What Is Employee Turnover and Employee Retention?
When we talk about employee turnover, we mean the number of employees who leave an organization over a specified timeframe, typically one year. On the other hand, employee retention is number of employees an organization keeps during a given period.
Many companies track turnover closely because it can be a huge cost to replace employees. Like customer retention, investment in employee retention has a higher return than investment in acquisition.
Retention is also a key sign of employee sentiment and engagement—it can even be a competitive advantage! After all, when a company is hemorrhaging employees, that’s typically a sign of something wrong. Compare this to a company with a team with a proven history of skills, knowledge, and relationships built long term within the company.
Which company would you rather work for or invest in?
That’s what we thought, too. 😉
But before we dive deeper into the who, where, and when of turnover and retention, let’s clear up some definitions.
Glossary of terms
Retention is the percentage of employees who stay at an organization over a set period. It can also be measured in terms of the average or median tenure; the number of years that employees remain with an employer.
Turnover is the percentage of employees who leave an organization over a set period. It is often reported monthly and annually.
💡 You may also hear terms like attrition, churn, or separations for turnover. Attrition can sometimes be used to refer to voluntary turnover, often in the context of a hiring freeze where employees leaving through natural attrition are not replaced in order to reduce the size of the workforce.
Voluntary turnover is when the employee decides to end the employment relationship—it’s the employee’s choice to leave. Generally, the primary focus of retention efforts is to reduce these resignations.
Retirement is technically voluntary turnover, however companies often report retirement rates separately because they are not a focus for reducing turnover.
💡 You may also hear terms like quits, exits, departures, or leaves for voluntary turnover.
Involuntary turnover is when the employer decides to end the employment relationship—the employee did not choose to leave. This could be for reasons of poor performance or a layoff due to redundancies.
💡 You may also hear terms like terminations or discharges for involuntary turnover.
More recently, employers are paying more attention to the following quality-of-attrition metrics, which report the attrition rates of “high quality” employees.
Healthy turnover is when ending the employment relationship is best for both the employee and employer. It could be when a project ends or there is just a poor fit.
In fact, helping employees understand their own strengths, needs, and preferences—in addition to clear expectations and accountability—can help them voluntarily leave when they’re not able to perform optimally or if they’re unhappy. An employee consistently performing at a low quality or having a toxic attitude impacts the whole team, and letting them go might be best for the long-term health of your company.
💡 You may also hear terms like non-regrettable or functional turnover.
Regrettable turnover is when an employer loses an employee important to its business.
This generally includes employees identified as high performers or high potentials. It also relates to how big an impact they make when they leave, typically because they had a lot of intellectual capital, many direct reports who relied on them, or critical skills that will be difficult to replace.
💡 You may also hear terms like unhealthy or dysfunctional turnover.
Avoidable turnover is when the reasons an employee left were within an employer’s control or influence.
An unavoidable departure may be an employee moving with their spouse, whereas an avoidable departure could be an employee taking a similar job at another company because they offer more flexibility in schedule.
While all types of turnover have some cost to the company, the critical focus for retention strategies is to reduce avoidable and regrettable turnover to as close to zero as possible.
Who is responsible for turnover?
Managers tend to have the biggest impact on retention and face the most immediate consequences when someone leaves their team.
That said, it is often the senior leadership team or HR who is responsible for tracking and reporting turnover. These groups may also work together on wider efforts to reduce turnover.
And overall, every member of an organization can influence and benefit from retaining the people needed to fulfill the organization’s purpose.
Where do I find my company’s turnover and associate cost?
First, you need company data on headcount and the number of people who left the company in a given time period. The general formula is:
Employee turnover rate as a percentage = (total number of employees who left in time period / average number of employees in time period) * 100.
If you don’t have access or can’t request this information, then you may need to partner with those who can report and influence this area. For example, you may be a manager speaking to an executive about the value of sharing the company’s turnover and developing a strategy around it.
As a manager, it can be valuable enough to pay attention to the turnover in your own team, where you have more information and influence. You will also have more insight into which turnover has been voluntary, regrettable, and avoidable.
If you have access to an HR information system (HRIS) or human capital management (HCM) software, then you may find categories like voluntary and involuntary turnover are already being tracked.
Or, you may spot an opportunity to leverage technology (and Excel spreadsheets count as technology here, too!) to better track the types of turnover for better insights and decisions.
To find out how much turnover costs your organization each year, try our Cost of Employee Turnover Calculator.
When should we pay attention to retention?
Retention may not always be the organization’s priority if your best people never leave for unavoidable reasons. Even if this is the case for you, though, retention is a competitive advantage that you will want to monitor and nurture.
From the very first employee-employer interaction, likely the job application, you have an opportunity to build a culture of commitment. Every aspect of the candidate and employee experience can help you keep the people who make your organization successful.
Why should I care about retention?
You’re in luck—our next chapter exclusively covers this question. Read on to find out!
Want to learn more about employee retention? Read our Ultimate Employee Retention Guide: