Employee turnover

Employee turnover refers to the proportion of employees who leave an organisation over a set period (often on a year-on-year basis), expressed as a percentage of total workforce numbers.

The term is used broadly to cover all leavers, voluntary and involuntary, including those who resign, retire or are made redundant, in which case it’s describing overall, or ‘crude’, employee turnover. It’s also possible to calculate more specific breakdowns of turnover data, such as redundancy-related turnover or resignation levels, with the latter particularly useful in assessing the effectiveness of people management practices.

Employee retention

Retention relates to the number of  retained employees, measured as the proportion of employees with a specified length of service (typically one year or more) expressed as a percentage of overall workforce.

Turnover and retention patterns in the UK

Turnover levels can vary widely between occupations and industries, with typically high turnover found in retail, hotels, hospitality and leisure, call centres and among other lower paid, private sector services groups. 

Levels of turnover also vary across regions, with higher turnover rates where unemployment is lowest and where it is relatively easy for people to secure alternative employment. CIPD’s labour market outlook provides quarterly reports on the recruitment and redundancy intentions of employers, indicating how employment patterns are shifting within the UK labour market.

There’s no set point at which employee turnover starts to have a negative impact on an organisation’s performance. Much depends on the labour market conditions in which the organisation competes. Where it’s relatively easy to find and train new employees quickly and at reasonably low cost, it’s possible to sustain high quality service despite having high turnover rates.

However, especially where skills are relatively scarce, where recruitment is costly or where employers have hard-to-fill vacancies, turnover is likely to be problematic. Employees who hold more in-demand or specialist skills or have developed strong relationships with customers, will be more valuable to employers and therefore more damaging for the business to lose, particularly if they move to a direct competitor.

Employers should monitor employee turnover and understand how it affects their organisation’s performance and ability to achieve its strategic goals. Turnover may also highlight workforce issues such as dissatisfaction with career progression opportunities. Employers should strive to address any issues and seek to make sure their employees experience good work, reflected in overall job quality. Employee retention is underpinned by effective recruitment, induction, the psychological contract and employee value proposition.

Measuring the levels and costs of employee turnover is vital in building the business case and informing targeted retention initiatives. This can be a powerful tool for winning line manager and board-level support for resourcing activities. 

However, CIPD’s resourcing and talent planning survey 2022, found that only 17% of respondents calculate the cost of labour turnover and 12% collect data to evaluate and improve retention initiatives. This suggests organisations need to do more to measure and evaluate turnover and retention interventions. 

Measuring employee turnover

Organisations may track their ‘crude’ or ‘overall’ turnover rates on a month by month or year by year basis, expressed as a percentage of employees overall. The formula is simply:

Total number of leavers over period x 100
Average total number employed over period

The total figure is for all leavers, including those who retire, or leave involuntarily due to dismissal or redundancy. It also makes no distinction between functional (beneficial) turnover and that which is dysfunctional.

Crude turnover figures are often used in published surveys of labour turnover as they tend to be more readily available and can be useful as a basis for benchmarking against other organisations.

However, it’s also useful to calculate voluntary turnover (resignations), as this is unplanned and often unpredictable (unlike planned retirements or redundancies) and can have an adverse impact on the business.

It may also be helpful to consider some of the more complex employee turnover indices, which take account of characteristics (such as seniority and experience) or calculate figures for different functions and locations of the business to highlight areas where turnover is particularly high.

Measuring employee retention

A stability index indicates the retention rate of employees. Like turnover rates, this can be used across an organisation as a whole or for a particular part of it. The usual calculation for the stability index is:

Number of staff with service of one year or more x 100
Total number of staff in post one year ago

Costing employee turnover

The costs associated with employee turnover related to resignations may be estimated by calculating the average cost of replacing each leaver with a new starter in each major employment category. Then multiple this figure by the relevant turnover rate for that staff group to calculate the total annual cost of turnover.
The major costs are:

• Administration of the resignation.
• Recruitment and selection costs.
• Covering the post during the period in which there is a vacancy.
• Induction training for the new employee.

Many of these costs consist of indirect management or administrative staff time, but direct costs can also be substantial where advertisements, agencies or assessment centres are used in recruitment.

More complex turnover costings give a more accurate and higher estimate of total costs. These could include measures estimating, for example, the reduced productivity of new employees and that of resignees during the period of their notice (both likely to have lower productivity levels of established employees).

Employees resign for many different reasons. Sometimes it’s the attraction of a new job or prospect outside the workforce that 'pulls' them. On other occasions they are 'pushed' to seek an alternative because they are dissatisfied in their present job. These ‘push’ factors range from a lack of career opportunities to organisational changes. The move might also be prompted by a combination of both ‘pull’ and ‘push’ factors.

One key reason for an individual’s decision to leave may be a poor relationship with their line manager, leading to disengagement. Find out more in our factsheet on employee engagement and motivation. Research has also found some groups, for example women and LGBT people, are more likely to be disproportionately subject to ‘push’ factors such as discrimination, exclusion and barriers at work.

Investigating why people leave

It’s important to understand why people leave, but getting accurate information can be difficult as the reasons given for resignation can differ from employees' genuine reason for leaving. Individuals may be reluctant to voice criticism of their managers, colleagues or the organisation generally and give less contentious reasons for their departure.

Where exit interviews are used to investigate the reasons for leaving, the interviewer should not be a manager who has responsibility for the individual or who will be involved in future reference writing. Confidentiality should be assured and the purpose of the interview explained.

Using an external provider to conduct exit interviews will help capture more accurate leaving data, as individuals are more willing to be honest when there is reassurance of anonymity.

Alternative approaches to collecting exit data could involve confidential attitude surveys for employees including questions on intentions to leave, or confidential questionnaires sent to former employees on exit or after their departure.

It’s also important to consider the experiences of employees within the organisation, as information from current employees will identify potential retention issues before they lead to people leaving, and help to minimise negative outcomes of turnover.

The first steps in developing an employee retention strategy are to find out:

• Why are employees leaving?
• Who is leaving? For example, are employees from a particular team or demographic group?
• The impact and cost that employee turnover has on the organisation.

This data can develop a costed retention strategy that focuses on the issues and causes of turnover specific to the organisation.

As well as basic pay and benefits, organisations should consider the following practices to improve retention:

• Be flexible - Wherever possible, accommodate individual preferences on working hours and times. It's also important to monitor workload and ensure it's manageable within working hours. Learn more on flexible working practices.

• Treat people fairly - A perception of unfairness, whatever the management view of the issue, is a major cause of voluntary resignations. For example, perceived unfairness in the distribution of rewards is very likely to lead to resignations. Read more on fairness in reward in our latest Reward management survey.

• Employee well-being - Support managers to help their teams thrive, and manage issues such as workplace stress and presenteeism. Find out more in our Health and well-being at work survey report and in our Wellbeing factsheet. Recently, employee resilience has become prominent as an important part of wellbeing.

• Enable career development - Maximise opportunities for employees to develop skills and careers and understand and manage people’s career expectations. Where promotions are not feasible, look for sideways moves that allow employees to gain different development experiences. This can also benefit an organisation's succession planning.

• Consult employees - Ensure that employees have a 'voice' through consultative bodies (UK employers should be aware of the updated Information and Consultation of Employees regulations), regular performance conversations, attitude surveys and grievance systems. There's more in our employee voice factsheet.

Books and reports

ACAS. (2014) Managing attendance and employee turnover. Advisory booklet. London: ACAS.

TAYLOR, S. (2018) Resourcing and talent management. 7th ed. London: Chartered Institute of Personnel and Development.

Visit the CIPD and Kogan Page Bookshop to see all our priced publications currently in print.

Journal articles

CROWELL, B. (2017) Elevating the employee experience. TD: Talent Development. Vol 71, No 1, January. pp 52-56. Reviewed in In a Nutshell, issue 64.

FOX, A. (2014) Keep your top talent: the return of retention. HR Magazine. Vol 59, No 4, April. pp31-32,34-35,38-40.

KOSSIVI B. et al. (2016) Study on determining factors of employee retention. Open Journal of Social Sciences. Vol 4, No 5.

NORBURY, M. (2019) The changing expectations of employees. People Management (online). 30 May.

RIGONI, B. and ADKINS, A. (2016) What millennials want from a new job. Harvard Business Review. 11 May.

CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR.

Members and People Management subscribers can see articles on the People Management website.