A good annual employee turnover rate for most companies falls somewhere between 10% and 20%, though what counts as “good” depends heavily on your industry. A tech company and a fast-food restaurant operate in completely different labor markets, so comparing them directly is misleading. The more useful question is how your rate stacks up against others in your sector and whether the people leaving are the ones you wanted to keep.
How Turnover Rates Vary by Industry
The Bureau of Labor Statistics tracks monthly separation rates across industries. In February 2026, the total separations rate (which includes quits, layoffs, and all other departures) looked like this on a monthly basis:
- Retail trade: 4.3% per month
- Information (tech, media, telecom): 3.9% per month
- Health care and social assistance: 2.6% per month
- Manufacturing: 2.3% per month
Annualized, those monthly figures translate roughly to 50% or higher in retail and around 27% to 30% in manufacturing and health care. That means a retail company running at 40% annual turnover might actually be outperforming its peers, while a manufacturer at the same rate would have a serious retention problem.
Industries with lower wages, seasonal demand, or a large share of part-time workers consistently see higher turnover. Sectors that require specialized training or licensing, like health care and manufacturing, tend to hold onto workers longer because both sides have more invested in the relationship.
How to Calculate Your Turnover Rate
The standard formula is simple: divide the number of employees who separated from the company during a period by the average number of employees during that same period, then multiply by 100. If you had 500 employees on average over the year and 75 left, your annual turnover rate is 15%.
A few details matter when you run this calculation. “Separated” means anyone who left the company, whether they quit, were laid off, were fired, or retired. It does not include people who transferred to a different department or went on a leave of absence. Promotions don’t count either, since those employees are still with you. If you want a monthly rate, use the same formula with that month’s numbers. To get a rough annual figure from a single month, multiply the monthly rate by 12, though this won’t account for seasonal hiring patterns.
Not All Turnover Is Bad
A 0% turnover rate sounds ideal, but it usually signals stagnation. Some departures are healthy for a company. Workforce researchers distinguish between two types: functional turnover and dysfunctional turnover.
Functional turnover happens when low performers, disengaged employees, or people who were about to be let go leave on their own. This kind of departure opens up a seat for someone better suited to the role. Most terminations fall into this category, as do resignations from employees who sense a dismissal coming.
Dysfunctional turnover is the kind that hurts. It’s when your best people walk out the door, taking institutional knowledge, client relationships, and team morale with them. To figure out which type you’re experiencing, look at the performance reviews, productivity metrics, and disciplinary records of departing employees. If managers say they would rehire most of the people who left, that’s a red flag. It means you’re losing talent you wanted to keep.
A company with 18% turnover concentrated among underperformers is in much better shape than one with 12% turnover that’s bleeding its top talent. The headline number alone doesn’t tell you enough.
The Real Cost of High Turnover
Replacing an employee is expensive. A recent industry report found the average cost of turnover has climbed to $45,236 per departing worker, up from about $36,700 the year before. That figure includes recruiting, onboarding, training, and the lost productivity during the months it takes a new hire to get up to speed.
For a 200-person company running at 25% annual turnover, that works out to roughly $2.3 million a year spent just replacing people. Even modest improvements in retention, say dropping from 25% to 20%, can save hundreds of thousands of dollars annually. The cost is even steeper for specialized or senior roles where the ramp-up period is longer and the recruiting pool is smaller.
What a Healthy Rate Looks Like in Practice
Rather than fixating on a single number, think of your turnover rate as healthy when three conditions are met. First, your rate is at or below your industry average. Second, the departures are skewing toward lower performers rather than your strongest contributors. Third, you can fill open positions fast enough that remaining employees aren’t burning out from carrying extra work.
If your rate is well below your industry benchmark, check whether you’re holding onto people who should be moving on. Sometimes low turnover masks a culture where underperformance is tolerated or where employees feel stuck but not motivated. A small amount of churn keeps the organization fresh and creates room for internal promotions.
Track your voluntary turnover rate separately from your overall rate. Voluntary departures, where the employee chose to leave, are the ones most within your control to reduce through better pay, management, and career development. Involuntary separations like layoffs and firings reflect different business decisions entirely. Blending them together can obscure problems or make things look worse than they are.