Employee turnover is one of the most critical and costly metrics for any business. But simply knowing your overall turnover rate is not enough. To truly understand the health of your organisation and build effective retention strategies, you need to move beyond the basic formula and uncover what lies behind your data.
Are you losing top performers? Is one department a revolving door? Are new hires leaving within the first year? Answering these questions starts with accurately determining your turnover rate and then using that insight to take meaningful action.
This guide explains the basics of calculating turnover, analysing the results, and using the insights to inform strategy.
The essential formula: How to calculate your employee turnover rate
To ensure your turnover data is consistent and meaningful, it’s essential to follow a reliable, standardised approach. The most commonly used equation is:
Employee turnover rate = (Number of separations ÷ Average number of employees) × 100
To apply this formula correctly, it’s important to understand what each component represents and how to calculate it. Follow the steps below to get started.
Step one: Identify the number of separations
The number of separations represents the total number of employees who permanently left your organisation during a specific period. This includes:
- Resignations
- Retirements
- Dismissals
- Any other permanent exits
Note: When determining this metric, it’s essential to exclude any internal transfers or temporary leaves unless there is a specific reason to treat them as turnover.
Step two: Determine the average number of employees
To calculate employee turnover over a specific period, you need to evaluate the size of your workforce during that time. Because headcount often fluctuates, the most reliable way to estimate this is by calculating the average number of employees, given by the summed number of employees at the start and end of the period, divided by two.
Example:
At the start of the quarter, you had 100 employees. By the end of the quarter, the number of employees increased to 110. This means:Average number of employees = (100 + 110) ÷ 2 = 105
This figure provides a balanced view of your team size throughout the selected timeframe.
Step three: Apply the formula
With both components in place, it’s time to apply the formula and calculate the turnover rate.
We continue the example from the previous step. Suppose that in the same quarter, 12 employees left the company. We plug that number into our turnover formula and obtain:
Employee turnover rate = (12 ÷ 105) × 100 = 11.4%
You can use the same process to calculate your own company’s turnover rate. To spot workforce trends over time, run the calculation monthly, quarterly, or annually, making sure to keep the timeframe consistent when comparing results.
Beyond the basics: segmenting turnover for deeper insights
A single turnover rate only scratches the surface. Segmenting your turnover helps uncover what’s really happening and where interventions are most needed. Here are the key types of breakdowns to consider:
Voluntary vs. involuntary turnover
Voluntary turnover includes resignations and retirements—situations where employees choose to leave on their own, whether to pursue a new opportunity, retire, or make a change due to shifting personal circumstances or priorities. In contrast, involuntary turnover refers to dismissals, redundancies, or contract terminations initiated by the employer, often due to organisational restructuring, evolving business needs, or concerns about role or cultural fit.
It’s important to distinguish between the two types of turnover, as they often signal different underlying issues. A high voluntary turnover rate may point to problems with morale, engagement, or company culture, while elevated involuntary turnover can suggest hiring mismatches, insufficient onboarding, or performance management challenges.
Regrettable turnover
Not all turnover is harmful, but when high-performing, high-potential, or critical employees leave, the impact can be significant. This is known as regrettable turnover: departures that the organisation would have preferred to avoid.
Tracking regrettable turnover helps you assess whether you’re losing the talent you most want to retain. Making this distinction supports more effective succession planning, targeted retention strategies, and stronger long-term workforce stability.
Turnover by department, manager, or role
Your overall turnover rate might look healthy, but isolated issues often get lost in company-wide averages. This is why it’s important to identify where turnover is concentrated. By breaking down the data by team, manager, or position type, you can uncover patterns that would otherwise remain hidden and target problems where they actually exist.
Key breakdowns to examine include:
- Department or business unit: Are certain areas consistently losing talent?
- Manager or team leader: Do some teams experience higher churn due to leadership style or team dynamics?
- Job level or seniority: Are you retaining entry-level staff but losing mid-level managers?
- Function or role type: Are high-skill or customer-facing roles turning over more frequently?
Example:
If your marketing team has a 7% turnover rate but your support team is at 24%, that’s a clear signal to investigate the employee experience and management practices in the support team.
This kind of segmentation helps you go beyond surface-level metrics to identify targeted interventions, improve team-level engagement, and avoid costly productivity gaps. Without it, you risk overlooking the specific areas where attrition is doing the most damage.
Turnover by tenure
Looking at when employees leave is just as important as how often. High turnover within the first 12 months—especially in the first 3 to 6 months—can signal fundamental issues with recruitment, onboarding, or role clarity.
Questions to explore include the following:
- Are new hires receiving adequate training and support?
- Are job expectations aligned with reality?
