Employee turnover. It’s a metric that can send shivers down any HR professional’s spine. A high turnover rate can signal instability, lost productivity, and a drain on resources. But understanding how to calculate employee turnover rate is just the first step to the benefits of healthy retention rates. To truly address the issue, you need to delve deeper and understand the “why” behind the numbers.
What is Employee Turnover Rate and Why Does it Matter?
Employee turnover rate is the percentage of employees who leave an organization during a specific period. It’s a crucial indicator of employee satisfaction, workplace culture, and overall organizational health. A high turnover rate, when it exceeds the industry average, can lead to:
- Increased costs: Recruiting, onboarding, and training new employees is expensive. A study by the Society for Human Resource Management (SHRM) found that replacing a salaried employee can cost six to nine months’ salary on average.
- Reduced productivity: New employees need time to acclimate, leading to temporary dips in productivity.
- Decreased morale: Frequent departures can negatively impact the morale of remaining employees.
- Loss of institutional knowledge: Experienced employees take valuable knowledge with them when they leave.
How to Calculate Employee Turnover Rate: The Formula
The basic formula to calculate employee turnover rate is quite simple and every organization should be tracking it religiously:
Turnover Rate = (Number of Employee Separations / Average Number of Employees) * 100
Let’s Break Down the Calculation:
- Number of Employees Who Left: This includes all employees who voluntarily or involuntarily left the company during the specified period (e.g., month, quarter, year).
- Average Number of Employees: To calculate this, add the number of employees at the beginning of the period to the number at the end of the period, and divide by two.
Here’s an Example:
Let’s say a company had 100 employees at the beginning of the month and 110 at the end. During that month, 5 employees left.
- Average number of employees: (100 + 110) / 2 = 105
- Monthly turnover rate: (5 / 105) x 100 = 4.76%
Using a Turnover Rate Calculator
For ease of use, many online turnover rate calculators are available and make measuring employee turnover rate simple. These tools automate the calculations, allowing you to quickly analyze your data.
Monthly Turnover vs. Annual Turnover
- Monthly Turnover: Provides a granular view of turnover trends, allowing you to identify short-term fluctuations.
- Annual Turnover: Offers a broader perspective, revealing long-term trends and overall stability.
Calculate Employee Retention Rate: The Flip Side of Turnover
While turnover focuses on departures, calculating employee retention rate focuses on those who stay. It’s a complementary metric that places the emphasis on a positive perspective on employee satisfaction and loyalty.
The formula for retention rate is:
(Number of employees at the end of a set time period / the number of employees at the start of a set time period) x 100
Analyzing Performance and Identifying High Turnover Areas
Simply calculating the turnover rate isn’t enough. You need dig deeper and analyze performance across different departments, roles, and demographics to pinpoint areas of high turnover.
- Departmental Analysis: Are certain departments experiencing significantly higher turnover than others?
- Role-Based Analysis: Are specific job roles associated with higher attrition?
- Demographic Analysis: Are there patterns related to age, tenure, or other demographic factors?
In addition, turnover rates vary wildly by industry and job type. Retail organizations that experience seasonal hiring and attrition within hourly employee populations. While education and government can have minimal turnover rates. It’s best to benchmark against similar job families and industries to understand turnover ranges that are healthy for your specific application.
The Importance of Employee Feedback
To effectively reduce turnover, you need to understand the root causes of why employees are leaving or being let go. According to a Work Institute report, 75% of the causes of employee turnover are preventable. This is where employee feedback becomes invaluable.
- Exit Interviews: Conduct thorough exit interviews to gather insights into why employees are leaving.
- Employee Surveys: Regularly administer surveys to gauge employee satisfaction, engagement, and identify potential issues.
- Feedback Sessions: Create a culture of open communication where employees feel comfortable sharing their concerns.
Explore survale’s professional edition to streamline surveys and feedback collection for deeper insights into workforce retention.
Employee Engagement: The Cornerstone of Retention
Employee engagement is a critical factor in employee retention. According to a Gallup study, disengaged employees have 37% higher absenteeism, 18% lower productivity, and 15% lower profitability. Engaged employees are more productive, satisfied, and less likely to leave.
- Create a Positive Work Environment: Foster a culture of respect, collaboration, and recognition.
- Provide Opportunities for Growth: Offer training, development, and career advancement opportunities.
- Recognize and Reward Performance: Acknowledge and appreciate employees’ contributions.
- Promote Work-Life Balance: Support employees’ well-being and flexibility.
Measuring Quality of Hire: Getting it Right from the Start
Preventing turnover starts with hiring the right people. Measuring quality of hire ensures that you’re bringing in individuals who are a good fit for your company culture and job requirements.
- Pre-Employment Assessments: Use assessments to evaluate candidates’ skills, personality, and cultural fit.
- Structured Interviews: Conduct structured interviews to ensure consistency and fairness in the hiring process.
- Performance Reviews: Track the performance of new hires to assess their success and identify areas for improvement.
- Time to Productivity: Measure how long it takes new hires to reach full productivity. This metric indicates how well the onboarding process is working.
By understanding how to calculate employee turnover rate, analyzing the data, and implementing effective retention strategies, organizations can build a strong retention culture and create a thriving workplace where employees want to stay. Survale’s workforce analytics solutions can help businesses track turnover trends and optimize retention strategies, ultimately saving significant dollars in rehiring costs and lost productivity.
FAQs
What is the formula to calculate employee turnover?
Turnover Rate = (Number of Employee Separations / Average Number of Employees) * 100
How do you measure employee turnover rate?
Let’s say a company had 100 employees at the beginning of the month and 110 at the end. During that month, 5 employees left.
Average number of employees: (100 + 110) / 2 = 105
Monthly turnover rate: (5 / 105) x 100 = 4.76%
How to calculate turnover rate of employees in Excel?
Any spreadsheet is a great way to keep track of employee turnover across time. Simply set up formulas that divide the number of employees lost by the average number of employees and multiply that number by one hundred.
What is a good employee turnover rate?
Turnover rates vary wildly by industry and job type. Retail organizations that experience seasonal hiring and attrition within hourly employee populations. While education and government can have minimal turnover rates. It’s best to benchmark against similar job families and industries to understand turnover ranges that are healthy for your specific application.
Is a high turnover rate always bad?
High turnover rates are baked into many industries and job families. For example, seasonal employers in agriculture or retail organizations rely on hiring and releasing large numbers to make their business models work. The focus is to minimize turnover within the boundaries of benchmarks for industry and job family.
