How to calculate employee turnover rate and what it means (2023)

The turnover rate is by far one of the best indicators of your company's long-term success. Provides a comprehensive assessment of yourcompany culture,recruitmentefforts andemployer brand🇧🇷 Tracking this metric is vital to staying ahead of major business setbacks.

As a business leader, it's important to take the time to understand what employee turnover represents, how to calculate your turnover rate, and how to interpret the results.

What is the turnover rate?

The turnover rate is defined as the percentage of employees who leave a company during a given period of time. Often described in connection withemployee retention rate, which measures the number of employees retained from the beginning of a given period to its end.

There are two types of rotation. The first is voluntary turnover, that is, when the employee decides to leave the company. The second is involuntary turnover, which occurs when an employer fires an employee, usually because the employee is underperforming, undermining the productivity of colleagues, failing to maintain organizational goals.core valuesor undermines the company's culture.

What is the turnover rate?

The turnover rate is the percentage of employees who leave a company during a given period of time. An employee turnover rate is often analyzed against an employee retention rate (percentage of employees retained).

Measuring and tracking turnover on a regular basis is essential ashigh turnover can be extremely costly for employers🇧🇷 On the one hand, it has a negative impact on your employer brand, and it's harder to fill roles when you have a reputation as a springboard or revolving door employer. This increases the amount of recruiting resources needed to attract strong candidates and ultimately inflates yourcost per rent.

Furthermore, the longer a job is vacant, the more revenue is lost, productivity declines, and employee morale is depleted: three elements of harmvacancy cost🇧🇷 In short, controlling turnover has a direct impact on your bottom line and the long-term health of your organization.

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(Video) How to Calculate Employee Turnover in 3 Steps

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How to calculate turnover rate

The formula for calculating your turnover rate over a given time period only requires three pieces of information: the number of employees on the first day, the number of employees on the last day, and the total number of employee layoffs that occurred during that period.

Turnover Rate Formula

Turnover rate = [(number of employee terminations) / (average number of employees)] x 100

The two count totals are used to determine the average number of employees. From there, simply divide the total number of employee terminations by the average number of employees during that period. It sounds complicated, but the process is relatively simple.

We'll use the following example to explain how to calculate the turnover rate:

XYZ Tech Company had 125 employees as of January 1, 2021. The company hired 25 people and went through 15 separations during the remainder of the year. As of January 1, 2022, there are a total of 135 employees.

How to calculate and use the employee turnover rate

  1. Set the time period for the calculation.
  2. Determine the average number of employees present during the time period.
  3. Define the total number of employee terminations during the period.
  4. Use the churn rate formula to calculate your churn rate.
  5. Compare your turnover rate to industry standards.

STEP 1: DEFINE THE TIME PERIOD

The turnover rate must, at a minimum, be calculated annually; You'll need to know your annual turnover rate during strategic planning meetings and budget conversations. However, to keep an eye on your employees' happiness and the overall health of your organization, plan to calculate your turnover rate more often.

(Video) How To Calculate Employee Turnover Rate - Employee Turnover Report Template

The first step is to clearly define the time period you want to analyze. When calculating your annual turnover rate, your start and end dates should be January 1 of last year and the current year, respectively.

Example

We are looking to calculate the turnover rate for XYZ Tech Company for the year 2021.

Therefore, the deadline would fall from January 1, 2021 to January 1, 2022.

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

On average, how many employees (EE) did you have during the given time period? To determine this number, you will need two pieces of information: the total number of employees on the first day of the given period and the total number of employees on the last day.

This information is easy to obtain: check your payroll system to determine the number of people at your job on both days. Include all full-time, part-time and direct hire temporary employees on the payroll. Do not list any independent contractors; Your departure from your company is a result of termination of your contract, not a form of billing. Including them will skew your results.

From there, add the two employee totals. Then divide the sum by two.

  • Mean # of EE = [(# of EE on the first day) + (# of EE on the last day)] / 2

Example

As of January 1 last year, XYZ Tech Company had 125 employees. At the end of 2021, there were 135 employees.

(125 + 135) / 2

260/2

130 = # average of EE

STEP 3: DEFINE THE TOTAL NUMBER OF SEPARATIONS

To accurately calculate your turnover rate, you must account for each employee item. Include the total number of separations, voluntary and involuntary, that occurred between the start date and end date of the indicated time period.

Do not count employees on temporary leave (paternity, medical or other) orsabbaticalslike separations. These people are still at their jobs, even if they are not active employees. Also, don't count promotions and transfers towards your compensation total.

Example

15 separations occurred at XYZ Tech Company during 2021.

(Video) 2 Minute Tutorial: How To Calculate Employee Turnover Rate

Total number of EE separations = 15

STEP 4: CALCULATE YOUR TURN RATE

To determine your turnover rate, divide the total number of separations that occurred during the given time period by the average number of employees. Multiply this number by 100 to represent the value as a percentage.

  • Turnover rate % = [(no. of EE separations) / (average no. of EE)] x 100

Example

XYZ Tech Company had 15 employee terminations and an average of 130 employees during 2021, giving the company an annual turnover rate of 11.54%.

15/130 = 0,1154

0.1154 x 100 = 11.54% turnover rate.

STEP 5: COMPARE YOUR TURN RATE TO INDUSTRY STANDARDS

While every business is different, it's important to measure the success of yours.employee retention strategywith your competition by comparing your churn rate to industry standards. According to Gartner, the average turnover rate for all organizations in the US is around24 percentfrom 2022.

Using our example, XYZ Tech Company entered the information industry turnover rate (38.9 percent) at a great 11.54 percent, but even with a below-average rate, other questions about employee turnover need to be answered before it's cause for celebration.

Understand your turnover rate

Industry benchmarks are incredibly helpful in understanding your churn rate, but again, every company is unique. As a result, it's more useful to look inward when analyzing billing data.

How to calculate employee turnover rate and what it means (1)

What is a good turnover rate?

ten percent or lessrepresents a generally accepted churn rate to serve in any industry, although it's important to remember that a "good" churn rate varies by company and its retention goals. For example,according to the US Bureau of Labor Statistics., the annual turnover rate in the leisure and hospitality industry is 84.9%, while the annual turnover rate in the government industry is 18.1%.

A low turnover rate compared to industry standards might seem unbelievable at first glance, but what happens if only your best employees leave? To avoid making assumptions and ignoring widespread issues, consider the context of your churn rate by answering the following three questions.

When do employees leave?

First, determine when turnover occurs, both in the business cycle and in the employee lifecycle. Was there a widespread change, such as a staff reshuffle, that preceded a significant increase in turnover? If so, the concussion may have ruffled feathers more than you initially thought. This may suggest a need to improve top-down communication efforts and build apositive company culture.

At the same time, consider retaining departing employees. Are they opting out after several years or a decade on the job, or just approaching the one-year anniversary of the job? A high turnover rate of new employees indicates ineffectivenessrecruitment strategies🇧🇷 you can bemealsthe wrong candidatesjob descriptionsmay be deceiving candidates or theirintegration processcan leave a lot to be desired.

Time is incredibly vital information to fully understanding why turnover is such a common issue in your organization and how you can react accordingly. To calculate the new employee turnover rate, divide the number of employees leaving within one year from the start date by the total number of employee layoffs during the same period. Multiply the number by 100 to represent the value as a percentage.

(Video) Business & Office Tips : How to Calculate an Employee Turnover Rate

What types of employees are leaving?

As mentioned above, a low churn rate is not necessarily something to celebrate, it depends.whohe leaves the company. If most of your best people are heading out the door, that's a big problem and probably a sign ofbad company culture, poor management or lack ofemployee developmentopportunities.

However, if disengaged employees are the main source of turnover, you don't need to sound the alarm just yet.Employee engagement is importantto the health of your business, and disengaged people do more harm than good; they can subvert your company's culture, as well as demotivate and spoil the experience for the people you want to retain. Handing over toxic employees can actuallyimprove your engagement results.

Before jumping to conclusions, think about the types of employees you're losing and what that says about your organization. Also, look at the roles of departing employees: are you always in the same role? Is turnover contained within a department or team? In this case, a high turnover rate could be the result of poor integration into a specific role or a bad manager, not necessarily a company-wide problem.

Why are employees leaving?

Breakups can be frustrating and uncomfortable, but that doesn't mean you should try to get over them as quickly as possible. A departing employee is very knowledgeable about their employer's brand and its competitors, so don't fire them before you've done your due diligence. Conductexit interviewswith engaged employees who intentionally terminated their jobs to get feedback and get to the bottom of voluntary turnover.

You may find that a number of employees have had serious problems with their direct managers or feel that they have stalled in their careers at your company. The only way to find out what really made employees want to leave is to ask them. Once you've done this, it's absolutely essential that you act on this information to avoid further churn; What frustrated one employee is likely to upset his replacement and could be the start of a vicious cycle of turnover. Pair exit interviews withstay interviewsto complete the feedback process for your employees.

Turnover rate is arguably one of the most important HR factors andrecruitment metricstrack back. Develop your own internal standards by regularly collecting billing data over multiple time periods and across departments. Also, track turnover against individual managers at different levels. Armed with this information, you'll be well prepared to make improvements and create an exciting job opportunity that job seekers want and employees don't want to leave.

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FAQs

How do you calculate employee turnover rate? ›

To start your employee turnover calculation, you should divide the total number of leavers in a month by your average number of employees in a month. Then, times the total by 100. The number left is your monthly staff turnover as a percentage.

How do you answer turnover Questions? ›

If a candidate asks you about the turnover rate, try to give them a positive, honest answer. This may help them see how they will or won't be a good fit in the company.

What is employee turnover and how is it calculated? ›

The employee turnover rate is calculated by dividing the number of employees who left the company by the average number of employees in a certain period in time. This number is then multiplied by 100 to get a percentage.

What does a turnover rate of 100% mean? ›

Employee Turnover Rate Formula

It is possible for your turnover rate to be more than 100%. This means that you replaced your entire workforce during that time period. As a general rule of thumb, a turnover rate higher than 20% is a sign that something is probably wrong with your work environment.

How turnover is calculated with an example? ›

Monthly turnover rate

You have 22 employees at the end of the month. Calculate the average number of employees for the month by adding the beginning and ending employee totals and dividing by two. Find your monthly turnover rate by dividing the three employees by 21. Then, multiply by 100 to get your turnover rate.

What is employee turnover example? ›

For example, if you have an average of 140 employees working during a month's time and 26 employees leave, your turnover rate would be around 18.6 percent. Do not include temporary hires or employees who go on temporary leave in either factor of the equation.

What is the best way to calculate turnover? ›

How to calculate turnover rate? To calculate turnover rate, we divide the number of terminates during a specific period by the number of employees at the beginning of that period. If we start the year with 200 employees, and during the year, 10 people terminate their contract, turnover is 10/200 = 0.05, or 5%.

How do you evaluate if turnover is a problem? ›

A general rule of thumb for determining whether your practice is experiencing high turnover is to look at the percentage of staff your practice turns over in a five-year period. In my experience, 15 percent staff turnover in five years is reasonable; 20 percent or more is considered high.

What is the most effective solution to turnover? ›

6 Strategies to Reduce Employee Turnover
  • Find the Right Talent. Every company has a different hiring process. ...
  • Encourage Retention Early On. ...
  • Recognize and Reward Employees. ...
  • Identify a Clear Career Path. ...
  • Encourage a Healthy Work-Life Balance. ...
  • Create Learning and Development Programs.
Nov 19, 2019

How is turnover measured? ›

Companies often measure employee turnover rate as a percentage. It's calculated by dividing the number of employees who leave in a year (or another time period) by the average number of employees at the organization during the same period.

What are 3 factors that lead to employee turnover for a company? ›

7 common causes of high employee turnover
  • Employees are overwhelmed by amount work. ...
  • Lack of recognition. ...
  • Company culture. ...
  • Poor relationship with Manager. ...
  • Lack of flexibility. ...
  • Remuneration and benefits. ...
  • Poor learning and development opportunities.

What is a good employee turnover rate? ›

Organizations should aim for 10% for an employee turnover rate, but most fall into the range of 12% to 20%. Certain industries report higher employee turnover rates due to the nature of the job.

What level of turnover is acceptable? ›

When asked, most respondents considered the ideal amount of turnover would be 1% to 10%. So turnover in businesses, on average, is double what we think is ideal. Personally, I have found that if your business has less than 10% turnover, it can lead to other challenges.

What are the 3 types of turnover? ›

You can calculate involuntary turnover, voluntary turnover and total turnover. Example: Say you start off the year with 100 employees.

What is the average turnover rate for 2022? ›

With a minimum of 5.57% and a max of 17.71%, the average employee turnover rate across all industries for 2022 is 10.87%.

What are the basics of turnover? ›

Put simply, turnover is the total amount of money your business receives from the sale of goods and services – minus discounts and VAT. Turnover is calculated over a specific period of time, usually a quarter or financial year.

How to calculate turnover in Excel? ›

Given that the employee turnover rate equals the number of employees who left divided by the average number of employees working during that period, the formula ends up being =(D2/((B2+E2)/2)). To get the number in percentage form, select the column, then press the percentage button in the toolbar.

Why do we calculate employee turnover? ›

Monitoring turnover is an important function of human resources. Companies want to monitor the movement of employees out of the organization so they can look for and minimize causes of turnover.

What are four types of employee turnover? ›

Here are four types of employee turnover you need to analyze:
  • Voluntary Turnover. No organization is immune from voluntary turnover. ...
  • Involuntary Turnover. Involuntary turnover is when the company asks an employee to leave. ...
  • Retirement. ...
  • Internal Transfers.
Aug 22, 2016

What is a good turnover ratio for a company? ›

For most industries, the ideal inventory turnover ratio will be between 5 and 10, meaning the company will sell and restock inventory roughly every one to two months.

What is a normal turnover rate? ›

General Employee Turnover Statistics

What is a good employee turnover rate? On average, every year, a company will experience 18% turnover in its workforce. A business can expect on average to lose 6% of its staff because of reduction in force or terminating them due to poor performance.

