Dr. Paul Borosky, DBA, MBA
Business Plan Writer & Financial Projections
How Do You Calculate Employee Turnover, and What Does It Cost?
Counting Who Leaves Tells You That. Asking Tells You Why.
People keep leaving, even though the pay is fair. You count the departures, shrug, and hire again. Each time it costs you training, mistakes, and customers. Business consultant Dr. Paul Borosky, DBA, MBA, walks you through how to calculate turnover, what it costs, and the two conversations that tell you why it is happening.
Last Updated: 11/08/2026 · Written by Dr. Paul Borosky, DBA, MBA
The Definition
What Is Employee Turnover?
Short Answer
Employee turnover is the rate at which people leave a business compared with how many work there. It is usually measured over a year as departures divided by average headcount. Every departure has a cost in recruiting, training, lost output, and mistakes. The rate measures how fast people leave. Exit and stay interviews explain the reasons.
Turnover rate = people who left ÷ average number of employees × 100
Doctor Owl, in Plain English
“A tally of who left is a symptom. The cause lives in conversations, with the ones walking out and the ones still here.”
How This Guide Works
Need the answer fast? Read the Short Answer above and the numbered steps. Want the full picture? Follow Beatrix, a bee who makes honey and candles from Dr. Paul’s Fabled Forest Business School Series, as three helpers leave in three months. Her story shows up in a few short gold notes along the way. The math sits in one section, clearly marked.
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Meet Beatrix Again: Three Gone Since Midsummer
Some lessons stick better as a story. Dr. Paul’s Fabled Forest Business School Series teaches business through a forest full of small business owners. Doctor Owl, a dry-witted consultant who lives in the Lone Oak, helps them fix the same problems real owners face.
Today he finds Beatrix the Bee staring at a slate. Since midsummer, three helpers have left the honey house: Juniper, her best worker, a summer jar filler who did not come back, and the newer hire who replaced Juniper. Down the coast, a new company that hired five people in July has one left by September, and the one is Juniper.
Why It Matters
Why Is Employee Turnover So Expensive?
Every person who leaves takes something with them: their training, their speed, their relationships with customers, and the knowledge of how things are actually done. Replacing them costs recruiting time, training time, slower work, and mistakes while the new person learns.
Owners rarely add it up. They see each departure as a one-time event. But turnover is a pattern, and the pattern has a cause.
In the Fabled Forest
The repair shop down the lane had learned the cost the hard way: one bad hire lasted three weeks at 12 coins a week, and two jobs he touched came back and had to be redone at 5 coins each. That is 46 coins for one departure, before counting the time it took to hire again.
Measure It
How Do You Calculate Employee Turnover?
- Count departures. Everyone who left during the period, for any reason.
- Find average headcount. Employees at the start plus employees at the end, divided by two.
- Divide and multiply by 100. That is your turnover rate for the period.
- Estimate the cost of each departure. Wages during training, rework, lost sales, and your own time hiring.
- Look for patterns. Same role, same manager, same month, same reason.
In the Fabled Forest
The company down the coast hired five in July. By September, four had gone: one over a rule, one after three midnight shifts, others without a word. Nobody had written down why any of them left.
Ask Why
What Are Exit Interviews and Stay Interviews?
An exit interview asks people who are leaving why they are going. Ask calmly, listen, and do not argue. A stay interview asks your current team why they stay, what could pull them away, and what would improve the job. The second is more valuable, because you can still act on it.
Then change something people can see. Asking and doing nothing is worse than not asking.
In the Fabled Forest
Juniper told Beatrix why she had left: not the hours, not the money. She had asked for a word in April and was told after the bloom. Beatrix sat down with Moss over tea, asked three questions, and waited after each. Then she walked down the coast with Juniper’s old apron and an offer built from Juniper’s own answers. Juniper put the apron on.
The Numbers
What Does Turnover Look Like in Numbers?
Here are the two businesses side by side, plus one departure’s real cost.
| Result | |
|---|---|
| Coast company: hired in July | 5 |
| Coast company: still there in September | 1 |
| Coast company: left in two months | 4 of 5, or 80 percent |
| Honey house: helpers who left since midsummer | 3 |
| One bad hire’s cost at the repair shop | 36 in wages + 10 in rework = 46 coins |
Step 1: The rate. 4 departures ÷ average headcount of about 3 × 100 = well over 100 percent on a yearly pace.
Step 2: The cost. Multiply departures by the cost of each one: wages while training, rework, and the owner’s hiring time.
Step 3: Your version. People who left last year ÷ average employees × 100. Then multiply departures by a realistic cost per departure. That total is what turnover costs you each year.
Illustrative numbers in forest coins, from the book. Use your own headcount and costs.
Step by Step
How Do You Reduce Employee Turnover?
Four steps, starting this month.
Calculate your turnover rate.
Departures divided by average headcount, times 100, for the last year.
Put a cost on each departure.
Training wages, rework, lost sales, and your hiring time.
Ask the ones who leave.
A calm exit interview. Write the reasons down.
Ask the ones who stay, and act.
Stay interviews with your best people, then change something visible.
In the Fabled Forest
Doctor Owl’s scroll for Beatrix pointed out that numbers measure the problem, while conversations explain it.
Beatrix’s Full Story
Did Juniper Come Home?
This page gives you the short version. The book gives you the whole autumn: a slate with three names on it, five stools at a long table down the coast, a junebug who answered the question nobody else asked, a gardener who only ever asked questions, an apron three sizes too big, and a notice someone was told to throw away.
Every chapter of Human Resources for Small Businesses works the same way. One owner, one problem, one real idea you can use on Monday, plus a one-page worksheet to do it.
A Business Consultant’s View
What Would a Consultant Look For in Turnover Numbers?
Dr. Paul Borosky, DBA, MBA · Business Consultant
When Dr. Paul looks at turnover numbers, he looks for clusters. Do departures happen in the same role, under the same supervisor, in the first ninety days, or after a schedule change? A high rate spread evenly usually points to pay or the work itself. A cluster points to a specific cause that can be fixed. He also has owners estimate the cost of each departure, because seeing the total in dollars changes how seriously turnover is taken. Then he puts stay interviews on the calendar for the people the business can least afford to lose. Fixing the reason one good person might leave is far cheaper than replacing them.
FAQ
What Gets Asked Most About People Leaving?
How do you calculate employee turnover?
What does employee turnover cost a small business?
What is the difference between an exit interview and a stay interview?
Keep Going
More on Keeping Your Best People
This is foundation 17 of 20. These pages build on it. New to a term on this page? Every one is in the human resources glossary.
Written by Dr. Paul Borosky, DBA, MBA, business consultant and author with 14+ years of experience and 1,000+ clients served. Hiring, paying, or managing a team and want a second set of eyes? See business consulting and prices.
This page is for general educational purposes only. It is not legal, financial, employment, or other professional advice. Figures are illustrations. The Fabled Forest and its characters are fictional. For decisions about your own business, consult a qualified professional.