Voluntary Turnover

What voluntary turnover is

Voluntary turnover (الدوران الطوعي) is the departure of an employee from the organisation at their own decision. It is measured as the number of people who left by their own decision during a period, divided by the average number of employees over the same period. The definition therefore contains a decision that has to be classified and a division that has to be calculated. The classification is the difficult part, because one departure can look from outside like the employee’s decision when it is in fact the result of circumstances the organisation created. The division is familiar, and the choice of denominator determines how it comes out.

The term covers only what the employee began. People whose employment was ended by the organisation have another classification and another figure, and they enter neither the numerator of this rate nor its denominator as leavers. A figure is always written with its period, its denominator and its classification rule, because a figure without these cannot be compared with another.

Who counts as having left by their own decision

An explicit resignation is the clear case, and around it lie borderline cases that need a written rule applied to everyone. If a contract with a set end date ends and is not renewed, the test is who decided against renewal: an employee who refused an offer counts as having left by their own decision, and if the organisation offered no renewal, the departure is on its side. If an employee resigns after being told that termination of their service is coming, the closest classification is a departure by the organisation’s decision, even though it carries a letter of resignation.

Where the relationship ends by agreement of both parties, which is covered under mutual termination, the organisation may place it in a separate third category, or attribute it to the party who first raised the subject. What matters is that the rule does not change from one case to the next. Retirement, death and inability to work have categories of their own, so they are counted neither as voluntary nor as involuntary turnover. This classification is administrative, for the purpose of measurement. It makes no finding on how the relationship ended or on the rights that follow from it.

How voluntary turnover is calculated

Voluntary turnover rate = number who left by their own decision in the period ÷ average number of employees in the period × 100. Take a hypothetical organisation with 250 employees at the start of the year and 270 at the end. During the year 39 employees left by their own decision, and the organisation ended the service of 6 others. The average number of employees is (250 + 270) ÷ 2 = 260, and the rate is 39 ÷ 260 = 15.0%. The six do not enter the numerator.

The denominator has an effect that cannot be ignored. If the same number were divided by the headcount at the start of the year, the rate would be 39 ÷ 250 = 15.6%, and divided by the headcount at the end it would be 39 ÷ 270 = 14.4%. A growing organisation that calculates on the start of the year therefore shows higher turnover than if it calculated on the end of the year, although the departures are the same. We suggest the average, and where the headcount varies widely between months, the average of the figures at the end of each month. The denominator is written beside the figure.

The calculation needs one register in which every departure is entered with its date, the length of service of the person and their role, and a field in which the category of departure is recorded when the exit procedures are completed, not months later. If classification is left until the end of the year, the details that determined it are lost: who raised the subject, what was said in the interview, and whether the employee was offered an alternative. The person responsible for the register reviews the category once before approving it, and it is amended afterwards only for a written reason.

Why the overall figure is not enough

The overall figure combines people whose departure the organisation regrets with people whose departure leaves no noticeable effect, and it makes them look alike. The first step in taking it apart is to classify leavers by whether the organisation regrets their departure or not. The criteria for regret are written before the departure happens, not after it: for example, the employee holds a critical role, sits in the top performance rating, or has a skill that is hard to replace in the organisation. If the criteria are written after a person has gone, they tend to justify what happened.

In the earlier example, suppose 12 of the 39 meet the written criteria and 27 do not. The regretted departure rate is 12 ÷ 260 = 4.6%, the rate for departures not regretted is 27 ÷ 260 = 10.4%, and together they make 15.0% as before. An organisation that looks at 15% alone does not know that the share of it that hurts is less than a third (12 ÷ 39 = 30.8%). That does not mean the remainder deserves no attention, because some of those whose departure the organisation does not regret leave for an administrative reason that can be corrected.

Where departures are concentrated

The second breakdown is by length of service. Suppose the 39 divided as follows: 14 left before completing a year, 15 between one and 3 years, and 10 after more than 3 years. The average number of employees in these groups was 70, 110 and 80, which together make 260 as in the example. The rates of departure in the groups are 14 ÷ 70 = 20.0%, 15 ÷ 110 = 13.6% and 10 ÷ 80 = 12.5%. In this example the departure rate among those who had not completed the first year is higher than among those who came after them, which the overall figure does not show.

