEE ENGAGEMENT

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When professionals use the term ‘Employee Turnover’ or ‘Attrition,’ people always take it negatively. However, as HR professionals, one should know that there are various types of employee turnover, and none of them raise questions about the company’s working culture. For instance, a trend started in 2021 called ‘The Great Resignation’ movement, where many employees worldwide gave up their jobs for better opportunities or to follow their passion. This is one type of employee turnover. But this movement did not last for long. In 2022, we saw a complete turnaround in the talent market. Due to fears of recession, companies started to retrench and many startups in India laid off employees. The trend continues as we enter the new year. This is another form or type of employee turnover. Similarly, there are other types of employee turnover. And all do not hurt the company.

What is Employee Turnover?

Employee turnover is the percentage of people who leave an organization in a given time. Companies usually measure the employee turnover rate annually or quarterly. They can also measure the turnover rate of newly hired employees to evaluate the organization’s talent management strategy. The turnover rate is one of the metrics used to assess the performance of the HR department in an organization.

First, some essential data should be prepared to calculate the annual employee turnover rate. Find the company’s total strength at the beginning and end of the financial year. Then, find the average of the two. Divide this average value by the number of employees left and multiply it by 100.

For example, say an organization had 42 employees at the beginning and 62 at the end of the year. And 13 employees left during the same period. To calculate your average number of employees, you could add 42 and 62, then divide the total by two. The result would turn out to be 52.

Following the same example, divide 13 (the number of employees who left within the time period) by 52 (the average number of employees), then multiply that number by 100 to get an employee turnover rate of 25%.

Different Types of Employee Turnover

Let’s delve deep into some types of employee turnovers with examples. All employee turnovers are not hindrances to the company’s growth. However, in all cases, an employee is leaving, and one needs to find a replacement, which can become a complex task for the talent acquisition team if the numbers are enormous.

Ideally, there are only two types of employee turnover:

1. Voluntary turnover

Voluntary turnover occurs when an employee decides to leave the organization. This is an undesirable form of employee turnover because it is unpredictable, and in most cases, the company loses good talent.

Examples

One example of voluntary turnover is when an employee finds a better opportunity elsewhere. The employee leaves the organization for growth, whether in terms of salary or designation. Moreover, even a disgruntled or disengaged employee who is unhappy with his or her job finds another job for a better culture.

Retirement is also an example of voluntary turnover when an employee reaches retirement age and retires from his duties.

How to Manage

Generally, people leave the organization for a better salary, job role, scale of work, learning opportunity, or culture issues. As HR professionals, it is a red flag when one witnesses a high number of voluntary turnover. The HR needs to keep a tap on their people, keep taking feedback, and see whether their people are feeling burnout, toxicity at work, or conflict issues. Moreover, an exit interview mechanism should be set up to know why people are leaving their jobs and accordingly fill the gaps ie, talent management strategies.

2. Involuntary Turnover

Involuntary turnover occurs when an organization decides to terminate an employee’s employment. Such decisions are generally made in the interest of the organization.

Examples

If the employee is not performing at par with the employer’s expectations, the organization can decide to end the employment on the grounds of performance issues with the employee. If an employee loses the job in such a scenario, it is not as if the employee has no skills; it means they were just unable to fit into the role.

Another example is a mass layoff. We have all seen that recently, many companies have laid off huge numbers of employees to cut costs. Such an action is taken when the company has no other option to keep the organization financially afloat.

How to Manage

To control involuntary turnover, the company needs to make smart hiring decisions. Robust talent acquisition mechanisms will help the organization hire the right people. Moreover, many companies overhire talent, which can lead to mass layoffs in the future when the company decides to downsize.

Main Effects of High Turnover Rates

Having a high turnover in an organization has various downsides, ranging from the high cost of hiring talent to the waste of time and effort, loss of knowledge, and raising questions about the company’s image.

1. High Cost

The cost of high employee turnover is hard on your pocket. According to Gallup research, the cost of hiring or replacing a new employee can be anywhere between one-half or twice an employee’s annual salary.

2. Decreased Employee Morale

A high turnover rate can be infectious or scary, depending upon the kind of turnover taking place. If voluntary turnover is high, it can get infectious, as other employees might also start leaving with others. If involuntary turnover is high, it can be scary. People may get insecure about their jobs, fearing that the axe of layoff may fall on them. This leads to a decrease in morale.

3. Loss of Knowledge and Expertise

Generally, when a tenured employee leaves, they take a lot of knowledge and expertise with them. There is always a risk that vital information and an organization’s intelligence might be leaked to competitors.

4. Company Reputation

When the employee turnover rate is high, it always raises questions about an organization’s culture. Today, employees choose their employers very carefully. In this information age, people do thorough research before joining a company. Employees may hesitate to join a firm that has a high turnover rate.

Causes of High Turnover in Organizations

There are various reasons for a high turnover rate. These can be divided into involuntary and involuntary turnover.

Reasons for High Involuntary Turnover Rates

Retirement
A large number of aged workforce who are preparing for superannuation. In large organizations, many tenured employees take up voluntary retirement, and some retire in their natural due course of time. During such times, employee turnover can increase.
Layoffs
Downsizing by the organization for cost-cutting, performance issues, or major restructuring. During major economic setbacks, financial downturns, or the closing of a particular line of business can result in major layoffs, where employees are asked to leave the organization. Such layoffs can also be a result of performance-based terminations.
Internal Hiring
Internal movement of talent where large organizations move one employee to another company, part of the same group, or in another role for career development or other strategic reasons.

