Employee turnover rate is a ratio comparison of the number of employees an organization replaces in a given time period, to the average number of total employees during that time period. It basically refers to the percentage of people who leave the company over the total number of working in a specific time period. Employee turnover is a huge concern to companies because of the high costs involved. A lot of time, money and human resources are invested for recruiting employees. Thereafter, the training and other administrative expenses add to the investment made on the employees. If these employees leave the organization frequently, the company suffers financially in more ways than one. The corporates need to refresh their strategies to bring down employee turnover rates. The cure is employee retention. And employee retention means taking time to look closely at certain segments, like employee engagement, and ascertaining the employees’ overall welfare. This will eventually aid in controlling the employee turnover rate. Increase in profits, better productivity and better business will follow suit.
Calculating Employee Turnover Rate
The universal formula for determining employee turnover rate is as follows:
Divide the number of separations during the specified period by the average number of employees in this period. Multiply this figure by 100. Resultant will be your percentage employee turnover for that period.
Let us go through the step by step protocol.
- First, we need to determine the time period for which the employee turnover rate is to be calculated. For example, monthly, quarterly, half yearly or annually.
- Next, we need to find out the average number of positions that were filled in the organization during this period. To calculate this, add the number of employees present at the beginning of the period and the number of employees at the end; divide the sum by two. For example, to calculate the average number of employees in the first quarter (January to March), we’ll follow this simple mathematical equation:
- Average number of employees in the first quarter = (number of employees on 1st January + number of employees on 31st March) / 2
- Determine the total number of voluntary and involuntary separations over the course of the time period. This will allow you to calculate and compare values for total, voluntary and involuntary turnover rates distinctly.
- Divide the number of separations by the average number of employees in this period. Multiply the result by 100. For example, if the average number of employees in the first quarter is 300 and we had a total of 21 separations (15 voluntary and 6 involuntary separations), then the employee turnover rate will be:
- Voluntary Turnover rate = 15 / 300 = 0.05 * 100 = 5 percent
- Involuntary Turnover rate = 6 / 300 = 0.02 * 100 = 2 percent
- Total Turnover rate = 21 / 300 = 0.07 * 100 = 7 percent
The employee turnover rate of your organization speaks volumes about your company’s health. If you compare the turnover rate of your company with the industry standards, then you will get to know the exact strength of your organization. If the figures are alarmingly high for your firm vis-à-vis the industry, then it’s time to pull up your socks and dive deep into finding the loopholes. You might like to review your hiring process, employee engagement strategies and employee orientation programs. You may also want to review the training and the management process as a whole. In order to increase profitability and be a part of the big league, your organization needs to be at par with the current industry standards as far as the employee turnover rate is concerned.