This group is examined together with time to productivity, because an employee who leaves in their first months has not reached the usual performance of the role, so the organisation has paid the cost of hiring and settling them in without receiving what corresponds to it. We do not attribute this pattern to other organisations. The distribution in the example is arithmetical, not real, and each organisation checks the distribution of its own departures.

What a departure costs

The cost does not appear in one register. It is spread across cost per hire, the manager’s time in screening and interviews, the period the role stands vacant, and the period the replacement takes to reach usual performance. Estimating the cost starts from an assumption the organisation sets from its own hiring, so we do not propose a general reference figure.

Suppose, for instance, that each departure costs the equivalent of 4 months of the position’s pay, an assumption for the sake of the calculation and not a prescribed proportion. The 39 departures are then equivalent to 39 × 4 = 156 months of pay. The pay of 260 employees over a year is 260 × 12 = 3,120 months. The cost is therefore 156 ÷ 3,120 = 5.0% of the year’s pay. If the actual cost in this organisation were two months and not four, the share would be 2.5%, and if it were six, it would be 7.5%. What a decision rests on is the estimate of cost, not the turnover rate alone, because the same 15% may justify action in one organisation and not in another.

What the figure does not show

Voluntary turnover does not show that employees are dissatisfied. An employee may leave because their family moves to another city, or to study, or for an offer the organisation cannot match. What the figure counts is the number of leavers, not what they said. Other tools find the reasons. The exit interview collects the leaver’s account at the moment of departure. Attrition root cause analysis traces cases back to a factor the organisation can change. A stay interview asks someone who has not yet left what keeps them.

Using the figure as a target for which a manager is held to account carries a risk. A manager held to account for lowering it may refrain from ending the assignment of someone who does not suit the role, or may push an employee to leave in a form that is classified as not voluntary. The figure then falls and the quality of the team declines. Voluntary turnover is an indicator to be examined, not a grade to be awarded.

How voluntary turnover differs from neighbouring concepts

The indicators in this area rest on different questions. Retention rate measures how many of a known group remain at the start date, so its denominator is the starting headcount and not the average, and it excludes anyone who joined afterwards. The stability index measures how many of the current employees have reached an announced length of service, so it counts those who stayed and not those who left. Voluntary turnover counts those who left by their own decision, and its denominator is the average number of employees.

Attrition is another concept: it is the reduction in the number of people holding posts when vacancies are not filled. A voluntary departure is an entry point to it, but attrition results from the decision about replacement afterwards. An organisation that replaces every leaver does not shrink, even if voluntary turnover in it reaches 15%. The counterpart, departures by the establishment’s decision, is the focus of Involuntary Turnover.

How voluntary turnover is examined over time

A quarterly figure is not multiplied by four to become an annual one, except with caution. Suppose 12 employees left by their own decision in a quarter when the average number of employees was 260. The quarterly rate is 12 ÷ 260 = 4.6%, and multiplied by 4 it appears as 18.5%. If it later emerges, after the year ends, that 27 employees left in the remaining quarters, the year has 12 + 27 = 39 departures, which is 15.0%. The gap of 3.5 points between the multiplied reading and the actual one arises because that quarter had more departures than each of the other quarters.

For that reason a quarter is compared with the same quarter of the previous year if the organisation knows that its work has seasons, and not with the quarter before it. In a small department a single employee changes the figure sharply: in a department of 8 employees, if two leave the rate is 25%, and if a third leaves it becomes 37.5%. Counts are therefore shown beside percentages, or small departments are merged into one group.

Is there an acceptable rate of voluntary turnover?

In the sources we reviewed, we found no reference rate that we could adopt, and we do not propose a figure of our own. The number changes with the definition of voluntary, the choice of denominator, the size of the organisation, the nature of its work and the labour market in which it competes for employees. A useful comparison is the organisation against itself across periods under the same rule, and then between its departments and its groups by length of service.

If an organisation wants to begin with what can be done quickly, it writes its classification rule and applies it to last year’s departures, then calculates the overall rate and breaks it down by the written criteria and by length of service. If a concentration appears in a particular group, that group is examined first, and if none appears, the overall figure is enough for the time being. In this way voluntary turnover becomes a question about who leaves, why, and at what cost, not just a percentage presented in a report.

This is an explanation of the concept, not legal advice.