Employee Turnover: What It Is And How You Prevent It

How successfully a company hires, onboards, manages, and rewards its people is fundamental to success. These factors are too important to leave to chance, so the most successful firms use data to inform workforce management: They compare their attrition rates with national and industry-specific benchmarks. They hold managers responsible for keeping the lines of communication open with their reports. They actively manage their career development programs and look at total compensation metrics in context of the cost of replacing top performers.

What Is Employee Turnover?

Employee turnover refers to the total number of workers who leave a company over a certain time period. It includes those who exit voluntarily as well as employees who are fired or laid off—that is, involuntary turnover.

Turnover is different from attrition. When calculating attrition, reductions in force and terminations are not counted.

Key Takeaways

• Turnover measures separations—employees who leave a company—within a certain time period. Separations include everyone who is no longer with the company, regardless of the reason.
• Turnover is broken down into two types: voluntary, where people leave of their own volition, and involuntary, where people have been terminated or were part of a seasonal layoff or reduction in force.
• Employees who voluntarily leave their jobs are often seeking more money and better benefits, career progress, a more optimal work/life balance, or to escape an ineffective or toxic manager.
• Turnover is expensive: Gallup pegs the cost at between 40% to 200% of the salary of the employee being replaced.

Employee Turnover Explained

Turnover, especially the voluntary variety, impacts a company’s ability to achieve business objectives and is a key concern for executives. The reasons people leave vary, and companies can’t always stem the tide.

Shifts in demographics are one driver. More older Americans are working than ever before, setting businesses up to expect more retirements in the coming years. According to Pew Research, roughly one in five Americans ages 65 and up were employed in 2023—nearly double the level in 1988—with 62% working full time, up from 47% in 1987.

Meanwhile, millennials, who comprise 36% of the US workforce, according to 2024 US Department of Labor data, don’t stay at their jobs as long as previous generations did. A September 2024 US Bureau of Labor Statistics (BLS) report states that the median tenure of workers ages 55 to 64 was 9.6 years. That’s more than three times the tenure of workers ages 25 to 34 years, which was just 2.7 years.

Among workers ages 60 to 64, 52% had been employed for at least 10 years with their current employers, compared with just 21% of those ages 35 to 39, according to BLS data.

Then there’s the issue of supply and demand. In certain roles and geographies, there aren’t enough people with the right skills to fill open positions. Perennial shortages are found among medical professionals, scientists, mathematicians, skilled tradespeople, engineers, and many IT specialties. It’s widely agreed that many of these shortages will persist even with higher-than-normal unemployment rates.

And finally, people want more from their employers—and not just money. Recall that guaranteed lifetime employment is no longer on the table for most professions. Even baby boomers are looking for more than a steady paycheck and say working for a company with a purposeful mission is a top priority. According to a 2024 Gallup report, the primary ways businesses could have prevented employees from leaving were additional compensation/benefits (30%), more positive interpersonal interactions with managers (21%), organizational issues (13%), career advancement (11%), and improved staffing/workload/scheduling (9%). Today’s workforce also values flexibility and time off, as well as a clear career path complete with the training to advance steadily and remain marketable.

What Do Turnover Rates Tell Us About a Business?

Turnover rates must be viewed in context, as certain industries, such as hospitality and retail, traditionally have higher than average employee churn. A company can and should benchmark its turnover rate across similar businesses in its industry to get a sense of how well it’s retaining talent.

Consider a restaurant. Personnel managers face challenges including employing many first-time, part-time, seasonal, and student workers. Additionally, upward mobility for restaurant employees often occurs by taking positions at a new location. Yet even restaurants can develop solid “people plans” to lower turnover rates and improve team morale and cohesion, all of which lead to a better experience for guests.

Generally speaking, high turnover rates signal problems—with the company’s recruiting, its culture, its compensation and benefits structure, individual managers, training and career progression paths, and more.

What Are the Top Reasons for High or Low Employee Turnover?

Employees across industries commonly leave their jobs for the same reasons: inadequate compensation, limited growth opportunities, poor management, stress, and unsatisfying work environments. While some turnover stems from personal reasons or externalities beyond the business’s control, such as health events or family relocations, companies can look for warning signs and take actions in the following nine categories to minimize unexpected turnover.

1. Stress LevelsEmployees with intense responsibilities, unclear roles, long shifts, and in otherwise high-pressure environments are ripe for burnout and turnover. Manageable workloads, clear expectations, regular check-ins, and staff autonomy can reduce burnout and increase performance.
2. Compensation and BenefitsEmployees who believe they’re underpaid relative to their colleagues or market rates are likely to search for higher-paying jobs. Competitive pay scales, transparent salary structures, regular raises, and comprehensive and flexible benefits packages can help retain talent, even when competitors come calling.
3. Opportunities for GrowthEmployees who don’t see a long-term path forward—opportunities are limited for promotions, building new skills, making more money, etc.—might look for jobs with more potential elsewhere. By investing in professional development, clear career paths, and internal mobility, businesses can retain employees and even tap into previously undiscovered skills.
4. Company LeadershipIf leaders don’t clearly communicate the company’s direction, values, goals, and long-term stability, employees may lose confidence in the business. Strong, transparent leadership can help employees feel like trusted team members and part of the company’s success, giving them solid reasons to stay.
5. ManagersAggressive, unsupportive, or incompetent managers can single-handedly drive top performers to competitors. Effective managers advocate for their teams, provide helpful feedback, and support a healthy work-life balance. Those on the front lines can also help HR and leadership understand why employees are leaving and what they can do to prevent it.
6. Employee EngagementEmployees who feel disconnected from the company culture or don’t share the same values will inevitably seek work elsewhere, where they are a better “fit.” Disengagement might show up as increased absences, deteriorating work quality, or indifference toward organizational priorities. On the other hand, engaged employees invest more energy in the company, take pride in their work, and are more loyal.
7. Work SatisfactionDissatisfaction can occur when workers feel underused or bored, viewing their time or potential as wasted or better served elsewhere. To help them feel more seen, businesses should try to align daily tasks with each employee’s skills and interests, and foster upskilling opportunities when possible. This personalized attention helps every team member find meaning in their jobs.
8. Office CultureToxic corporate culture, often marked by incivility, dishonesty, or lack of respect, is a strong predictor of turnover. Companies that foster a positive culture emphasizing open communication and mutual respect can help employees feel valued. This openness also gives workers a chance to voice concerns and suggest improvements rather than quit.
9. External FactorsStrong labor markets, new local employment opportunities, frequent recruiter outreach, increased marketing for new jobs in the industry, or life events can pull even satisfied employees away from a company. Managers should seek to understand their motives and use the feedback to help improve their own practices.

Types of Employee Turnover

Turnover accounts for all separations, both people who leave the company on their own accord and those who the business lets go. It also includes separations for external reasons, such as death or disability. Turnover is different from attrition in that it accounts for all departures from the company, whereas attrition considers only voluntary turnover. Furthermore, some HR teams may track inter-departmental transfers as internal turnover, excluding those figures from overall turnover metrics.

Common types of employee turnover include:

• Resignation: An employee leaves for a new job, career change, or personal reasons.
• Retirement: An employee reaches the end of their working life and leaves the company.
• Termination: An employee is let go due to poor performance, policy violations, or misconduct.
• Job abandonment: An employee stops showing up to work without formal notice or resignation.
• Layoffs or reductions in force (RIF): Employees are let go due to budget cuts, restructuring, or changing business needs. This type of turnover is often larger scale than other categories and can significantly increase turnover rates until restructuring is complete.

Source – https://www.netsuite.com/portal/resource/articles/human-resources/employee-turnover.shtml