How to Calculate Employee Turnover in 4 Steps

When you have a high turnover rate, it causes problems for your company. Hiring and retraining new employees is expensive. Plus, high turnover can really hurt your employees’ morale.

If you’re dealing with a lot of turnover, you need to find a strategy to reduce it. But first, you need to calculate your turnover rate to see where the problem actually is. Then you can figure out ways to bring that number down.

Step One: Determine What You Are Calculating

If you’ve ever wondered what employee turnover is or why it matters, you’re not alone. The turnover rate is basically how fast you’re replacing existing employees with new ones.

This rate gets affected by resignations, layoffs, or firing someone. Even positive changes like retirement bump up your turnover rate. If you’re streamlining your work processes, you may also see higher turnover because of job elimination.

The whole point of calculating your turnover rate is to see if it’s actually a problem. The only real way to do this is by deciding what kind of turnover you want to measure. You could include all job losses or replacements. Some managers choose to include everything except retirements.

Step Two: Determine the Average Number of Employees

Once you figure out what you’re tracking, the next step is calculating the average number of employees. You’ll do this for whatever time period you want to compare, which is usually a one-year period.

Take the number of employees you had at the start of the year and the number you still had at the end of the year. Add these two numbers together, then divide by two. That’s your average number of employees.

Let’s look at Evergreen Subs as an example. At the start of the year, they had 22 workers. By year’s end, they had 18 workers. 18 plus 22 equals 40. Divide that by 2 to get an average of 20 workers.

Step Three: Calculate Your Turnover Rate

Now it’s time to calculate your actual turnover rate. First, figure out how many employees left during the year.

Then divide this number by your average number of employees. To turn this into a percentage, multiply by 100. That’s your turnover percentage.

Back to our Evergreen Subs example. Last year, they had four workers quit and get replaced. We divide 4 by 20, then multiply by 100.

This gives us a turnover rate of 20 percent. While this might be high for the tech industry, it’s actually extremely low for the food industry.

Step Four: Translate to Any Period

You can repeat this process as often as you need to. If you want to see whether your turnover rate is getting better, you don’t have to wait until next year. Compare your turnover rate between different months or quarters instead.

For example, Evergreen Subs lost one employee last month. At the start of the month, they had 20 workers. They had 19 workers at the end because they hadn’t hired a replacement yet.

This means their average number of employees was 19.5. We divide 1 by 19.5 and multiply by 100 to get a turnover rate of 5.12 percent.

Looking at turnover over shorter time frames lets you see if changes in human resources, new wellness programs, or other factors are making a difference. It also shows you seasonal patterns.

If your company recently started a new project, you can see whether the project is causing excessive stress and high turnover. You might also want to calculate turnover rates for individual projects to see if different projects and managers are harder for employees to handle.

The Cost of Employee Turnover

Business managers know that disengaged employees lead to higher turnover rates. When employees aren’t happy with their job, they leave. For employers, this turnover gets expensive fast.

You have to spend money to replace lost employees through recruitment ads, interviews, background checks, and other hiring costs. An estimated 70 percent of employers struggle to replace an employee.

Once you finally find a new hire, you still have to pay for training them and other onboarding costs. If the new employee doesn’t work out, you get to pay all those costs again.

Use This Information to Prevent Turnover

Once you’ve gathered information about your turnover rate, the next step is figuring out what to do with it. Take some time to understand why your employees are leaving.

This might mean gathering demographic details like employees’ ages to see if older or younger workers are more likely to leave.

You may also want to conduct exit interviews to ask workers directly about changes you can make to improve retention. Once you know why employees are leaving, you can work to prevent it from happening.

Employee Turnover Isn’t Always Bad

Sometimes, employee turnover can actually be a good thing. If you have a lazy employee, it’s probably better for them to quit than to keep paying them. Likewise, it’s great when someone retires after enjoying a long career with your company.

Aiming for 0 percent turnover isn’t a good idea because some turnover is healthy. Some reasons are completely unavoidable. No matter how great your company is, you can’t stop employees from moving to another state to be closer to family.

Your main goal should be learning what your turnover rate is, why turnover happens, and what you can do to keep it reasonable.