# Calculating Employee Turnover

Employee turnover is driven by many

factors including inadequate compensation, lack of employee engagement, poor

job fit, etc. Whatever the cause, you can easily calculate your company's rate

of turnover. This is a critical benchmark that can help you understand your

relationship with your competition and with your employees. You should

continually monitor this rate so you can make informed choices in the future.

**Calculating Monthly and Annual Turnover **Attention all non-math majors: These

calculations are easy. To ease into it though, we will start with verbal

explanations.

Monthly turnover is the number of

employee separations in one month divided by the average number of active

employees at the worksite during the same period. We’ll make it easy and say we

have one site of operations.

Written as a math formula, here is the same

calculation:

Now to pull numbers into our formula

for monthly turnover:

Annual employee turnover is calculated by adding up the monthly turnover for a

12-month period. Makes sense, right? Okay, the next step follows.

Using the same example, if four

employees leave each month, a yearly total of 48 leave. Plugging those numbers

into the formula:

**The Costs of Employee Turnover for Your
Organization **The costs of turnover will depend on your company’s particular mix of

employees. Some will be relatively inexpensive to replace, some will be quite a

bit more costly. Turnover of less skilled workers is still expensive. One

estimate is that direct turnover costs are 50 to 60 percent of employee salary. It adds up! When thinking about retention you also have to consider the

business costs of top talent leaving. For example, lost revenue because a project

release date was delayed due to a key engineer’s departure or lost sales due to

a top sales person moving on.

**Calculating Turnover of Employees Within First Year of
Employment **Among the most expensive of turnover

is that of employees who leave in the first year of employment. In many jobs,

an employee is not fully productive for months. A high turnover in the first

year of employment can therefore represent a particularly painful cost.

To compute the value for your

company, divide the total number of employees who leave in less than one year

by the total number of employees who leave in the same period.

Here’s what the formula looks like:

Now let’s pull in the 48 employee number from our previous calculation, but

note that nine left within their first year of employment.

**What Can Employee Turnover Calculations Tell You About
Your Organization? **Whatever the number, you will likely want to

compare yourself to similar organizations in your industry and in your region. Also

be sure to check many years of data, as the last year might represent an

anomaly. Those with very high turnover will want to examine their on-boarding

and selection process. Those with high or low turnover should take another look

at their compensation practices. You may be paying inappropriate amounts in

either case.

Want to learn more compensation best practices and PayScale software?

**Attend a FREE upcoming educational webinar or product demonstration.**

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Very helpful. It should also be made clear that you are only including the number of voluntary resignations, as both involuntary and voluntary together would change the significance of the results. However, if you are doing this to calculate your total cost combined, you could always include both. Please expand on this – would you do either, depending on your desired end numbers?

NOT SATISFIED

NOT MUCH DETAIL ON COST OF TURNOVER

how do you calculate the average number of active employees.

If you start with 10 employees

2 quit

1 new hire

What is your average number of active employees?

Is it (10-2+1)/2

Or is it

(10+1)/2

how do you calculate the average number of active employees.

If you start with 10 employees

2 quit

1 new hire

What is your average number of active employees?

Is it (10+ 10-2+1)/2

Or is it

(10+10+1)/2

Found this handy online tool which will calculate turnover costs. This can be helpful also.

http://www.insightlink.com/employee_turnover_costs.cfm

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