It’s no secret that in today’s world, employees expect more from the companies they work for and are less afraid to leave those that fail to meet their expectations.
As you sit down to calculate the employee turnover rate in your company, you may find yourself with some unique questions:
“What if I had two employees retire in a given year?”
“What if several of our employees were promoted to different positions?”
Below we discuss how you can calculate your turnover rate and how you can account for these various factors.
Employee turnover rate is most commonly calculated as a percentage and this rate includes both involuntary and voluntary separations.
Voluntary turnovers include:
- Involuntary turnover includes:
- Layoffs due to financial reasons
- Downsizing of employees
“How do I calculate employee turnover rate?”
There are two different formulas you can use to determine the employee turnover rate in your company. The following formulas are used to calculate employee turnover rates on both a monthly and annual basis.
How to calculate monthly employee turnover rate
The following formula can be used to calculate employee turnover rate on a monthly basis:
Monthly employee turnover rate: (Employees who left in a month/average number of employees in a month) x 100.
- Determine the number of employees that left in a given month as well as the average number of employees your company had in the same month.
2. Divide the average number of employees by the number of employees who left in the month being analyzed.
3. Multiply this number by 100
Example: In February, your company had an average of 25 employees. Within the same month, two employees left. This gives you the following calculations: (2/25) x 100 = .08.
So, in February, your company has an 8% employee turnover rate.
How to calculate annual employee turnover rate:
The following formula can be used to calculate employee turnover rate on an annual basis
Annual employee turnover rate: (employees who left in a year/(beginning number of employees + ending number fo employees/2) x 100
- Determine how many employees left your company in a given year.
2. Add the number of employees you had at the beginning of the year to the number of employees you ended the year with. Divide this number by 2.
3. Divide the above number by the number pf employees who left in the year being analyzed.
4. Divide the above number by the number of employees who left in the chosen year.
5. Multiply the total by 100.
Example: In 2018, your company had 100 employees at the beginning of the year and 98 employees at the end of the year. During the same year, five employees left your company. This gives you the following calculations: [5/(100+98/2)] x 100 = .05. Using this formula, you can conclude that your employee turnover rate for 2018 was 5%.
Types of employee turnover
As you determine the overall turnover rate for your company, keep in mind that there are several different types that may need to be analyzed.
Voluntary turnover happens when an employee leaves an organization by their own volition.
While most employees usually put in a two weeks’ notice, some will just simply stop showing up. To better understand the cause of voluntary turnover within your company, our MCDA CCG team suggest that you have exit surveys in place.
Involuntary turnover happens when an organization asks an employee to leave.
Typically, retirement is considered a voluntary turnover, yet it may not be included in the analysis of turnover rates. However, you will most likely need to fill this position with a new employee, so it should be accounted for when determining your company’s employee turnover,
This type of turnover is when an employee is promoted or moved to another position within the same organization. While the employee may still be working for the same company, that employee’s old position will likely need to be filled with a new employee, and therefore, should be considered when calculating the employee turnover rate.
“How do I interpret my employee turnover rate?”
There are various reasons as to why an employee leave their job, and these reasons are important as you determine your turnover rate,.
Ask specific questions, such as:
- What is the reason for your employee leaving?
- Are they leaving after a short period of time?
- Is there any way to make changes to prevent other employees from leaving?
When you’re working to determine your companies turnover rate, its critical that you take into account the turnover rate for your particular industry. This will help you decide if your companies turnover rate is above or below average.
Additionally, the structure and size of your company should also be taken into account, as smaller companies with a higher percentage of turnover will be considered to have a low retention rate, whereas larger companies with same number of employees lost will be considered to have an acceptable turnover rate.
Understanding the various aspects that influence turnover rate analysis is important when determining if your organization’s turnover rate is good or needs improvement.
Keep in mind that calculating and analyzing your turnover rate is only the very first step in establishing a strong culture. Moving forward, there is no one size fits all equation that exists to address the areas of weakness and concern within every company. You need a strategy customized to your companies’ unique needs and features, including its size, industry, and structure.
Whether you have specific questions regarding your turnover rate, are looking for budget-friendly ways to retain your employees, management coaching and more, we can help. Reach out to one of our MCDA CCG team members for a free, no obligation consultation today: Get in touch
Other MCDA CCG Resources you may like: