Employee turnover rate tells you the percentage of workers who leave (voluntarily or involuntarily) and are replaced by new employees. Calculating your turnover rate is important to understand the cost of employee turnover, analyze why employees are leaving, and take steps to mitigate these costs by reducing turnover in your company.
There are three numbers to keep track of month to month:
Average Number of Employees:
Once you have these 3 numbers, you need to calculate the average number of employees in the company every month or every year.
Add your employees from the beginning of the month and the end of the month and get the average:
S+E/2=Average # of Employees
To get your final percentage, take the number of employees who left and divide by the average number of employees for that month.
(L/Average # of Employees)x100= Monthly/Annual Turnover Rate (%)
Depending on your industry, this number might be really high or really low. The number can help you point out if there’s a pattern to your employees leaving (ie. timing). What becomes important is looking at the profiles of the employees that are leaving, when they’re leaving and why they’re leaving.
Involuntary Turnover: when you fire an employee.
Voluntary Turnover: when your employees resign or quit.
Is there a pattern to turnover in your company? Is there a higher turnover among your hourly workers vs. salaried workers? Is it related to their performance or are your competitors attracting your workers with better benefits or higher compensation?
Once you consider your employee profile, you can start to take real actions to rectify the turnover rate in your organization.
Companies in the service industry by far have high turnover rates and financial stress is the leading cause of poor job performance and absenteeism. These are businesses where the majority of the workforce is making less than $25 an hour. Having some turnover is normal and a natural part of a business, but when this number is above 10% then it’s hurting your business.
What if you could improve your turnover rate by 30%? PayActiv has a proven track record in helping businesses improve employee retention and help your bottom line.
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