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.
With Homebase, small businesses can track team performance, simplify hiring and onboarding, and build systems that support long-term employee retention.
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 these types 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
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
Explore Homebase Hiring and Onboarding to create a better employee experience that reduces turnover and supports long-term business growth.