What Is a Good Turnover Rate? Industry Benchmarks
A good employee turnover rate is 10% or below annually. See benchmarks by industry and company size, plus the calculation formula and strategies to reduce turnover.
What Is a Good Turnover Rate?
Industry benchmarks, how to calculate your rate, and what small businesses can do when turnover runs higher than average.
Benchmarks and Context
If you are running a small business and wondering whether your turnover is normal, here is the quick benchmark: a good employee turnover rate is 10% or below annually. But that single number hides enormous variation by industry, company size, and whether you are measuring voluntary or total turnover.
The challenge for small businesses is that you are likely running higher than that 10% target simply due to structural factors. Companies with fewer than 50 employees face turnover rates averaging 51.5%, compared to 44.4% at larger enterprises. Before you panic about your numbers, you need context about what drives turnover and what you can realistically control.
This guide breaks down turnover benchmarks by industry and company size, explains exactly how to calculate your rate, and focuses on the specific factors that small businesses can address to improve retention.
How to Calculate Your Turnover Rate
Before you can know if your rate is good or bad, you need to calculate it accurately. Many businesses get this wrong by using the wrong denominator or mixing up what counts as turnover.
A few important notes on what to include. Count all permanent employee departures: resignations, terminations, layoffs, and retirements. Do not count internal transfers, promotions to different departments, or temporary leaves. For seasonal businesses, calculate turnover on an annualized basis or compare the same periods year over year. Most HR professionals recommend tracking turnover monthly or quarterly to spot trends early, rather than waiting for annual reviews.
Average Turnover Rate by Industry
Industry context matters more than any single benchmark. A 25% turnover rate would be catastrophic for an insurance company but excellent for a restaurant.
| Industry | Annual Turnover | Rating |
|---|---|---|
| Hospitality & Food Service | 60-75% | Industry norm |
| Retail & Wholesale | 25-47% | High but typical |
| Healthcare | 20-37% | Moderate-high |
| Construction | 35-41% | High |
| Professional Services | 13-15% | Average |
| Technology / Software | 12-13% | Average |
| Financial Services | 10-13% | Low-average |
| Insurance | 8-12% | Low |
| Manufacturing | 28-40% | Moderate-high |
| Government | 18% | Below average |
The hospitality and retail sectors consistently show the highest turnover because of their reliance on hourly workers, seasonal fluctuations, and lower barriers to job switching. Professional services and technology tend to run lower because knowledge workers have higher switching costs and employers invest more heavily in retention.
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See How It WorksTurnover Rate by Company Size
Company size is one of the strongest predictors of turnover, and it works against small businesses. The data consistently shows an inverse relationship: smaller companies face higher turnover rates.
| Company Size | Total Turnover | Notes |
|---|---|---|
| 1-49 employees | 51.5% | Highest turnover tier |
| 50-249 employees | 47.2% | Mid-market |
| 250-999 employees | 45.8% | Upper mid-market |
| 1,000+ employees | 44.4% | Enterprise |
Why does size matter so much? Larger companies offer more advancement opportunities, more comprehensive benefits, more specialized roles, and more redundancy when someone leaves. Small businesses compete on different advantages: closer relationships, faster decision-making, and broader responsibilities.
What About Startups?
Startups and high-growth companies often see even higher turnover as they navigate rapid scaling, role changes, and funding uncertainty. Annual turnover rates of 25% are common at startups, regardless of their retention efforts. The goal at this stage is often to keep regrettable turnover low rather than total turnover.
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See It in ActionVoluntary vs. Involuntary Turnover
Not all turnover is created equal. Breaking down your rate into voluntary and involuntary components tells you much more about your retention challenges than the total number alone.
Voluntary turnover is generally the more concerning category because it represents employees choosing to leave. High voluntary turnover signals problems with compensation, culture, management, or growth opportunities. Involuntary turnover, while costly, is often a sign that you are managing performance appropriately.
For small businesses, the voluntary vs. involuntary distinction helps focus your retention efforts. If most departures are voluntary, look at engagement, compensation relative to market, and manager relationships. If involuntary turnover is high, examine your hiring process and onboarding to ensure you are setting new hires up for success.
What Turnover Actually Costs Your Business
Turnover is expensive, and small businesses feel the cost more acutely because each departure represents a larger percentage of the team and institutional knowledge.
| Role Level | Replacement Cost | Example ($50K salary) |
|---|---|---|
| Entry-level / Frontline | 30-50% of salary | $15,000-$25,000 |
| Skilled / Professional | 75-125% of salary | $37,500-$62,500 |
| Technical / Supervisory | 100-150% of salary | $50,000-$75,000 |
| Management | ~200% of salary | $100,000 |
| Executive | Up to 213% of salary | $106,500+ |
For a 20-person company with average $50,000 salaries losing 4 employees per year, total turnover costs range from $100,000 to $400,000 annually. That figure includes recruiting costs, interviewing time, training investment, lost productivity during the vacancy and ramp-up period, and the knowledge that walks out the door with each departure. For a detailed breakdown, see our guide on the cost of employee turnover.
