How to Calculate Your Employee Turnover Rate

Turnover rate is a hot topic in HR these days, and for good reason. Understanding the employee turnover rate helps companies gauge the health and stability of their team. But how exactly do you calculate the turnover rate? Don't worry; it's easier than it sounds.

This article offers a practical, easy-to-follow guide to calculating turnover rates. Learn the two key data points needed, where to find them, and how to plug them into the formula. With the help of this guide, companies will be turnover rate calculation experts in no time.

Understanding Employee Turnover Rate

To calculate the employee turnover rate, companies first need to determine the number of employees who left the company within the given period, like June 2024. This includes employees who quit, retired, or were fired.

Track Departures

Keep records of all employee departures, including their last day of work. Note whether they quit voluntarily or were terminated. It's best to keep this data in a tool that can automatically calculate metrics for you.

Calculate Turnover Rate

Take the total number of employee departures in a specific period. Divide that by the average number of employees for the month. For instance, if a company had 10 employees leave out of an average of 200 workers, the turnover rate would be 5%.

A high turnover rate of over 10% each year can indicate issues with employee satisfaction or company culture that are worth addressing.

Address Underlying Problems

Survey the remaining employees to identify the factors contributing to turnover. This may include a lack of work-life balance, limited prospects for growth, or a weak company vision. Make updates to create better employee engagement and boost retention.

Providing good pay and benefits is vital, but employees also want to feel valued and connected to the company’s mission. Focus on open communication, manager support, and programs that promote work-life balance. These efforts create a workplace where people want to stay for the long haul. With time and effort, companies can build a culture where turnover becomes a thing of the past.

How to Calculate Employee Turnover Rate

Companies need to gather specific data to calculate the employee turnover rate.

First, determine the number of employees at the beginning of the month. This is the starting headcount. Next, figure out how many employees left the company during that month. They may be through resignation, termination, or other means. This is the turnover amount.

With these numbers in hand, calculate the turnover rate. Simply divide the turnover amount by the starting headcount. For instance, with 100 employees at the start of June and 10 left during the month, the turnover rate would be 10% (10 divided by 100 equals 0.10).

A high turnover rate of 10-15% a year can result in less productivity and increased expenses spent on hiring and training replacements. But some level of turnover is unavoidable and even healthy for most companies. The key is knowing what an acceptable level is for a specific business. Companies must also address any potential issues that may add to attrition.

Some things to consider when reviewing turnover rates include:

• Job satisfaction: Are employees happy with their work?
• Compensation: Are salaries and benefits fair and competitive?
• Work set up: Is the culture positive and supportive?
• Career Advancement: Do employees have prospects for career growth and promotion?

By tracking the turnover rate and these related factors, companies can gain valuable insight into the overall health and sustainability of the business. The results may spur key dialogues on ways to boost employee retention and better support the team.

Some companies calculate turnover rates for specific departments or types of employees (like managers or entry-level staff). This can uncover areas of concern regarding employee retention that need change. It may also be insightful to compare a company’s turnover rate to the industry average or that of direct competitors. Rates that are too high can be harmful, implying issues with company culture, job satisfaction, or compensation.

Keeping track of employee turnover and taking action to reduce it leads to a more stable, productive workforce. Employees who feel happy and see a future with the company will stick around longer, benefiting both themselves and the business.

Calculating New Hire Turnover

Calculating new hire turnover involves analyzing the number of employees who left within the first year of employment. To know the new hire turnover rate, hiring managers need to track the total number of new hires in a given month or year. They must also determine the number of new hires who left voluntarily or involuntarily within 12 months.

The formula for calculating the new hire turnover rate is:

Number of new hires who left within 12 months ÷ Total number of new hires in that month/year x 100

For instance, if Company XYZ hired 200 new employees in June 2024 and 50 of them left within the first year, the new hire turnover rate would be:

50 (new hires who left) ÷ 200 (total new hires) x 100 = 25%

A high new hire turnover rate signals potential issues with recruiting, hiring, onboarding, or company culture that need attention. Some possible reasons for high new hire turnover include poor job fit, unrealistic expectations, poor onboarding, or a lack of career growth prospects. Conducting exit interviews can provide valuable insights into the root causes.

To reduce new hire turnover, companies must focus on hiring the right candidates, simplify the onboarding process, and foster an engaging work environment. Providing mentors, check-ins, and openings for regular feedback and coaching are also helpful for integrating new hires. With the right strategies and support, companies can notably improve new hire retention.

FAQs About Calculating Employee Turnover Rate

1. What is the employee turnover rate?

   The employee turnover rate refers to the percentage of employees who leave a company during a certain period.

2. Why is it important to calculate the employee turnover rate?

   Calculating the employee turnover rate helps give insights into the overall health and stability of the company. A high turnover rate could indicate poor hiring practices, a weak company culture, a lack of employee engagement, or job satisfaction. It is a key metric that allows companies to spot areas for progress to build a stronger, more sustainable workforce.

3. What period should companies use?

   The most common time periods for calculating employee turnover rates are monthly, quarterly, and annually. For this calculation, look at the number of employees who left during June 2024. Make sure to also calculate the company's average number of employees for that same month.

4. What is a good turnover rate?

   A good employee turnover rate depends on the industry and company size. In general, a rate of 10% or less per year is good for most companies. If the rate creeps above that, it is a good idea to look at ways to improve hiring, employee satisfaction, and retention. A lower turnover rate results in reduced expenses and time spent on recruiting and training new employees.

Conclusion

Keeping tabs on the turnover rate each month gives companies valuable insights into the health and engagement levels of their team. A high turnover rate may signal issues that need addressing. A low, stable rate suggests the company is doing a good job of retaining talent. Tracking turnover over time also helps spot trends and seasonal fluctuations.

The current calculations will serve as a benchmark to compare against the past and future months. With these metrics, companies can analyze and improve their retention strategies. Steady tracking ensures they can stay ahead of turnover issues before they become crises.