Staff turnover

What it means

Staff turnover shows how often people leave a company and have to be replaced. It is usually calculated as the number of leavers in a year divided by average headcount and expressed as a percentage. With 40 employees and 10 leavers a year, turnover is 25 %.

Voluntary turnover, when employees leave of their own accord, is distinguished from involuntary turnover, when the employer ends the employment. First-year turnover is tracked separately, as it shows whether the company picks the right people and handles onboarding well, as are departures of key people, which hurt most.

Some turnover is healthy: it brings new ideas and allows rotation. Too much, however, means constant training, loss of know-how and overload for those who stay. Too little can mean the company is unable to part with underperformers.

How it works in practice

The cost of turnover is higher than it seems: advertising and selection time, training, lower output from the new person in the first months, possible severance pay or pay in lieu of untaken leave, and the work colleagues cover in the meantime. For skilled roles it is estimated at half to a full year’s salary.

The causes come to light in exit interviews during offboarding, regular appraisals and anonymous satisfaction surveys. Most often they are below-market pay, lack of progression, a poor relationship with the manager or uneven workload. From payroll data we can show where pay is drifting away from the market.

We recommend tracking turnover as a KPI by department and month. A sudden rise in one team is often the first sign of a management problem that is worth addressing before more people leave.

What to watch out for

A common mistake is trying to fix turnover with higher pay alone. Money helps if pay really is below market, but if people leave because of management or how work is organised, a raise only delays their departure. Knowing the real causes is what matters.

Watch out for sudden waves of departures too, for example when a popular manager leaves and takes the team along. A non-compete clause and protection of trade secrets can limit the damage, but the best prevention is making sure key know-how is not in just one person’s head.