Employee turnover rate is one of the simplest HR metrics to calculate — and one of the easiest to get subtly wrong by using the wrong headcount denominator.
The formula
A worked example
You start the year with 80 employees, end with 100, and 15 people left during the year (voluntary and involuntary combined).
Average headcount = (80 + 100) ÷ 2 = 90 Turnover rate = 15 ÷ 90 × 100 = 16.7%
Note this isn't 15 ÷ 100 (18.75%, using ending headcount) or 15 ÷ 80 (18.75% coincidentally the same here, using starting headcount) — using the average is the standard SHRM method and matters more the faster you're growing or shrinking.
Monthly vs annual turnover rate
Calculating monthly turnover and multiplying by 12 overstates annual turnover, because it doesn't account for compounding — the same employee can't leave twice. For an accurate annualized figure, sum actual separations over the full 12-month period and divide by the 12-month average headcount, rather than annualizing a single month's rate.
Voluntary vs involuntary turnover
Total turnover rate blends voluntary departures (resignations) and involuntary ones (layoffs, terminations). Track them separately — a spike in voluntary turnover signals a retention problem; a spike in involuntary turnover signals a hiring or performance management issue. Blending them hides which lever to pull.
Frequently asked questions
Should retirements count as turnover? Most HR teams count retirements as voluntary turnover in the raw rate, but flag them separately in analysis since they're rarely preventable or a signal of dissatisfaction.
What counts as "separated" — does it include internal transfers? No. Internal transfers and promotions are not turnover; only people who leave the organization entirely count as separations.
Use the Employee Turnover Calculator to compute your rate automatically from separations and headcount.