How To Decrease Employee Turnover

Employee turnover measures the number of employees who leave a company within a specific time frame and need to be replaced. In 2025, Gallup found that 52% of employees are watching for or actively seeking a new job, making self-reported turnover risk at its highest point since 2015. While some turnover is normal, employers must implement specific strategies to reduce excessive turnover.

Attracting top talent requires a significant investment of time and resources. After making informed hiring decisions, employers strive to minimize the costs, challenges, and disruptions associated with employee turnover. Retention strategies need to begin during onboarding to set the stage for long-term success.

Implementing effective employee retention strategies is essential for fostering a happy workforce while supporting long-term productivity and operational efficiency. Strong retention efforts help minimize turnover-related costs, maintain continuity, and enable employees to perform at their best.

Turnover Costs

The many direct and hidden costs associated with employee turnover impact a company’s bottom line. These include lost productivity, decreased morale, knowledge gaps, team disruptions, recruiting expenses, background checks, staff time and resources, onboarding, and training new hires. To find out the precise turnover costs for your company, use a cost of employee turnover calculator.

“Gallup estimates that the replacement of leaders and managers costs around 200% of their salary, the replacement of professionals in technical roles is 80% of their salary, and frontline employees 40% of their salary.” Applauz states that “the costs of replacing an individual worker can range from half to four times the employee’s annual salary.” It is estimated that 60% of the costs are soft costs, and 40% are hard costs.

Turnover Rates

According to the U.S. Mercer Turnover Survey published in August 2025, “The average voluntary turnover rate in the US from 2024 to 2025 is 13.0%, excluding retirees, volunteers, and contractors.” Turnover rates vary by industry and department. The retail and wholesale industry has the highest turnover rate (26.7%), while the insurance industry has the lowest turnover rate (8.2%). They found that turnover is the lowest with higher-level positions (executives, 5.2%) and the highest with para-professional blue-collar workers (12.5%).

How To Calculate Employee Turnover Rate

Employee turnover rate is typically calculated annually, but it can be done monthly or quarterly. It may be calculated for the entire company and/or in subcategories based on role, department, years of service, or location. There are multiple formulas to calculate it, and no agreed-upon right way to do it.

AIHR recommends dividing the number of terminations during a period by the number of employees at the beginning of the period and then multiplying by 100 to yield a turnover percent. For example, if you had 200 employees at the start of the year and 10 left during the year, your turnover rate would be 5%.

By comparing your turnover rate to industry averages, you can identify whether turnover is a major area of concern for your company. HubEngage defines a healthy turnover rate as ranging from 10% to 15%, but explains that it depends on the specifics of your workforce and industry.

Categories of Employee Turnover

Employee turnover can be classified into the following six categories. In order to decrease employee turnover, focus on voluntary turnover.

• Voluntary turnover: This category is for employees who choose to leave your organization by resigning. Boosting employee retention requires strategies to address the reasons for resignations.
• Retirement: Employers expect retirements to happen as employees age. They can conduct succession planning for a smoother transition. Offering phased retirement options helps reduce the impact of this type of turnover.
• Internal transfer: In a healthy company culture that prioritizes growth and internal mobility, internal transfers and promotions fall into a positive category that does not impact your turnover rate.
• Involuntary turnover: When an employer ends the employment relationship by laying off or terminating an employee, it is called involuntary turnover.
• Functional turnover: When the departure of an employee is viewed as a positive outcome for the company, then it is called functional turnover. An example would be when a low-performing employee exits the company.
• Dysfunctional turnover: If a turnover negatively impacts the company due to the loss of a valuable, highly productive employee, it is labeled dysfunctional turnover.

Common Causes of Employee Turnover

Gallup found that the top reasons people leave their jobs can be classified into two categories: Engagement and Culture (37%) and Well-being and Work-Life Balance (31%). Other common themes for leaving include pay and benefits and leadership. Furthermore, they identified the top four attributes that attract U.S. employees to new jobs: greater work-life balance and better personal well-being, significant increases in income or benefits package, greater stability and job security, and the ability to do what I do best.

Ineffective hiring practices increase employee turnover due to poor role fits, misaligned expectations, and cultural mismatches that lead to disengagement and dissatisfaction. Recruiting software helps employers to streamline the hiring process, identify top candidates, and make smart hiring decisions.

Employee disengagement occurs when employees feel undervalued, unsupported, or disconnected from their work. When employees feel disengaged, they are more likely to seek opportunities elsewhere, which leads to employers experiencing higher turnover and increased replacement costs.

The Work Institute explains seven common causes of high employee turnover. Their list includes lack of growth and development, ineffective managers and leaders, compensation and benefits misunderstandings, poor work-life balance, lack of recognition and appreciation, low employee engagement, and an incomplete onboarding process.

Tips To Reduce Employee Turnover

Employers can use many strategies and tips to increase employee retention. Taking steps to prevent employee turnover should start before the first day of work for new hires and be incorporated throughout every stage of the employee life cycle.

While 42% of employee turnover is preventable, it is frequently overlooked. More than a third of employees who depart voluntarily do not talk to anyone before they decide to resign. This shows the importance of managers engaging in ongoing, meaningful conversations with employees. This proactive dialogue enables managers to intervene at the first sign of a problem, well before employees make the decision to leave.

Start During Onboarding

Onboarding is the comprehensive process used to integrate new employees into a company. Onboarding new employees consists of eight steps that should be tailored to your organization and conducted over six months to one year.

The biggest risk for turnover is newer employees. Paycor reports, “Employees who have been with a company for two years or less are 38% more likely to quit in the next 12 months.”

