Employee Turnover: Why Employees Leave & How to Fix It [2026]

U.S. businesses lose over $1 trillion annually to voluntary turnover—and research shows 42% of those departures were preventable. Your best line cook knows every recipe, trains new hires, never calls in sick. Then one Tuesday, they give two weeks’ notice. No warning. No stay interview. Just gone.

The cost to replace that $50K/year employee? $25,000 to $100,000. Three months of chaos. Customers complaining about inconsistent quality. Other employees quit from the extra workload. Multiply that by 10, 20, or 50 employees per year and you’re bleeding millions in preventable costs.

Here’s how to calculate your turnover rate, understand the 15 real reasons why employees leave, and fix it before your best people walk out.

What Is Employee Turnover?

Employee turnover is the rate at which employees leave an organization and are replaced, measured as a percentage over a specific period (monthly, quarterly, or annually). Turnover includes both voluntary departures (employees who choose to leave) and involuntary separations (employees who are terminated or laid off).

High turnover is expensive and disruptive, costing companies time, money, and institutional knowledge. Low turnover indicates better retention and suggests employees are satisfied and engaged.

How to Calculate Employee Turnover Rate

Basic Formula

Turnover Rate = (Number of separations / Average number of employees) × 100

Example:

• 15 employees leave during the year
• Average headcount: 100 employees
• Turnover rate = (15 / 100) × 100 = 15%

Calculate Average Headcount

Average = (Employees at start + Employees at end) / 2

Example:

• Start with 95 employees
• End with 105 employees
• Average = (95 + 105) / 2 = 100 employees

Voluntary vs. Involuntary Turnover

Calculate separately to understand what’s driving turnover:

Voluntary Turnover = (Voluntary separations / Average headcount) × 100 Involuntary Turnover = (Involuntary separations / Average headcount) × 100

High voluntary turnover indicates retention problems. High involuntary turnover may signal performance management issues, poor hiring, or restructuring.

Industry Benchmarks: What’s Normal?

Turnover rates vary widely by industry:

Note: Shift-based and hourly roles typically experience higher turnover than salaried positions. Benchmark against your industry, region, and historical data—not just a single “good” number.

Why Employees Leave: 15 Real Reasons

42% of employees who quit say their manager could have done something to keep them (Gallup)—but resignation decisions often happen 6-12 months before the actual departure. Here are the top reasons:

1. Inadequate Compensation

Pay doesn’t match responsibilities, market rates, or cost of living.

Fix: Benchmark salaries annually, adjust for inflation, conduct pay equity audits, be transparent about compensation decisions.

2. Lack of Career Advancement

No clear path for promotion or skill development.

Fix: Create transparent career frameworks, offer training and mentorship, discuss career goals regularly, promote from within.

3. Poor Management

Ineffective, unsupportive, or micromanaging managers. Gallup research shows managers account for at least 70% of employee engagement variance.

Fix: Invest in leadership training, hire for people skills, hold managers accountable for retention, conduct 360-degree reviews.

4. Insufficient Recognition

Hard work goes unnoticed.

Fix: Recognize achievements publicly, implement peer recognition programs, offer spot bonuses, train managers to give timely praise.

5. Burnout and Work-Life Imbalance

Excessive workloads, long hours, unpredictable schedules.

Fix: Set realistic workloads, provide predictable schedules with advance notice, encourage PTO usage, offer flexible arrangements.

6. Better Opportunities Elsewhere

Competitors offer more attractive packages.

Fix: Assess what competitors offer, conduct stay interviews, improve your unique selling points, make thoughtful counteroffers when appropriate.

7. Toxic Workplace Culture

Gossip, favoritism, harassment, or negativity. One toxic employee can drive away entire teams.

Fix: Address toxic behavior immediately, foster psychological safety, reinforce values through actions, hold everyone accountable.

8. Lack of Flexibility

Rigid policies around remote work or scheduling.

Fix: Offer remote/hybrid options, allow shift swaps and flexible scheduling, trust employees to manage time, focus on results.

9. Feeling Undervalued or Unheard

Employees’ opinions and feedback are ignored or dismissed.

Fix: Solicit feedback through surveys and one-on-ones, act on feedback and communicate changes, involve employees in decision-making.

10. Poor Onboarding Experience

New hires feel lost or unclear about expectations in their first 90 days.

Fix: Develop structured onboarding with clear milestones, assign mentors to new hires, check in frequently during first 90 days.

11. Mismatch Between Job and Expectations

The role doesn’t match what was promised during hiring.

Fix: Be honest during interviews, provide clear job descriptions, set transparent expectations about workload and culture.

12. Lack of Autonomy

Micromanagement and inability to make decisions independently.

Fix: Delegate meaningfully, trust employees to execute, focus on outcomes not processes, empower problem-solving.

13. Inadequate Benefits

Health insurance, retirement, PTO, or other benefits are insufficient.

Fix: Offer comprehensive health/dental/vision insurance, provide employer-matched retirement plans, include generous PTO and parental leave.

14. No Sense of Purpose

Work feels transactional or disconnected from impact.

Fix: Communicate company mission and how each role contributes, share customer success stories, align projects with personal values.

15. Company Instability

Layoffs, financial struggles, constant restructuring, or lack of strategic direction.

Fix: Communicate openly about company health, be transparent during difficult times, demonstrate competent leadership through actions.

