Step 2: Determine the Total Number of Employees During the Period Are you interested in determining your annual turnover rate, or are you more concerned about how many people you may be losing during a specific time of year, like after bonus payouts or during the holidays? Different time periods will provide unique insights into possible issues you may need to address. The first step in calculating your turnover rate is to decide what kind of time period you will be looking at. Let’s break down how you can fill out each part of this equation. Overall Employee Turnover rate = ( Number of employees who left during a specific time period / Average number of employees during that time period) x 100 A basic equation for determining total turnover is as follows: While many factors influence turnover rate, calculating the turnover rate is straightforward.
But how can you accurately track turnover in your business? Simply put, a high employee turnover is an issue that no company can afford to overlook. This, in turn, can have a negative impact on employee morale, service quality, customer retention, and more. Employees begin to view their positions as unstable or start to think of the organization as a pit stop on the way to something better. When members of your workforce see their colleagues leave, it can take a major toll on your company culture. Increased employee turnover also hurts employee engagement. And there’s no guarantee that the new employee you bring on is going to stay long enough to offset that investment - research from Lattice says that approximately 52% of employees who have been with their companies for fewer than three months (and 60% who have been there for fewer than six months) are actively looking for new jobs. How does this impact translate into dollars? Every business is different, but SHRM suggests that the average base cost of bringing on a new hire is about $4,700, and the total costs may be as high as three to four times the position’s annual salary. And, of course, locating and onboarding a suitable replacement means investing all over again. The employee’s job is suddenly vacant and their responsibilities either fall to another employee (potentially leading to burnout) or get put on hold (decreasing productivity). When an established employee leaves your organization, the money and time you invested in recruiting, outfitting, licensing, and training that individual leaves with them. A high turnover can reduce institutional knowledge and cut into company culture, all of which reduce your organization’s capacity to serve your customers.Įxcessive employee turnover carries with it a significant cost. It can also contribute to improved outcomes for the organization overall. The lower this figure is, the better your business will be able to recoup its hiring investments and foster valuable, loyal talent. If the 10% turnover comes from your top performers, then that number is definitely still too high. That said, most leaders agree that a turnover rate of about 10% is ideal, and Gallup agrees - provided that the 10% who are leaving represent the 10% who are least engaged in your organization. On average, US businesses during that time period saw a separation rate of 47.2%. What constitutes a ‘high’ turnover rate will vary from industry to industry - according to the US Bureau of Labor Statistics, the industries with the highest separation (turnover) rates in 2021 were ‘accommodation and food services,’ ‘leisure and hospitality’, and ‘arts, entertainment, and recreation’ with each showing a separation rate of about 75% – 85%. Turnover rate is the opposite metric to employee retention, which measures how many of your hires remain with the company. This figure gives decision-makers a clearer picture of just how big of an issue turnover is in their organization. ‘Turnover rate’, meaning the percentage of employees who leave a company during a specific period of time. ‘Turnover’ is when employees leave a company, voluntarily or otherwise.
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Here’s how you can calculate your turnover rate, how to interpret your number, and ways you can improve it. So, yes, turnover is natural - but it’s also expensive and, if you have a high churn rate, could be a sign of broader issues within the organization worth addressing. This is a natural part of working with people. