How to Reduce the Employee Turnover Rate at Your Company

Employee turnover refers to employees leaving an organization and being replaced by new employees. It is a measure of the rate at which employees join and leave a company over a specific period. 

Employee turnover can be classified into two types: voluntary turnover and involuntary turnover.


Voluntary Turnover

This occurs when employees choose to leave the organization willingly. Reasons for voluntary turnover can vary and may include pursuing better job opportunities, seeking career advancement, dissatisfaction with the current job or work environment, relocation, retirement or personal reasons.


Involuntary Turnover

Involuntary turnover refers to employees being separated from the organization against their will. This can happen due to various reasons, such as poor performance, violations of company policies, downsizing, restructuring or disciplinary actions.

Employee turnover should not be confused with employee attrition, a term which specifically refers to the natural or gradual reduction in the size of the workforce due to employees leaving the organization without being replaced. 

Attrition typically occurs through voluntary means, such as retirements, resignations or employees choosing not to renew their contracts. Attrition is often seen as a more passive form of employee turnover, where the organization doesn’t actively initiate the departure.

Employee turnover rate is the number of employees who leave your company during a given time period.

Employee turnover rate is an important metric for organizations, helping them to assess the effectiveness of their talent management strategies, employee engagement levels and overall work environment. 

High employee turnover rates can be indicative of underlying issues, such as poor management, inadequate compensation, lack of growth opportunities or negative work culture. On the other hand, low turnover rates may suggest positive aspects like employee satisfaction, strong leadership and effective employee retention strategies.

By tracking and analyzing the employee turnover rate, companies can identify patterns, address areas of concern and implement strategies to improve employee retention and employee engagement, ultimately leading to a more stable and productive workforce.

To calculate your employee turnover rate, divide the total number of employees who leave your organization in a month by the average number of employees at your company. Multiply this number by 100 to determine your employee turnover rate percentage.

Illustration of the formula for calculating employee turnover rate: "Employee Turnover Rate = (Employees who leave / Average number of employees) x 100".
Use our interactive employee turnover calculator to calculate your retention improvement and potential cost savings.

After you’ve calculated your employee turnover rate, it’s important to understand why employees leave. Here are some of the most common causes. 

Financial Stressors

According to the 2022 PWC Employee Financial Wellness Survey, financially stressed employees are twice as likely to be looking for a new job.1

Poor Work-Life Balance

A poor work-life balance is not only potentially harmful to employee morale and well-being but also a significant driver of high employee turnover rates. Inflexibility in the workplace is a significant issue, and one growing even faster in a work environment with young people.

Insufficient Career Advancement Opportunities

A lack of potential for career growth and professional development can hurt your company’s turnover rate. If your company doesn’t offer growth potential, you should consider how to upskill and train high-potential employees, minimizing the chances of turnover.

A high employee turnover rate can be detrimental to a company’s overall success. Some negative effects of a high employee turnover rate can harm your workplace culture, inhibit your company’s ability to provide outstanding customer service and rack up a multitude of costs.

  • Departure costs
  • Lost production
  • Recruiting costs
  • Onboarding and training costs

As explained above, a high employee turnover rate can bring about some negative effects on your company if left unaddressed. Productivity loss, reduced employee morale and increased hiring costs and training costs are just a few of the most common adverse effects. 

To avoid these issues, companies should consider how they can reduce their employee turnover rate by increasing employee happiness.

There are a few methods to help keep employees happier and more engaged in their roles.

Offer Competitive Compensation and Benefits

A comprehensive benefits package that goes above and beyond competitors will give a hiring edge and contribute to employee appreciation and retention.

Competitive compensation means not only paying industry-standard wages, but also increased flexibility for how often employees can access their earned wages. Compensation involves not only how much an employee gets paid, but also how often.

Employees dealing with financial stress will see negative effects on performance and productivity.

Empower Employee Financial Wellness

Employers should consider how they can further support employees through financial wellness benefits. These benefits may help employees keep track of earnings and expenses, pay bills on time, budget for the future and more.

Deliver Meaningful Rewards and Recognition

Recognizing an employee for their hard work can play an important role in motivating and retaining employees. However, this reward should be meaningful and provide a tangible incentive for employees who’ve gone above and beyond in their roles.

Why Top Companies Trust DailyPay

Learn how our employer clients gain significant cost savings as well as reduced employee turnover and financial stress, leading to increased employee satisfaction.

Read our case studies

Reduce Employee Turnover Rate With On-Demand Pay 

According to a report by DailyPay and Mercator, an added benefit such as on-demand pay may increase employee retention for organizations. 

Discover how on-demand pay may help bolster an employee retention strategy today.

All information herein is for educational purposes only and should not be relied upon for any other use. The information herein does not constitute the rendering of professional advice by DailyPay. DailyPay does not warrant the completeness or accuracy of any information provided to you.

1 Source:PwC

2 Source:U.S. Bureau of Labor Statistics

3 Source:November 2022 DailyPay User Survey

  • What are the two types of employee turnover?

    Typically, employee turnover can be broken down into two major categories: voluntary and involuntary. 

  • What is an employee turnover rate and how is it calculated?
  • What is a good employee turnover rate?
  • Why is it important to reduce your employee turnover rate?
  • How do you reduce your employee turnover rate?
  • Which industry has the highest employee turnover rate?
  • How does high turnover hurt productivity?
  • Does burnout lead to high turnover?
  • Can flexible pay benefits reduce turnover rates?

All information herein is for educational purposes only and should not be relied upon for any other use. The information herein does not constitute the rendering of professional advice by DailyPay. No fiduciary obligation or duty exists, or is created, between you and DailyPay. DailyPay does not warrant the completeness or accuracy of any information provided to you.

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