How to calculate the cost of employee turnover

Employee turnover is a big problem for companies in almost every industry. It is not just a staff management issue, but it also represents a financial problem that affects business profitability. 

Furthermore, it is a key indicator of how effective retention and motivation strategies are. Therefore, learning how to calculate employee turnover is essential for proper human talent management and the profitability of your company. 

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Unfortunately, not every organization allocates adequate resources to accurately monitor turnover. Many companies either underestimate its impact or fail to track it systematically, resulting in missed opportunities to address the root causes. 

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When turnover is not measured correctly, it becomes nearly impossible to implement targeted solutions. This oversight can lead to recurring issues such as low morale, disengagement, and a continuous cycle of hiring and onboarding new employees who may not stay for long.

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How does employee turnover affect your organization?

The impact is both substantial and far-reaching. According to statistics, employee turnover costs an average of $15,000 per employee, taking into account recruitment expenses, training time, lost productivity, and the disruption of team dynamics. For companies with high turnover rates, the financial strain adds up quickly and can directly affect the bottom line—making the organization up to 30% less profitable. But the effects aren’t just monetary.

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Turnover also takes a toll on the people who stay. Constant departures can disrupt team cohesion, create uncertainty, and increase workloads for remaining employees. Over time, this instability leads to lower morale—studies show that morale can drop by nearly 30% in organizations with high turnover. 

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When employees see their peers frequently leaving, it undermines confidence in leadership and raises doubts about the company’s culture and direction. These negative effects on morale and engagement can, in turn, fuel even more turnover, creating a damaging cycle.

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These statistics paint a bleak picture that underlines just how important it is to actively monitor and manage employee churn. Measuring turnover is the first step toward identifying problems and implementing solutions. It enables organizations to understand patterns, address underlying issues, and build a more stable, motivated workforce—one that drives sustainable growth and long-term success.

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What causes employee turnover?

Employee turnover is typically caused by a combination of organizational, managerial, and personal factors. One of the most common reasons is poor management. Employees often leave managers, not companies—lack of leadership, unclear expectations, or micromanagement can quickly lead to dissatisfaction. Similarly, a toxic work environment or a poor organizational culture can drive even the most talented employees away.

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Another major factor is limited career growth or advancement opportunities. When employees feel their professional development has stalled, or when they don’t see a clear path forward within the company, they’re more likely to seek opportunities elsewhere. Inadequate compensation and benefits also contribute to turnover, especially in competitive industries where workers can easily find better offers.

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Work-life imbalance is another key reason, especially post-pandemic. Long hours, inflexible schedules, or high stress without adequate support can lead to burnout and eventual resignation. Finally, lack of recognition or appreciation can be a silent driver of turnover. When employees don't feel valued or heard, engagement drops—and turnover rises.

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How to measure employee turnover?

Measuring employee turnover is a crucial step in understanding workforce stability and improving retention strategies. The most common method is calculating the employee turnover rate, which gives you a clear, quantitative view of how often employees leave your organization within a given time period.

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Measuring this turnover is important for a company because it allows it to identify staffing problems and improve retention, as well as increase employee satisfaction and productivity. To calculate it, you must secure the following data:

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• The specific time period you wish to calculate (months or years).
• The number of employees who have left the company during the selected period (voluntarily or involuntarily).
• The number of employees who were there at the beginning of the selected period.
• The number of employees who remain at the end of the selected period.

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Then, apply the formula below to perform the respective calculation, where (R) is the employee turnover, (S) are the employees who have left the company during the period, (I) are the employees who were there at the beginning of the selected period, and (F) are the employees who remain at the end. 

For example, over a period of 6 months at a certain company, 250 people started their jobs and 243 stayed. During that period, the number of workers who left was 15. Putting these values ​​into the corresponding letters, we obtain the following:

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I = 250

F = 243

S = 15

R = 15 / ((250 + 243) / 2)

R = 15 / 246.5 

Therefore, in this company, employee turnover over a 6-month period was R = 0.0608 or, expressed as a percentage, R = 0.0608 x 100 = 6.08%. Therefore, an annual turnover rate above 10% is considered cause for concern, and a rate above 20% is considered very high.

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How can Adepti help you reduce turnover rates?

Adepti can help reduce employee turnover rates by giving organizations a clear, data-driven view of their workforce’s skills, strengths, and development opportunities. One of the primary reasons employees leave is the lack of growth or visibility into their career paths. Adepti solves this by mapping employees’ existing skills and identifying gaps that can be filled through targeted learning and development initiatives. This ensures that team members feel their careers are progressing and that their growth is supported—two powerful drivers of retention.

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Moreover, Adepti helps HR teams and managers make more informed decisions when it comes to internal mobility. By providing a real-time snapshot of who is ready for new challenges or leadership roles, it encourages companies to promote from within rather than hire externally. This not only boosts morale but also shows employees that their contributions are recognized and rewarded.

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Adepti also enhances workforce planning and engagement by offering analytics that highlight patterns and trends in turnover. By identifying early warning signs—such as skill mismatches, lack of development activity, or underutilization—companies can take preventive action before dissatisfaction turns into resignation. In this way, Adepti turns talent management into a strategic lever, helping businesses retain valuable people and reduce the high costs associated with churn.

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Ready to reduce employee turnover and boost retention? 

With Adepti, you can uncover skill gaps, support career growth, and empower internal mobility—ensuring your top talent stays engaged and motivated. Book a free demo now.