Given that 20% of employees quit within the first 45 days, employers need to focus on a smooth start for new hires. Onboarding software helps streamline and automate the entire process, from preboarding to training.

Offer a Competitive Total Compensation Package

In order to attract and retain top talent, employers need to offer a competitive total compensation package, which includes direct compensation (base salary, bonuses, and commissions) plus indirect compensation from benefits and other perks. Many elements of a total compensation package impact employee wellness, including flexible hours, gym memberships, childcare assistance, employee assistance programs, paid time off, and insurance.

When determining employee pay, employers should research average pay and use salary benchmarking tools to ensure fair and competitive pay. With pay transparency laws in many states, employers often need to disclose their pay ranges in job postings. According to CNBC, “14% of business leaders say employees have left because they saw job postings with higher pay elsewhere, and 11% have seen a job posting within the organization and realized they were being paid less for a similar job.”

Offering a competitive PTO policy serves as an effective strategy to attract top talent, boost employee wellness, promote a work-life balance, and combat employee burnout and turnover. An essential part of your PTO policy should be specific strategies to encourage employees to use their PTO, as employees often face many barriers to taking time off.

Build a Positive Company Culture

Building your company culture starts from the top down with leaders modeling desired behaviors. Affirming and reaffirming a positive company culture involves intentional actions and an ongoing, evolving process. A healthy company culture boosts employee retention, while a toxic company culture results in high turnover.

In a positive company culture, internal communication is open and transparent. Employees feel respected, supported, valued, included, and proud. A healthy company culture fosters employee wellness, employee engagement, psychological safety, and diversity, equity, and inclusion (DEI).

Implement a Recognition and Reward System

Nectar reports that “71% of employees would be less likely to leave their organization if they were recognized more frequently.” Recognition and rewards help employees feel valued and connected, yet research shows that only 30% of employees receive regular recognition.

By using employee engagement software, employers can easily implement a recognition and reward system as well as engagement strategies. Employees enjoy receiving and showing gratitude and praise. Public shoutouts from peers and managers help boost morale. Employers can use software with comprehensive direct rewards where employees earn and redeem points for custom rewards, gift cards, experiences, merchandise, or charitable donations.

Utilize Performance Management Strategies

Research shows that 94% of employees say they would stay at the company longer if their company invests in professional development. Implementing a performance management system will help decrease employee turnover. Employers can boost employee growth, professional development, engagement, and retention by utilizing performance management software that unifies goals, reviews, and feedback in a single automated system.

Traditional annual performance reviews are biased with limited, untimely insights from only one source. Harvard Business School suggests it may be time to replace outdated traditional annual performance reviews with a tool that supports regular, meaningful conversations and career growth.

“When people feel stuck in an organization and don’t know how to get to where they want to go, that’s a recipe for losing people.” – Katherine Coffman, Harvard Business School Professor

Many employers now use 360-degree feedback tools for ongoing feedback, a transparent review process, and professional development.  Employers gain a well-rounded view of an employee by gathering feedback from multiple sources, including self-assessments, peers, direct reports, and supervisors. Managers boost employee retention by holding regular one-on-one meetings to provide continuous feedback, set and track goals, identify clear career paths, and support learning and development.

Provide Managers with Support and Training

LinkedIn’s Workforce Confidence survey found that “Seven in 10 U.S. workers say they would leave a job if they had a bad manager.” Younger employees are more likely to quit because of a bad boss than other generations.

WebMD research shows that managers (53%) experience burnout at a higher rate than employees (33%). Furthermore, only three in 10 managers are engaged in their jobs, and managers are more likely to consider quitting their jobs. Managers have the extra stress of trying to balance the needs of their team with the needs of senior leadership.

How do you develop good managers and prevent bad managers from triggering employee turnover? Managers need ongoing support, self-care practices, one-on-one meeting tools, training, and soft skills as they struggle to manage their own stress and to lead with empathy.

New managers require extra support and training before being thrust into this challenging role. While managers support career growth and wellness for their direct reports, the company may overlook their own career growth and well-being. Managers can be trained to recognize the signs of burnout in both employees and themselves.

Solicit Employee Feedback 

Why are employees leaving your company? Employee surveys and exit interviews will provide valuable information to answer this pressing question. Employers can conduct a variety of employee surveys to obtain employee feedback that can be used to develop retention strategies. With effective employee retention survey questions, you can discover what employees are experiencing and use their perceptions to shape your retention efforts.

Managers can conduct stay interviews, also known as retention interviews. Stay interviews are structured conversations to proactively understand why employees stay and why they may leave. The goal is to build trust and find out what employees like and dislike about their jobs. Great Place To Work provides tips and suggested questions for effective stay interviews.

Exit interviews are part of the offboarding process, after an employee has made the decision to leave a company. While it is too late to prevent employees from leaving, you can gain valuable insights about why they are leaving to help prevent additional employees from departing in the future.

Act on Survey Results and Data

Based on data and feedback from employees, employers can implement targeted retention strategies. The most important part of a survey is what you do with the data. Employees feel valued and more engaged when they know how employers are using their feedback and when they see meaningful changes. Take a deep dive into specific segments of your workforce using AI tools and advanced analytics to identify those at a greater risk for turnover.

Target Hard-To-Fill Roles

When employees leave a role that is hard to fill, it is more costly to replace them. By identifying these hard-to-fill roles and implementing custom strategies, you can decrease this costly turnover risk. According to Mercer, it is hardest to fill and retain talent in the following industries: healthcare, logistics, transportation equipment, and non-financial services. Burnout and workforce shortages significantly impact healthcare workers. Regardless of an employee’s role, department, or industry, active listening and making meaningful changes are fundamental for decreasing employee turnover.