Employee turnover ratio measures how often people leave your company and need to be replaced. On the surface, it’s just a percentage. But underneath, it’s a reflection of how your business is running—how people are managed, how they feel about their work, and whether they see a future where they are.
A high turnover rate can slow down productivity, increase hiring costs, and chip away at team morale. A low rate might look stable on paper but could hide problems like stalled growth or poor role alignment.
So, the best employee turnover ratio? The short answer: it depends. But there’s more to it than that.
Refered helps make sense of this number in a way that’s relevant to your team. By analyzing patterns, filtering context, and identifying areas for action, Refered brings clarity to what can otherwise feel like a guessing game.
How Employee Turnover Ratio Is Calculated
The formula to calculate employee turnover is:
(Number of separations during a period ÷ average number of employees during the same period) × 100
Let’s say your company had 10 employees leave over a year, and you averaged 100 employees total. Your turnover rate would be:
(10 ÷ 100) × 100 = 10%
Some businesses calculate turnover monthly or quarterly to spot trends sooner. Others track only full-time employees or separate out voluntary vs. involuntary turnover.
These distinctions matter. Voluntary turnover—people quitting—often signals culture or leadership issues. Involuntary turnover—layoffs or firings—can point to other concerns like poor hiring decisions, shifts in company direction, or budget cuts.
Refered makes it easier to track these variables and break down turnover into categories that help you pinpoint what’s really going on.
What’s Considered a “Good” Turnover Ratio?
There isn’t a universal “ideal” turnover rate. Context makes all the difference.
Here are some rough industry averages:
- Retail, food service, and hospitality: 60–100% annual turnover is common. Many roles are seasonal or entry-level, and churn is expected.
- Healthcare and manufacturing: 20–30% is more typical. Roles often require more training or credentials, so employers aim for more stability.
- Professional services and tech: 10–20% is average, though it can spike during periods of high competition for talent or industry change.
Beyond the numbers, you have to ask: What’s driving people to leave?
A 15% turnover rate might be fine in one company and a red flag in another. If high performers are exiting while weaker ones stay, or if your best people leave within a year of joining, the problem may not be the rate itself—it’s the story behind it.
Also, an extremely low turnover rate (say, under 5%) might seem ideal but can lead to stagnation. When no one leaves, there’s less room for new perspectives, promotions, or necessary change.
What Impacts Employee Turnover Rates?
A company’s employee turnover ratio is shaped by a mix of internal and external factors. Here are a few of the most common:
- Pay and benefits: When compensation lags behind market rates, people start looking elsewhere—especially when inflation or cost of living rises.
- Manager relationships: People often leave managers, not companies. A disconnect between employees and direct supervisors is one of the biggest predictors of turnover.
- Workload and burnout: Long hours, unclear priorities, and chronic stress push people to the edge. If these issues aren’t addressed, even loyal employees may eventually walk away.
- Career growth: If employees don’t see a path forward, they’ll find it elsewhere. Regular conversations about development and promotion make a big difference.
- Work environment: Toxic culture, lack of flexibility, or unclear communication create friction that adds up over time.
All of these factors influence your employee turnover ratio—and understanding their impact is key to managing it well.
External forces matter too. Remote work has expanded job options. Industry-wide shifts (like AI or automation) can make certain roles feel unstable. Economic changes can cause people to cling to jobs—or leave quickly if the market looks strong.
How to Improve a High Turnover Ratio
If your turnover rate is rising and you’re not sure why, don’t guess—dig in. Here’s where to start:
- Exit interviews: They’re only useful if you ask the right questions and listen to the answers. Look for patterns in why people leave.
- Pulse surveys and one-on-ones: Check in with current employees. Are they feeling overwhelmed? Do they see growth opportunities? What’s frustrating them?
- Onboarding and role clarity: Some turnover happens early. A rough start can sour even a good fit. Make sure new hires have clear expectations, good support, and the tools they need.
- Training for managers: Supervisors have a big impact on retention. Leadership coaching or even simple communication workshops can help reduce friction on teams.
- Flexible policies: Not every problem is about pay. Flexible schedules, mental health support, or clear workload boundaries can help people stay longer.
Refered pulls all of these inputs into a single place, so you can track them over time and spot patterns. No more spreadsheets or scattered notes—just usable insight.
It’s not about eliminating turnover entirely—it’s about reducing unnecessary churn and building a workplace where people want to stay for the right reasons.
Final Thoughts (and What to Do Next)
There’s no magic number for the “best” employee turnover ratio. It depends on your industry, company culture, and goals. But if you’re paying attention to what your turnover is telling you—and responding in a way that respects your employees’ needs—you’ll be in a much stronger position over time.
That’s where Refered can help. We give you the tools to track turnover accurately, spot trends early, and understand the real reasons behind employee exits. You’ll get clearer insights without needing to guess what’s going wrong—or what’s going right.
Need help understanding your turnover rate? Get in touch with Refered. We’re here to support smart, people-first decisions. Reach out today to learn more.
