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How to Calculate Employee Turnover

Topics: Retention
Costs of Employee Turnover – In order to see the full picture of employee turnover, there are some unexpected twists and variables you should keep in mind. Here, we'll cover a few of the many variables that can affect your turnover rate and affect how you choose to interpret results of your employee turnover calculations.

Psst… check out this post to get the lowdown on employee turnover.

In order to see the full picture of employee turnover, there are some unexpected twists and variables you should keep in mind. Here, we’ll cover a few of the many variables that can affect your turnover rate and affect how you choose to interpret results of your employee turnover calculations

Analyzing the Cost of Employee Turnover Rates

Beyond just looking at your overall employee turnover rate, taking the time to look closely at certain segments of your organization will provide you even more insights into your organization’s health.

For example, you could focus on employees who leave in the first-year of employment. From hiring to firing to replacement, losing employees in the first year can be costly.

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Some employee replacement costs include:

  • sourcing (how you find applicants and how they find you)
  • interviewing
  • hiring expenses

On-boarding costs include:

  • training the new employee
  • acculturation of the employee to the organization’s culture and expectations

Employee separation costs include:

  • unemployment compensation
  • COBRA benefit continuation costs
  • conducting exit interviews

As a side note, effective orientation programs in the first several months after a hire have been proven to have a direct, positive impact on the employee’s choice to stay with the organization.

How to Calculate Employee Turnover by Month

Looking at monthly employe turnover can be used to learn more when employees leave in their first year.

To calculate monthly employee turnover rates, divide the number of employee separations in one month by the average number of active employees at the worksite during the same period. We’ll say we have one site of operations.

Monthlyturnover

For example, let’s say we lose four employees out of 200.

Monthlyturnover2
That gives us an employee turnover rate of two percent. What if we repeated this employee turnover calculation to highlight the turnover rate just in the new hires, not in the whole company, over the course of a year?

How to Calculate Employee Turnover Rates within the First Year

Have you wondered if employees leaving in less than 12 months have a bearing on your business? What about on your business practices? You can learn both by learning about first year employee turnover.

To compute this, 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:

First Year Turnover Rate
Now to pull numbers into our formula for first year employee turnover:

26.7% = 31 employees in first year of employment / 116 Employee turnover in a time period

[Do you want reduce voluntary employee turnover? Come to our annual event about compensation – Compference18 – to see how you can use comp to retain your key employees. ]

What Can Employee Turnover Calculations Tell You About Your Organization?

How do 26.7 percent first-year employee turnover rates compare to the industry standard, or to your local area? If it is consistent with those measures, your organization may be fine.

The following questions and answers will be important to note and act on, regardless if 26.7 percent is a good number or a bad one.

  • If 26.7 percent is higher than your overall employee turnover rate, the industry standard, or the standard turnover in the area, you might want to review your selection or on-boarding process.

    For instance, what questions were asked when the employee was hired? Did the questions relate to the job? If not, they may have set up the application for the job to be quite different than the job really is. If so, why was that done?
  • Did those who sorted applicants by their responses understand what skills the job required? Did they end up looking for or finding the wrong things?
  • Did the employee get an orientation? Was the employee made to feel comfortable in the organization after the orientation? Why or why not?
  • How did the employee’s supervisor interact with the employee?
  • How did the existing workforce interact with the new employee? With acceptance and assistance, or with a cold shoulder? How did the supervisor react to that? Did the supervisor take any steps in response to the workforce interaction with the new employee?

How might the supervisor’s training have contributed to this percentage?

Want to learn more about Turnover? Download this PayScale whitepaper on the subject: 5 Keys for Retaining Top Employees: Solving Turnover Challenges

 

 

 

 

 

Alex D'Angelo
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Jan Turner
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Jan Turner

I think there is an error in your article. I am referring to this section:
Here’s what the formula looks like:

First Year Turnover Rate

26.7 % = 116/31

That should be 31/116.

ulyesses
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ulyesses

Good catch!

Girish Malhotra
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Girish Malhotra

Very good Information

Lora Dudick
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Lora Dudick

This is a great article!

udo jane
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udo jane

i will like to learn more

amy
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amy

I would like to use this in a report… so its the number of employees less than a year divided but the overall number of staff exiting or ONLY total of first year exits (saying if you had to calculate it per department).

Sweeney Tood
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Sweeney Tood

Employee turnovers are delicious.

S.T.R
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S.T.R

Some
said turnover rate is ” Employee Separation for the Period is divided by Average number of Employees during the period…
If so, the formula expressed the above…and
that formula…how to different???
please explain ?

Philip Azumah
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Philip Azumah

At what percentage rate is it not advisable for Turnover not to exceed?

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