Employee turnover rate is the percentage of employees who leave your business over a certain period of time, whether due to resignation, termination, or retirement. It’s a key metric for understanding workforce stability, hiring efficiency, and employee satisfaction.
For small business owners, turnover rate is more than just a number—it’s a sign of how well your team is functioning and whether your work environment supports long-term growth. A high turnover rate can disrupt operations, increase hiring costs, and affect team morale. A low turnover rate often points to a healthy, engaged workforce.
How To Calculate Employee Turnover Rate
The basic formula for turnover rate is:
(Number of employees who left during a period ÷ Average number of employees during the period) × 100
For example:
- You had 4 employees leave in a quarter
- Your average number of employees during that quarter was 20
Turnover rate = (4 ÷ 20) × 100 = 20%
You can calculate turnover monthly, quarterly, or annually depending on your business size and hiring activity.
Types of Employee Turnover
Understanding what types of employee turnover you’re dealing with can help you take the right action:
- Voluntary turnover: Employees choose to leave (resignations, job changes, personal reasons)
- Involuntary turnover: The business initiates the departure (layoffs, terminations, performance issues)
- Internal turnover: Employees leave one role for another within your company (e.g., promotions or transfers)
- Regrettable turnover: High-performing or valuable employees leave
- Non-regrettable turnover: Low-performing or seasonal employees leave with minimal impact
Why Turnover Rate Matters for Small Businesses
Turnover has a direct impact on small businesses, often more than it does for large companies. Here’s why it matters:
- Higher hiring costs: Advertising, interviewing, and onboarding new employees takes time and money
- Lost productivity: When someone leaves, the rest of the team often takes on extra work
- Inconsistent customer service: Frequent staff changes can affect customer experience and loyalty
- Lower morale: Teams may feel unstable if coworkers are constantly leaving
- Reputation risk: High turnover may signal to candidates that your business isn’t a great place to work
Monitoring turnover rate helps you make strategic decisions about culture, leadership, and staffing.
What’s a Good Turnover Rate?
Turnover benchmarks vary by industry, but here are some general guidelines:
- Hospitality and retail: 60% to 100% annually is common
- Restaurants and food service: Often over 70%
- Professional services or office jobs: 10% to 20% is more typical
How To Reduce Employee Turnover
Reducing turnover isn’t about gimmicks—it’s about creating a workplace where people want to stay. Here are strategies small businesses can use:
- Improve onboarding: Make sure new hires feel welcomed and prepared from day one
- Set clear expectations: Define roles, responsibilities, and paths for growth
- Offer schedule flexibility: Help employees balance work and life, especially in hourly roles
- Provide regular feedback: Show employees you care about their progress and development
- Recognize great work: Celebrate wins, even small ones
- Create a positive work environment: Foster respect, fairness, and communication
- Pay competitively: Even small pay bumps or bonuses can help retain your best people
With hiring & onboarding tools, small businesses can track team performance, simplify hiring and onboarding, and build systems that support long-term employee retention.
Using Turnover Rate To Improve Your Business
Tracking turnover rate gives you a measurable way to evaluate:
- Hiring effectiveness: Are you finding the right people for your business?
- Manager performance: Do certain teams or locations experience more turnover?
- Workplace culture: Are people leaving because of leadership, stress, or burnout?
- Operational planning: Are you staffing properly for peak seasons and minimizing burnout?
How Homebase Helps Reduce Employee Turnover
Homebase helps small business owners simplify hiring, scheduling, onboarding, and communication—all of which play a critical role in improving employee retention.
With Homebase, you can:
- Post jobs and manage applicants in one place
- Digitally onboard new hires with required documents
- Set clear expectations with roles, tasks, and shift notes
- Schedule fairly and flexibly
- Communicate with your team in real time
- Recognize top performers and track hours worked
Sign up for Homebase today to create a better employee experience that reduces turnover and supports long-term business growth.