4 Easy Steps to Calculate Employee Turnover

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4 Easy Steps to Calculate Employee Turnover

Posted on January 22, 2019 by Danny Leffel

A company’s employee turnover rate is the number of employees who leave a company within a specific time frame. Since every company has turnover, we’ll explain below why knowing your employee turnover rate is important and how to calculate it.

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Why Does Your Employee Turnover Rate Matter?

Your company should already be taking some initiatives to cut down on employee turnover before it becomes an issue, such as regularly surveying employees to ask what improvements they would recommend. However, even the best tactics won’t prevent everyone from leaving. The only question is whether you will be in a position to monitor and learn from your employee turnover.

Knowing your employee turnover is beneficial in many ways. For example, if your company has high turnover during a specific time each year, it may be a good idea to hire seasonal help. You can also start to narrow down the causes of a high turnover rate by holding exit interviews and asking employees why they’ve chosen to leave the company. Keep in mind that not all employees may feel comfortable answering honestly, but you should be able to identify a pattern after several interviews.

Retention Plans

Once you’ve isolated the turnover causes, you’ll be better equipped to implement a retention plan, a set of guidelines that a company follows to engage employees long-term and reduce turnover.

One common reason employees cite for leaving a company is lack of communication. If your team misses announcements or isn’t all on the same page, it can really affect morale, which in turn leads to employees searching for new jobs. If you think poor communication might be an issue in your company, your retention plan should include an online app like Crew, which makes it easy for supervisors to send important messages directly to their employees’ smartphones.

Employee Turnover Costs

From a financial standpoint, it’s important to know your employee turnover rate because there are steep costs associated with replacing employees. Finding applicants, conducting interviews, and ordering background checks are just a few ways expenses can add up — and the costs don’t stop once you’ve hired someone. The time it takes for new employees to be trained and become proficient at their jobs will also affect your bottom line. Not to mention, you’ll have expenses associated with separating from an employee, as well, including a loss of productivity from employees covering their shifts.

How to Calculate Employee Turnover Rate

Now that you know the importance of knowing your company’s employee turnover rate, below are four easy steps to calculate it.

1. Select a Period of Time

Do you want to figure out your turnover rate for the entire year, or would you like to narrow it down to a set month? You can choose any length of time, but annual or monthly are common time frames for most businesses. Quarterly is less common, but it’s useful to know, especially if you hire a lot of seasonal workers or have certain busy times that may cause more stress on your employees.

2. Determine the Number of Employees During the Specified Time

Next, you’ll need to figure out how many employees your company had during your chosen time period. Since the number probably fluctuated throughout that time frame, you can use an average. This can be calculated by adding the number of employees your company had at the beginning of the time frame with the number of employees it had at the end of the time frame and dividing that number by two.

3. Count the Number of Separations During the Specified Time

For your chosen time frame, figure out how many employees separated from your company, whether voluntarily or involuntarily. Promotions or transfers within the company are not usually included in the number of separations, but retirements are. If you have a human resources department, the information should be readily available in their employee management system.

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4. Calculate the Employee Turnover Rate

Now that you’ve gathered all of the information you need, simply do the math. Take the number of separations, divide it by the average number of employees, and then multiply by 100. For example, if you have 20 separations and 200 employees during a specified time, the equation would be 20/200 x 100, which equals 10. That means that 10 percent of your workforce left during a certain period of time.

You can use this information to narrow down your rate to specific groups of employees, such as those who have been with the company less than a year. If there were 20 separations, and 12 of them were new employees, your equation would be 12/20 x 100, which equals 60, meaning that 60 percent of your overall turnover rate for a specific time were new employees.

Remember that employee turnover rates will vary depending on the industry, so only use similar companies as a frame of reference when comparing yours. If the percentages are still high after the comparison, your company may have a larger retention issue.

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