The True Cost of Employee Turnover

Direct Costs

• Recruiting: Job ads, recruiter fees (15–25% of salary), background checks
• Onboarding: Orientation programs, training materials, instructor time
• Separation: Exit interviews, severance, unused PTO payouts

Indirect Costs

• Lost productivity: Vacant roles and new hires ramping up mean reduced output for weeks or months
• Team disruption: Remaining employees burn out from extra work, morale drops
• Lost knowledge: Institutional knowledge, client relationships, expertise leave with the employee
• Customer impact: Inconsistent service, longer wait times, turnover-related errors
• Manager time: Recruiting, interviewing, onboarding instead of leading teams

Total Replacement Cost

Research by SHRM and Gallup suggests replacing an employee costs 50–200% of their annual salary:

• Entry-level: 50–75% of salary
• Mid-level: 100–150% of salary
• Senior/specialized: 150–200%+ of salary

Example: Replacing a $50,000/year employee costs $25,000–$100,000.

How to Reduce Employee Turnover

Quick Wins (No Cost, High Impact)

1. Give predictable schedules with 2+ weeks notice (critical for shift workers)
2. Address toxic behavior immediately (one bad manager ruins retention)
3. Recognize wins publicly in meetings or company channels
4. Conduct stay interviews before people consider leaving
5. Allow schedule flexibility through shift swaps

Medium-Cost Investments

6. Benchmark salaries annually and adjust for market rates
7. Offer competitive benefits (health, 401k, generous PTO)
8. Provide regular training to develop skills
9. Perfect your first 90 days with structured onboarding
10. Create clear promotion paths so employees see a future

Cultural Changes

11. Train managers in retention (teach feedback, recognition, communication)
12. Fix patterns from exit interviews (don’t just collect data, act on it)
13. Act on employee surveys (ignoring feedback accelerates turnover)
14. Measure turnover by manager and hold them accountable
15. Foster positive culture (address toxic behavior, recognize achievements)

The #1 factor: Having a great direct manager is the single biggest retention driver. Fix management first.

How to Diagnose Why Employees Are Leaving

Conduct Exit Interviews

Ask open-ended questions:

• What prompted your decision to leave?
• What could we have done differently?
• How would you describe your relationship with your manager?

Track patterns—if multiple people cite the same issue, prioritize fixing it.

Hold Stay Interviews

Ask current employees:

• What keeps you here?
• What might tempt you to leave?
• What changes would make your job better?

Act on insights—stay interviews are useless without follow-through.

Monitor Warning Signs

Watch for declining performance, reduced participation, increased absenteeism, LinkedIn updates, or sudden disinterest in development. Intervene early with candid conversations.

Analyze Turnover Data

Track turnover by department, manager, tenure, and role. High turnover in specific areas signals targeted problems.

The Bottom Line

Employee turnover is the rate at which employees leave an organization and must be replaced. High turnover costs 50–200% of an employee’s salary when factoring in recruiting, training, lost productivity, and team disruption.

Key points:

• Turnover rate = (Separations / Average headcount) × 100
• Top reasons employees leave: inadequate pay, lack of growth, poor management, burnout, toxic culture, insufficient recognition
• 42% of exiting employees say their employer could have prevented their departure
• Managers are the most critical retention factor—invest heavily in leadership development
• Reducing turnover requires competitive pay, career development, great managers, recognition, work-life balance, and positive culture
• Diagnose issues through exit interviews, stay interviews, and turnover data analysis

Investing in turnover reduction saves money, strengthens teams, and builds a workplace where people want to stay.

Looking for tools to reduce turnover? ShiftFlow’s time tracking provides predictable schedules that reduce burnout, workforce insights identify retention risks early through data analysis, and GPS-verified clock-ins ensure accountability without micromanagement.

Sources

• Society for Human Resource Management – HR Resources
• Gallup – Workplace Research
• Work Institute – Retention Report
• LinkedIn – Talent Solutions Resources

Further Reading

• Employee Resignation – How to handle resignations and offboarding
• Employee Retention & Satisfaction – 21 strategies + 40 survey questions

Frequently Asked Questions

What is employee turnover?

Employee turnover is the rate at which employees leave an organization and are replaced. It includes voluntary turnover (resignations, retirements) and involuntary turnover (terminations, layoffs). High turnover is costly and disruptive; low turnover indicates better retention.

How do you calculate employee turnover rate?

Turnover rate = (Number of separations / Average number of employees) × 100. For example, if 15 employees leave and your average headcount is 100, turnover rate is 15%.

What are the top reasons employees leave?

The top reasons include inadequate compensation, lack of career advancement, poor management, insufficient recognition, burnout and work-life imbalance, better opportunities elsewhere, toxic workplace culture, lack of flexibility, feeling undervalued, and poor onboarding experiences.

What’s a good employee turnover rate?

It varies by industry. Government and education often see 10–15%. Healthcare and finance average 15–25%. Retail and hospitality often exceed 60–100%. Compare to your industry and aim for continuous improvement.

How much does employee turnover cost?

Replacing an employee costs 50–200% of their annual salary, depending on role complexity. Costs include recruiting, training, lost productivity, team disruption, and manager time. For a $50,000/year employee, replacement costs range from $25,000–$100,000.

What percentage of employees leave because of their manager?

Research from Gallup shows that managers account for at least 70% of the variance in employee engagement scores, and poor management is consistently cited as one of the top reasons employees leave.

Is all turnover bad?

No. Some turnover is natural (retirements, relocations) and even beneficial (losing poor performers or bad cultural fits). Focus on reducing regrettable turnover—losing high performers or key talent you wanted to keep.

How can I reduce employee turnover?

Key strategies include competitive pay, career development, strong managers, regular recognition, work-life balance, positive culture, transparent communication, effective onboarding, flexibility, and acting on employee feedback. Track turnover by department to identify hotspots.