Calculating Employee Turnover


Employee
Turnover Rates

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: 

Image 1

Now to pull numbers into our formula
for monthly turnover:
   
  Image 2

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:

Image 3
 
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:

 
Image 4

Now let’s pull in the 48 employee number from our previous calculation, but
note that nine left within their first year of employment.

Image 7 

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.

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10 Comments on "Calculating Employee Turnover"

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barchary pickalo
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barchary pickalo
2 years 4 months ago

blaaahhhhh

Alex
Guest
Alex
2 years 4 months ago

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?

RAMAN SADHWANI
Guest
RAMAN SADHWANI
2 years 1 month ago

NOT SATISFIED

NOT MUCH DETAIL ON COST OF TURNOVER

No sir, I don't like it
Guest
No sir, I don't like it
1 year 2 months ago

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

No sir, I don't like it
Guest
No sir, I don't like it
1 year 2 months ago

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

George
Guest
George
1 year 5 days ago

Found this handy online tool which will calculate turnover costs. This can be helpful also.
http://www.insightlink.com/employee_turnover_costs.cfm

Packers and Movers India
Guest
Packers and Movers India
10 months 3 days ago
Packers and Movers in Pune
Guest
Packers and Movers in Pune
10 months 3 days ago
Packers Movers
Guest
Packers Movers
10 months 3 days ago
Gremminger
Guest
Gremminger
7 months 6 days ago

Not helpful

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