HR Glossary  /  Labor Turnover
Labor Turnover7 min read
Table of Contents:

What is Labor Turnover?

Labor turnover is the rate at which employees leave an organization within a specific timeframe; often measured monthly, quarterly, or annually. Whether staff resign, retire, or are terminated, labor turnover plays a critical role in your business’s stability and workforce planning.

A well-monitored turnover rate can help you spot underlying issues before they become costly. In this glossary-style guide, we’ll define labor turnover, show you how to calculate it, explore the causes and consequences, and share actionable strategies to reduce it.

Labor turnover refers to the rate at which employees leave a business and are replaced by new hires. It’s also known as employee turnover, staff turnover, or attrition (though the latter has slightly different implications).

This HR metric directly reflects how well your organization retains its talent. A higher-than-average turnover rate could indicate problems with compensation, culture, career growth, or management style. On the flip side, extremely low turnover isn’t always good, as it may indicate stagnation, poor innovation, or a lack of opportunity.

Turnover vs Attrition: Attrition refers to employees leaving without being replaced. Turnover implies those roles will be filled again. Both impact workforce planning but require different responses.

Employee Turnover vs. Attrition: Understand the Key Differences →

Labor turnover generally falls into two buckets:

Voluntary Turnover

This is when an employee chooses to leave. Common reasons include:

  • Better salary or benefits elsewhere
  • Lack of advancement opportunities
  • Poor work-life balance
  • Burnout or disengagement
  • Relocation or career change

Voluntary turnover is often preventable and should prompt a closer look at company culture and retention policies.

Involuntary Turnover

This occurs when the employer initiates the exit. Examples include:

  • Performance-based terminations
  • Layoffs or restructuring
  • Contract expirations

Involuntary turnover is sometimes necessary, but excessive layoffs or firings can damage morale and signal internal instability.

You may also hear about functional vs. dysfunctional turnover:

  • Functional: When low performers leave.
  • Dysfunctional: When high-performing employees quit.

Here’s a basic formula:

Turnover Rate = (Number of Employees Who Left During the Period ÷ Average Number of Employees) × 100

Example:

If 12 employees left your company this year, and your average workforce was 120 people:

(12 ÷ 120) × 100 = 10% turnover rate

This rate is often tracked monthly, quarterly, or annually. Some companies break it down by department, location, or role.

Calculate labor turnover costs now →

Why Labor Turnover Matters

Labor turnover affects everything from company culture to your bottom line. Here’s why it should be on every HR leader’s radar:

  1. Cost of Replacing Employees: Replacing an employee can cost up to 2x their annual salary, according to Gallup. Between recruitment, training, and lost productivity, turnover drains both time and money.
  2. Operational Disruption: When people leave unexpectedly, workloads get shuffled. Deadlines are missed. Institutional knowledge is lost. High turnover destabilizes operations.
  3. Employee Morale: Watching colleagues leave frequently can trigger uncertainty and lower team morale. It also sends a message—fair or not—that something’s wrong.
  4. Brand and Reputation: If turnover is high, word gets out. This can impact your employer brand, leading to trouble attracting top talent.
  5. Workforce Planning: Turnover data helps HR leaders forecast staffing needs, assess team stability, and plan for succession.

Some turnover is natural, especially in seasonal businesses or early-career roles. But consistently high turnover suggests deeper issues. Common causes include:

  • Poor onboarding (first impressions matter)
  • Lack of internal mobility
  • Micromanagement or toxic culture
  • Inadequate compensation
  • No remote or flexible work options

Use pulse surveys, anonymous feedback, and exit interviews to gather insights into what’s driving exits.

Here are practical strategies to reduce unwanted turnover:

Improve Onboarding

A smooth, engaging onboarding experience boosts retention by up to 82%, according to Glassdoor. Use structured checklists and digital workflows to help new hires feel prepared and welcomed.

Offer Clear Career Paths

Create progression plans, promote internally, and invest in upskilling. Employees who see a future with you are more likely to stay. Tools like TalentHR can help you map employee goals and track performance metrics.

Use Stay Interviews

Don’t wait for the exit interview. Conduct stay interviews to learn what motivates employees—and what might make them leave. These conversations can reveal actionable insights and build trust.

Benchmark Compensation

Use salary surveys and platforms like Payscale or Glassdoor to ensure your compensation is in line with industry standards. Consider total rewards, including benefits, bonuses, and perks.

Recognize and Reward Effort

Peer-to-peer recognition programs, shoutouts, and performance-based bonuses increase employee engagement. Small gestures like public praise or gift cards can go a long way.

Invest in Manager Training

People don’t leave companies—they leave managers. Provide training on communication, emotional intelligence, feedback delivery, and inclusive leadership.

Promote Flexibility and Work-Life Balance

Offer remote work, hybrid models, or flexible hours where possible. Employees increasingly value autonomy over their schedules.

Tools to Help You Track and Manage Turnover

Manual tracking makes it hard to connect the dots between turnover and its root causes. HR software like TalentHR simplifies this:

  • Visual reports to track turnover trends
  • Custom reports by team, tenure, or department
  • Centralized employee records and performance feedback
  • Integration with other payroll, performance, and benefits systems

With TalentHR, HR teams can catch early warning signs and design targeted retention programs. It’s a streamlined solution that scales as your team grows.

Explore how TalentHR helps reduce employee turnover →

Q: What is a good labor turnover rate?

A: A good labor turnover rate depends largely on your industry, company size, and job roles. For example, fast-paced sectors like retail or hospitality may naturally experience turnover rates of 20–30% due to part-time and seasonal work. On the other hand, professional services firms typically aim for under 10% to maintain institutional knowledge and stability. A "healthy" rate is one where you’re not constantly scrambling to fill positions yet still benefit from some level of fresh talent and ideas. Always compare your figures with industry benchmarks and internal historical trends to get a clearer picture.

Q: What’s the difference between turnover and attrition?

A: Turnover refers to any instance where an employee leaves your organization, either voluntarily (resignation) or involuntarily (termination or layoff), and the role is filled again. Attrition, however, occurs when an employee leaves and the company intentionally leaves the position vacant. For example, if a company is downsizing or eliminating redundant roles, those exits are categorized as attrition. Understanding this distinction helps in strategic workforce planning—turnover often needs action, while attrition may be part of a cost-saving strategy.

Q: Can turnover ever be a good thing?

A: Yes, not all turnover is bad—especially if it helps remove underperformers or makes room for new ideas and skill sets. This type of turnover, often called functional turnover, can lead to stronger team dynamics and improved productivity. However, turnover becomes a problem when high-performing employees leave due to dissatisfaction, burnout, or lack of growth opportunities—what’s known as dysfunctional turnover. The key is to regularly analyze exit data to distinguish between the two and act accordingly.

Q: How can HR software help reduce turnover?

A: HR software like TalentHR empowers teams to reduce turnover by offering visibility into workforce trends and employee engagement levels. For example, it can track metrics like absenteeism, performance reviews, and employee sentiment, flagging potential flight risks before they exit. You can also automate surveys, stay interviews, and onboarding workflows to enhance the employee experience. More importantly, TalentHR’s integrated analytics help identify patterns—such as departments with high churn—allowing HR leaders to take proactive, targeted action to improve retention.

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Labor turnover is more than a number; it’s a window into your company's culture, leadership, and employee experience. Tracking it regularly and addressing its root causes can improve retention, morale, and long-term business success.

Ready to make labor turnover easier to manage? Sign up for free to try TalentHR—no credit card required.

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