What are the factors that affect the rate of turnover? ›

Employee turnover refers to how many employees leave an organization within a timeframe. Some key factors influencing employees to quit their jobs are job satisfaction, communication, colleague relation, organizational commitment, justice, politics, reputation, etc.

What are the factors that can affect turnover? ›

There are six factors affecting employees' turnover intention being selected from previous research, which are colleague relations, organizational commitment, organizational justice, organizational reputation, communication, and organizational politics.

How do you improve turnover ratio? ›

Six ways to improve inventory turnover
  1. Know your inventory items' position in their product life cycle.
  2. Improve demand forecasting accuracy.
  3. Prioritise your inventory.
  4. Reorder smarter.
  5. Use-up excess inventory by redistributing stock.
  6. Use automation to improve insights.
Nov 1, 2020

What are the three important methods of measuring Labour turnover? ›

Measurement of Labour Turnover – Top 3 Methods: Separation Rate Method, Replacement Method and Flux Rate Method (With Formula)

What is the strongest factor behind employee turnover? ›

The four main causes of turnover are lack of growth and progression, inefficient management, inadequate compensation, and poor workplace culture. These reasons for staff leaving are present at many organizations around the world.

What are some key drivers of employee turnover? ›

Some of the top reasons employees quit are:
  • Lack of recognition or appreciation.
  • Job burnout or overwork.
  • Lack of flexibility.
  • Lack of career growth.
  • Missing connection or alignment.
  • Uncompetitive pay and benefits.
Jan 20, 2022

What are the two major influences on high employee turnover? ›

Many of the top reasons for turnover—poor compensation or work-life balance, little training and scant career advancement opportunities—hinge on the manager, so HR teams need to identify supervisors who flat out lack the competence to manage people and either transition them to new roles or provide support and training ...

Is it better to have a high or low turnover rate? ›

A high turnover rate negatively affects the company's image. If employees leave due to poor compensation or lack of growth opportunities, it tells potential talent that it is not the best working environment. The image of a satisfied worker is a good way to attract and retain talent.

What is healthy attrition rate? ›

What is a Good Attrition Rate? While it's difficult to define a “good” attrition rate, businesses should generally aim for an attrition rate of 10% or lower. Keep in mind, however, that this number will vary from company to company and industry to industry, depending on the circumstances.

What is the difference between attrition and turnover? ›

While turnover refers to layoffs due to negative reasons such as differences in corporate culture and toxic management, employee attrition occurs due to natural causes such as retirement. Turnover and attrition occur when employees leave the company for different reasons, such as layoffs and terminations.

What is another word for employee turnover? ›

Definition: Staff attrition refers to the loss of employees through a natural process, such as retirement, resignation, elimination of a position, personal health, or other similar reasons. With attrition, an employer will not fill the vacancy left by the former employee.

How is turnover defined? ›

Turnover is the total sales made by a business in a certain period. It's sometimes referred to as 'gross revenue' or 'income'. This is different to profit, which is a measure of earnings.

What is average turnover rate by industry? ›

Financial activities: 28.5% Professional and Business services: 64.2% Education and Health services: 37.3% Leisure and Hospitality: 84.9%

What turnover is considered high? ›

Typically, high turnover means 28% of your new employees quit within the first 90 days of their employment. (Again: this presents an enormous cost to companies because they have to constantly repeat a cycle of recruitment, hiring, and training new people.)

How do you calculate YTD employee turnover? ›

Most employers want to report not only a monthly turnover rate but also a year-to-date (YTD) or annual turnover rate (TR). To determine the YTD turnover rate, the employer adds the monthly turnover rates together.

What is a normal turnover rate for employees? ›

General Employee Turnover Statistics

On average, every year, a company will experience 18% turnover in its workforce. A business can expect on average to lose 6% of its staff because of reduction in force or terminating them due to poor performance. This is known as involuntary turnover.

How do I calculate employee turnover in Excel? ›

Given that the employee turnover rate equals the number of employees who left divided by the average number of employees working during that period, the formula ends up being =(D2/((B2+E2)/2)).

How do you calculate a company's turnover? ›

To calculate the annual turnover of a company, simply add together the total sales. If the business sells products, the annual turnover refers to the total number of sales from the products sold. If the company sell services, the turnover is the total charged for these services.

What is the average employee turnover rate in 2022? ›

With a minimum of 5.57% and a max of 17.71%, the average employee turnover rate across all industries for 2022 is 10.87%.

Why is it important to measure employee turnover? ›

Purpose: Staff turnover is an important way to measure both the effectiveness of the human resources management system and the overall management of an organization or program. It provides a complementary measure to the previous indicator on key positions filled.

What are the two types of employee turnover? ›

Regardless of business type there are two main types of employee turnover: voluntary and involuntary.

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