Employee turnover rate: Calculation, definition & importance

Turnover is, in essence, the act of replacing one employee with another. Employee turnover rate is a metric that tells you the percentage of staff members who left the company over a period of time. It’s typically calculated on a monthly or yearly basis, but in practice, you can use whatever frequency fits you best. When employees leave an organization because they were asked to do so, it is called involuntary turnover. Retirement and firing are two of the most common examples of involuntary turnover.

To fully understand what’s trending on your teams, dedicate resources to analyzing turnover data over time. This is the only method that inspires workplace improvements that keep employees engaged and fulfilled. Employee turnover describes what happens when existing employees leave an organization, effectively terminating the relationship.

• This means that the turnover in our example above is 5%, as five out of a hundred left the company.
• Employee turnover is costly, kills culture, and erodes customer consistency, so you want to avoid it at all costs.
• Include all full-time, part-time and direct-to-hire temporary employees on payroll.

This stresses the importance of making a clear distinction between Employees, Hires, and Terminations. These are three different groups with three different metrics. Hires are people who joined the company during the given period – and they should be treated as such as we have a separate set of metrics for them.

In addition to that, you can examine and tell what areas in your company are working well. In order to determine if your turnover rate is too high, you need to compare your results with normal or healthy turnover rates in the same industry. Later in this article, I will show you healthy numbers for different industries. Nevertheless, having a high turnover rate is not normal and indicates something is not working how it should work. There are many options when it comes to lowering turnover rates.

Not a maths person? Don’t worry, we’re going to explain how easy it is to calculate employee turnover

If your company employs 100 employees and 15 employees are fired or quit, your turnover is 15%. Emphasize team building, professional development, and social interactivity to ensure your workplace is a joy to work in. If your people love coming to work, they’re far more likely to have strong employer loyalty, be more engaged, and be less inclined to even consider a role elsewhere. With BrightLearn, you can effortlessly develop and upskill your staff, without incurring hefty training costs. Our Learning Management System gives your staff access to interactive learning and course completion certificates, while you track their progress.

If you’re looking at your employee turnover rate with a bit of concern, take the time to step back, and ask yourself these questions. Count the number of employees who left your company during the same time period. This includes resignations, terminations, retirements, and any other forms of separation. When looking at employment turnover rates, there are two types of separation to take into account. In this post, I’ll show you how to calculate the employee turnover rate in 3 simple steps. In addition, the correct way to interpret the result and some statistics that will give you a broader picture of the implications it has.

Step 5: Calculate the Turnover Rate

Companies that offer flexible working by default, robust healthcare packages, and defined routes for professional development often attract the best talent in the market. First, make sure that when you look into the market, you’re competitive in what you’re offering your people. This doesn’t just mean paying them more, you need to look holistically at your remuneration package. Here are three tips to help you counter each one and prevent avoidable turnover.

Step 4: Divide the Number of Separations by Average Number of Employees

So, based on your analysis, take appropriate actions to address any issues causing high turnover. Identify the number of new employees who joined your company during the chosen time frame. This information is typically found in your HR records or onboarding documents. Voluntary turnover occurs when employees choose to leave your company, including cases of resignation or retirement. If you’ve ever wondered how to calculate your employee turnover, don’t worry — you’re in the right place.

Step 2. Calculate the Average Number of Employees

Conduct exit interviews with engaged employees who willfully terminated their employment to collect feedback and get to the bottom of voluntary turnover. Industry benchmarks are incredibly helpful for understanding your rate of turnover, but again, every company is unique. As a result, it’s more useful to look internally when analyzing your turnover data. Do not count employees on temporary leave — parental, medical or otherwise — or sabbaticals as separations.

STEP 2: DETERMINE THE AVERAGE NUMBER OF EMPLOYEES FOR THE PERIOD OF TIME

When employees leave, a company has to replace them with new employees. This depends on your industry and the kind of jobs you offer. In a call center or in retail, 50% annual turnover isn’t bad.

How to calculate turnover rate?

If so, a high turnover rate could be the result of poor onboarding in a particular role or a bad manager, not necessarily a company-wide issue. If disengaged employees are the main source of turnover, though, you don’t need to sound the alarm just yet. Turning over toxic employees can actually improve your engagement outcomes. cash flow statement indirect method As previously mentioned, a low turnover rate isn’t necessarily something to celebrate — it depends on who is leaving your company. If the majority of your top performers are headed for the door, that’s a huge problem and likely a sign of a bad company culture, poor management or a lack of employee development opportunities.