What Is Labor Turnover?

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Labor turnover refers to how many employees in an organization leave their position in a designated time period, usually over the period of a year. Labor turnover is measured in a percentage of total workers and is a popular metric to evaluate the stability of a company's workforce.

Labor turnover is important both internally and externally. A high turnover rate may indicate poor working conditions, which reflects poorly on an organization. Internally, having to frequently hire new replacements can be expensive due to training costs.

The turnover rate differs between organizations for many reasons, and also significantly differs based on the industry they operate in. The industry with the highest turnover rate is the leisure and hospitality industry, which has a turnover of almost double the average.

There are many individual types of turnover, some good and some negative. A positive type of turnover can be an internal promotion within an organization. However, internal position changes can also be negative, like when a demotion occurs.

Another common aspect of turnover to analyze is voluntary turnover. If employees actively leave the company for a different job, it reflects on the working conditions. However, if they are let go or fired due to downsizing, it may reflect the company's economic struggles.