Losing a team member might not feel like a crisis at first – but if you’re running a small or medium-sized business, it can hit harder than you think. There’s the immediate scramble to cover their work, the time spent hiring someone new, and the ripple effect on morale. And if it keeps happening? You’re looking at a serious dent in both your budget and your culture.
Employee turnover isn’t just a HR stat. It’s something that can shape the future of your business. And with SMEs more vulnerable to staffing changes than bigger firms, it’s worth getting under the skin of what’s going on.
So, what’s the actual definition of staff turnover?
At its simplest, employee turnover is the rate at which people leave your company and need to be replaced. It includes both voluntary exits (like resignations or retirements) and involuntary ones (think redundancies or dismissals). In most UK businesses, it’s measured annually.
You’ll often hear the terms “staff turnover” and “staff retention” used interchangeably in the UK – and while they are related, they tell different stories. Turnover tells you who’s leaving; staff retention tells you who’s staying. Both matter, but they reveal different things.
How do you work out the employee turnover rate?
It’s not as tricky as it sounds. You take the number of employees who left during a specific time period (usually a year), divide that by the average number of employees during the same period, and multiply by 100.
So, if you had 50 employees on average and 10 left, your employee turnover rate is 20%.
It’s a useful metric, but only when you’ve got something to compare it to. For example, smaller UK businesses see an average turnover rate of employees around 18.2%, while in larger companies (1,000+ staff) it drops to about 13.6%. Some sectors, like hospitality and retail, have far higher churn. So don’t panic if your number looks high; context is everything.
What does turnover actually cost?
This is where it starts to sting. Replacing someone isn’t just about the job ad or interview time; it’s the onboarding, the training, the loss of momentum while you get them up to speed. For SMEs, where every team member plays a key role, that disruption is magnified.
Depending on the role, the cost of replacing a single employee in the UK can range from £12,000 to over £30,000. That figure covers everything from advertising and recruitment fees to the time spent onboarding and training the new hire. Businesses also often need to bring in temporary cover or ask existing staff to work overtime to fill the gap, which adds more cost and stress. Lost productivity is another factor, especially during the new starter’s learning curve…and mistakes are more likely while they’re still getting up to speed. And of course, there’s the added pressure it puts on the rest of the team, which can lead to dips in morale and even more departures if it’s not managed carefully.
And that’s before you get into the less measurable stuff, like losing someone who really understood your clients, or whose attitude held the team together. A high turnover of employees doesn’t just cost money; it chips away at your culture too.
Why do people leave?
Sometimes it’s obvious. A better salary, a shorter commute, a complete career change. But other times, it’s more subtle. Poor management, burnout, feeling undervalued, or just not seeing a path forward.
What fascinates me is how often people decide to leave months before they actually do. The signs are there, you just have to be tuned in. A sudden drop in engagement, reluctance to commit to future projects, more sick days, or someone who used to be chatty going quiet. None of these guarantee a resignation letter is coming. But together, they can hint at dissatisfaction bubbling under the surface.
So how can you keep hold of your team?
You don’t need a ping-pong table or a flashy benefits package. In my experience, some of the best employee retention strategies are the simplest, and the cheapest. Start by checking in with your team early, not just when someone hands in their notice. “Stay interviews” can be a great way to find out what’s working, what’s not, and what might tempt someone to leave.
It’s also worth investing in your managers. A good manager can make someone stay and thrive; a bad one will almost certainly drive them away. Management training doesn’t have to be expensive, just making time to develop people skills, communication, and empathy can make a big difference.
Flexibility is another win. Whether it’s remote work, flexible hours, or compressed working weeks, giving people some control over how they work shows trust. And that trust often gets repaid with loyalty.
Recognition matters too. It doesn’t always have to be a bonus (though let’s be honest, those are appreciated). Public thanks, shoutouts in meetings, opportunities to take on something new; these all show people that their work is seen and valued.
And then there’s culture. In any workplace, but especially a smaller one, people want to feel part of something. A respectful, inclusive, open environment where people are heard and supported will always beat a fancy office with a toxic vibe.
If budgets are tight (and let’s be honest, they usually are), non-financial rewards like extra holiday, volunteering days, or the chance to work on a special project can go a long way in making people feel valued.
A quick note on costs vs revenue
One thing that often gets overlooked is how to work out employee costs as a percentage of turnover (as in revenue, not staff turnover). It’s a handy way to see how much of your income goes on staffing.
Just divide your total employee costs (wages, National Insurance, pensions etc.) by your total turnover (revenue) and multiply by 100. For a small business, this can help you assess whether you’re over or under-investing in your team compared to industry benchmarks.
The bigger picture
Not all turnover is bad. Sometimes, people move on and that’s okay. But if you’re regularly losing good people, or if every departure leaves a gaping hole, it’s worth taking a closer look.
Interestingly, the next generation of workers (students and recent graduates) are actively looking for roles where they can grow, feel trusted, and make a difference. If you’re looking to hire a student who’s eager to contribute and develop with your business, platforms like Unibeez can be a great place to start.
Because ultimately, retaining staff isn’t just about keeping people in seats. It’s about creating the kind of workplace people don’t want to leave. And when you get that right, everything else, from customer experience to business growth, starts to feel a bit easier.