- Is there enough managerial guidance during the ramp-up period?
- Are cultural or team fit issues surfacing early on?
Tracking turnover by tenure helps you assess whether new employees are being set up to succeed or are exiting before they can make an impact. Reducing early-tenure attrition not only lowers rehiring and training costs but also strengthens long-term team stability and performance.
The true cost of turnover (and why it matters)
Turnover doesn’t just affect headcount—it impacts your bottom line, team performance, and long-term growth. While some costs are easy to spot, others are harder to measure but just as important. Understanding both is essential for budgeting, workforce planning, and making smarter talent decisions.
Direct costs
These are the most visible and measurable expenses tied directly to replacing an employee. They’re easy to identify, and can add up quickly when turnover is high:
- Job advertising and recruiter fees
- Interview coordination and hiring manager time
- Pre-employment screening and administrative setup
- Onboarding and training for the replacement
For example, hiring a mid-level employee might cost you $6,000–$10,000 just in direct replacement efforts.
Indirect costs
While direct costs are easier to quantify, indirect costs often have a longer-lasting impact on your organisation. These hidden consequences of turnover can disrupt team dynamics, slow down operations, and erode institutional stability, making them just as important to track and address. Some common examples of such losses include:
- Lost productivity while the position is vacant
- Lower output during ramp-up time for new hires
- Strained team morale or increased workload for the remaining staff
- Disruption to customer relationships or internal projects
- Loss of institutional knowledge and internal expertise
For example, having a key employee leave in the middle of a product launch can delay delivery, lower team confidence, and hurt client satisfaction.
Why it matters
Understanding the full cost of turnover is essential for strategic business planning and long-term growth. Here’s why:
- It affects the bottom line: Each departure creates financial drag through replacement costs and missed output
- It disrupts workforce stability: Frequent exits damage team rhythm and reduce operational consistency
- It signals deeper issues: Unusual turnover spikes may reflect issues with leadership, culture, or mismatched roles
- It justifies retention investment: Demonstrating real financial impact helps secure buy-in for retention programmes
- It sharpens workforce planning: Reliable turnover data supports more accurate resourcing and hiring forecasts
In short, turnover data isn’t just a metric to report but a lens into organisational health and a lever for operational and financial performance.
From manual spreadsheets to automated analytics
Spreadsheets might work when your team is small, but as your organisation grows, so does the complexity of tracking employee turnover accurately. Manual processes quickly become time-consuming, error-prone, and disconnected, making it hard to trust the numbers or take action based on them. This section explores the limitations of spreadsheet-based tracking and how automation can help you scale with confidence.
The problem with manual tracking
Manual methods are often reactive, slow, and unreliable. They contribute to data silos between HR and finance, force teams to rely on outdated or inconsistent reports, and make it difficult to track turnover trends with any depth or precision. Most critically, they prevent you from segmenting your data in meaningful ways, limiting your ability to uncover patterns, compare groups, or take proactive steps.
Manual methods are especially prone to:
- Human error and formatting inconsistencies
- Delayed updates and static reporting
- Limited ability to drill into department, role, or tenure-level data
- Inconsistent formulas and calculations across teams
As your workforce grows, these issues scale with it, amplifying the time, effort, and risk involved in even basic reporting.
The advantage of integrated automation
Platforms like Deel Local Payroll, powered by PaySpace, automatically pull from employee records, start and end dates, job classifications, and payroll systems to deliver real-time, segmented turnover metrics—without manual input.
This means you’re working from a single source of truth and always operating with the latest data. By replacing manual tracking with Deel Local Payroll, you eliminate guesswork, reduce errors, and ensure your turnover data is always up-to-date and audit-ready.
How Deel Local Payroll turns data into a retention strategy
With Deel Local Payroll, HR and finance teams can choose from a range of reporting options that make it easier to understand why people leave and how to respond. Depending on the level of insight required, teams can use built-in reports or add-on tools for deeper analysis and visualisation. Here’s how it works:
- Standard Reports (included): Export-ready reports under the Reports menu provide core workforce data on hires and terminations
- Custom Report Writer (included): Teams can build tailored reports to highlight the metrics most relevant to their organisation
- Cloud Analytics (add-on): Advanced visuals, such as hire-versus-termination trends, are available with this paid module
- Power BI (add-on): Customers can use uploaded templates for deeper analytics and retention insights, though this option comes at an additional cost.
By choosing the reporting option that fits your organisation best, Deel Local Payroll empowers your teams to move from reactive tracking to proactive decision-making—turning turnover data into a strategic advantage.
Ready to see what’s driving turnover in your organisation—and what to do about it?
Book a demo with our team today.