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.
Numbers to track
There are three numbers to keep track of month to month:
- Employees at the start of the month/year (S)
- Keep track of how many employees you start out with and make a note of which employees have been there for a while and who is new.
- Employees at the end of the month/year (E)
- Again, keep track of the employees that are leaving and what category they fall into. Is there a particular department they seem to be leaving from?
- Employees who left (L)
- Keep an eye on the profile of the employees that are leaving. Is it seasonal workers? Is it long time employees?
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
Calculate Turnover Rate
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 (%)
What The Numbers Mean
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.
- Are you losing high performing/highly qualified employees?
- Is it a certain position?
- Is there a certain time of the year when you notice more employee turnover?
- Does this correlate to certain seasons in your industry?
- The big one: Why are employees leaving?
- This could be a multitude of factors, which is why it’s important to conduct thorough exit interviews. The more you know, the more you can do in the future to prevent or diminish employee turnover.
Understanding employee turnover
Involuntary Turnover: when you fire an employee.
- What does this say for the types of people you’re hiring?
- Are you casting a wide enough net to get a diverse applicant pool?
Voluntary Turnover: when your employees resign or quit.
- Is there a common factor that all your ex-employees state for quitting?
- Is there a certain department that has the highest turnover rate?
Why are employees leaving?
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.
Average Yearly Turnover Rates by Industry in 2018*
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.
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