Hidden Costs Small Businesses Miss
The direct costs of recruiting and training are obvious. But small businesses often miss the hidden costs: remaining team members picking up extra work, customer relationships that weaken when their contact leaves, the time you personally spend interviewing instead of running the business, and the cultural impact of watching colleagues leave. When you are running a 15-person team, losing two people in the same quarter is not just expensive: it changes the entire dynamic of your company.
The Contagion Effect
Turnover breeds turnover. When employees see colleagues leaving, they start questioning their own situation. Research shows that turnover can spread through teams and organizations, with one departure increasing the probability of additional departures in the following months. This is why addressing turnover early matters more than waiting for it to stabilize on its own.
Why Small Businesses Face Higher Turnover (And What to Do About It)
Small businesses operate at a structural disadvantage when it comes to retention. Understanding why helps you focus on the factors you can actually influence.
The Structural Challenges
Career ceiling effects hit small businesses hard. An ambitious employee at a 20-person company has limited advancement options. Benefit gaps are real: competing with Fortune 500 health insurance and 401k matching is difficult on a small business budget. Management bandwidth is limited, meaning problems that would get caught early at larger companies can fester. And every departure has outsized impact because there is no bench depth to absorb the loss.
The Small Business Advantages
Small businesses also have retention advantages that larger companies cannot replicate. Close-knit culture creates genuine relationships, not corporate anonymity. Direct impact visibility lets employees see how their work matters. Greater autonomy comes naturally when there are fewer layers of bureaucracy. Leadership accessibility means employees can talk to decision-makers directly. And flexible work arrangements are often easier to implement without enterprise-level policy constraints.
Practical Steps for Small Business Retention
Focus on what you can control. Partner with a PEO to access Fortune 500-level benefits at scale. Implement structured onboarding because even basic structure dramatically outperforms the typical "figure it out" approach. Conduct regular Payscale or Salary.com analysis to ensure compensation is within 10% of market. Treat every exit interview as critical data since small samples mean each departure contains valuable information. And offer flexible work arrangements, which are easier to implement at small companies and reduce turnover by 10-25%.
How to Reduce Turnover at Your Small Business
The single most cost-effective way to reduce turnover is not raising salaries. It is fixing your first 90 days. The data on this is overwhelming.
Organizations with strong onboarding improve new hire retention by 82% and productivity by over 70%. Yet only 12% of employees say their company does a great job onboarding, and 36% of employers lack any structured onboarding process at all. This gap is where most small business turnover starts.
The First 90 Days Are Everything
Twenty percent of all employee turnover happens within the first 45 days. Nearly a third of new hires quit within 90 days. And 86% of new hires decide how long they will stay during their first six months. If you lose people early, your onboarding is the problem. If they stay past 90 days and then leave, look at management, compensation, or growth opportunities.
The connection between onboarding quality and retention is not subtle. Companies with structured onboarding see 50% greater retention than those with unstructured approaches. Employees who experience great onboarding are 18 times more committed to their employer. These are not marginal improvements. They are transformational.
High-Impact Retention Strategies
Notice that compensation ranks lower than most people expect. Only 16% of departing employees cite pay as their primary reason for leaving. Engagement, culture, and manager relationships account for 37% of departures. Fixing those costs less than across-the-board raises and has larger impact.
The Manager Factor
Research consistently shows that 57% of employees who quit do so because of their manager, not the company. For small businesses, this is both a risk and an opportunity. You likely have fewer managers, which means each one has outsized impact on retention. Investing in manager development, teaching them to have career conversations, give feedback effectively, and recognize good work, can dramatically reduce turnover without touching compensation.
Exit Interviews Reveal the Real Problems
Every departing employee is a source of valuable data. Ask exit interview questions that uncover systemic issues rather than just individual circumstances. In a small business, each departure is a larger percentage of your sample, so the information matters more. Look for patterns across multiple exits: if three people in a row mention the same manager or the same unclear expectations, you have found an actionable problem.
At FirstHR, we built our platform specifically to help small businesses create structured onboarding experiences that reduce first-90-day turnover. When your employees feel prepared, supported, and clear on expectations from day one, they stay longer.
- A good turnover rate is 10% or below annually, but always benchmark against your specific industry, not the national average of 18%.