Reasons for High Voluntary Turnover

Lack of Career
Advancement Many organizations lack in giving proper career development to their employees. Neither the management nor the manager is able to provide greater opportunities to the employees and help in their growth.
Toxic Culture
There can be cases where a company may have a cutthroat culture where only top performers can survive, and employees work against each other rather than working as a team. Moreover, there can be cases of workplace bullying where managers and seniors have a rude attitude toward employees. In all such cases, employees prefer joining another company for a chaos-free environment.
High Burnout
As the nature of work or industry demands, there can be some workplaces that call for high-pressure work where burnout is usual. Also, poor management and processes can lead to employees working overtime. This impacts an employee’s well-being, leading to high turnover.
Low Compensation
In some cases, employees may find that they are not being paid as per the industry standards. This leads to dissatisfaction in employees encouraging them to look out for other opportunities which can pay them more.
Low Recognition
Apart from salary, employees also seek a sense of value and appreciation for their work. If an employee finds that their work is not being appreciated at the workplace, their morale may get low. If the situation remains the same for a long time, such employees may quit.

What is a Good Turnover Rate for an Organization?

It is quite difficult to say what should be the range of a healthy employee turnoverrate as there are many factors that add to the same. However, as a thumb rule, an employee turnover rate below 10% is considered to be good. But this may vary as per the industry, role and economic conditions. As per an SHRM report, industries such as technology, hospitality, retail, and call centers are known for high turnover rates, while healthcare, government, education, finance, and insurance industries have lower employee turnover rates.

How to Calculate Turnover Rate?

The turnover rates are calculated on an annual basis. There is a basic formula for calculating the annual employee turnover rate.

The formula is Employee Turnover rate = Number of departed employees / Number of total employees * 100.

To calculate the annual employee turnover rate, divide the number of employees who departed in a year by the total number of employees at the end of the year and multiply it by 100.

Example: (20 departed employees / 1,000 total employees) * 100 = 2% attrition rate.

What is the Difference between Attrition and Employee Turnover?

Very conveniently, people use the word attrition and employee turnover interchangeably. But they mean different. Employee turnover is the rate at which employees leave an organization and are replaced within a given period of time. However, attrition refers to employee turnover, whether voluntary or involuntary, where the company takes a strategic call to never fill the position again in the future. Read more about turnover and attrition.

HR professionals need to know which kind of employee turnover is bad and good for the organization. In fact, as per general industry standards, an employee turnover rate below 10% is said to be healthy. But it may depend on the industry. Moreover, many experts have also said that an organization needs to have some sort of employee turnover to break stereotypes and bring in fresh perspectives, which can add to the organization’s growth.

How AdvantageClub.ai can Help Companies to Reduce Employee Turnover

Being a platform with various offerings, Advantage.Club.ai is a one-in-all solution for HR professionals to tackle various factors of unwanted employee turnovers ranging from employee dissatisfaction, well-being, toxic culture, and lacking a sense of inclusion.

Increase Job Satisfaction and Morale

In today’s time, an employee seeks more than just the salary. They want to get rewarded for their hard work. AdvantageClub.ai’s R&R (Rewards & Recognition) platform allows managers and leaders to reward employees through points which can be redeemed on the platform for various products and services ranging from fashion, clothing, lifestyle, wellbeing, fitness, retail and more. This keeps the employees happy and motivated to perform much better in the future.

Enhance Employee Well-being

As employee burnout and a highly stressful environment are also a cause of employee turnover, it becomes important to address these issues. India’s First Marketplace-Led Comprehensive Wellness Suite: Advantage Wellness is designed to not only provide better health outcomes for employees but also to simplify the management of wellness programs for organizations. The platform’s innovative approach ensures that wellness initiatives are flexible, data-driven, and employee-focused.

Building a Culture of Appreciation

Apart from just rewards, it is important to also appreciate employees for who they are which is recognizing them beyond the scope of work. Through the AdvantageClub.ai platform, companies can run peer-to-peer recognitions where colleagues can appreciate each other through innovative badges and personalized notes. This helps to build a culture where employees appreciate each other and also enhances team bonding.

Inclusion

As we work with a diverse set of people, each comes with different personalities. When employers fail to recognize these individualities of their employees, they feel isolated which may lead to dissatisfaction in people. Through the AdvantageClub.ai’s communities platform, employers can build different communities such as hobby clubs for acting, sports, fitness, or gardening where like-minded employees can interact. This allows employees to bring their whole-self to work.

Personalization

AdvantageClub.ai recently introduced ADVA, our AI chatbot, to the world, which means that the platform is equipped with AI capabilities that can further personalize the experience of employees. For instance, AI technology can provide AI-guided exercises for employee wellness, which can suggest practices that suit your lifestyle and limitations. Learn more about integrating AI into employee wellness programs.

Employee turnover and attrition are serious matters and issues for any HR leader. It costs money to hire talent, and the cost gets even higher when companies replace an employee. Given that, it is important to understand different types of employee turnovers and how one can reduce them. There are different causes and reasons for employee turnover and practices and tools that are available to control them.