- Small businesses with under 50 employees average 51.5% turnover. A rate of 30-40% at this size is actually better than average for your tier.
- 42% of voluntary turnover is preventable. Focus on management quality, clear expectations, and structured onboarding before raising salaries.
- 20% of all turnover happens in the first 45 days. Fixing your first 90-day onboarding process is the highest-ROI retention investment.
- Track voluntary and involuntary turnover separately. High voluntary turnover signals engagement problems. High involuntary suggests hiring or onboarding gaps.
Frequently Asked Questions
What is a good employee turnover rate?
A good employee turnover rate is generally 10% or below annually. This varies significantly by industry: under 50% is good for hospitality while under 10% is the target for professional services. Always compare your rate to industry-specific benchmarks rather than the national average.
Is 20% turnover rate high?
It depends on your industry. A 20% turnover rate would be excellent for hospitality or retail (where norms are 47-75%), average for healthcare or manufacturing, and concerning for technology, financial services, or insurance where rates typically run 8-13%.
What is the average turnover rate in the US?
The current US average is approximately 18% total turnover annually, with voluntary turnover at 13-13.5%. However, this average masks enormous variation by industry, company size, and region. Small businesses (1-49 employees) face 51.5% total turnover on average.
How do I calculate my turnover rate?
Turnover Rate = (Number of Separations ÷ Average Number of Employees) × 100. Calculate average employees by adding headcount at start and end of period, then dividing by two. Include resignations, terminations, layoffs, and retirements. Exclude internal transfers and temporary leaves.
What is the difference between turnover and attrition?
Turnover measures all departures including those you backfill. Attrition specifically measures departures you do not replace, resulting in headcount reduction. A company with 15% turnover but 10% attrition is replacing some but not all departing employees.
What is the difference between voluntary and involuntary turnover?
Voluntary turnover is employee-initiated (resignations, retirements, career moves). Involuntary turnover is employer-initiated (terminations, layoffs, performance issues). Currently, voluntary turnover runs approximately 13% annually while involuntary runs about 6%.
What causes high employee turnover?
The top causes are toxic work environment (32%), poor company leadership (30%), dissatisfaction with direct manager (28%), lack of career development (a top reason for 13 consecutive years), and poor work-life balance (21%). Notably, only 16% cite compensation as the primary reason for leaving.
How much does employee turnover cost?
Replacement costs range from 30-50% of salary for entry-level roles to 200%+ for executives. SHRM benchmarks the general range at 6-9 months of salary. For a $50,000 employee, expect $25,000 to $100,000 in total replacement costs including recruiting, training, and lost productivity.
Why do small businesses have higher turnover?
Small businesses face structural challenges: limited career advancement paths, less competitive benefits packages, less management bandwidth to address issues early, and higher proportional impact from each departure. The average turnover rate for businesses with 1-49 employees is 51.5%, compared to 44.4% for larger enterprises.
How does onboarding affect turnover?
Dramatically. Organizations with strong onboarding see 82% higher retention. Yet 20% of turnover happens in the first 45 days, and 86% of new hires decide to stay or go within their first 6 months. Only 12% of companies do onboarding well. Improving your first 90 days is the highest-ROI turnover reduction strategy.
Is some turnover actually healthy?
Yes. Extremely low turnover (under 1%) can indicate stagnation where poor performers stay too long and fresh perspectives stop entering. Functional turnover, when underperformers leave, benefits the organization. The goal is controlled, manageable turnover rather than zero turnover.
What is a good retention rate?
Retention rate is the inverse of turnover. If turnover is 15%, retention is 85%. A good retention rate is 90% or above annually (corresponding to 10% or below turnover). Track retention alongside turnover to see the positive side of the equation.
Context Beats Benchmarks: What to Actually Track
A good turnover rate is 10% or below annually, but that benchmark only makes sense in context. Compare yourself to your industry, adjust for company size, and separate voluntary from involuntary turnover to get a clear picture of where you stand.
For small businesses facing higher-than-average turnover, the highest-impact investment is not higher salaries. It is structured onboarding. Organizations that do onboarding well see 82% better retention, yet most small businesses have no formal process at all. Fixing your first 90 days is the most cost-effective path to better turnover numbers.
Remember that some turnover is healthy. The goal is not zero turnover but controlled, manageable turnover where departures are mostly non-regrettable and timing is predictable. Track your rate quarterly, benchmark against your industry, and focus improvement efforts on the factors you can actually control: onboarding quality, manager effectiveness, clear expectations, and regular check-ins with your team.
When you are ready to build an onboarding process that actually reduces turnover, FirstHR can help. We built our platform specifically for small businesses that want enterprise-quality onboarding without an HR department.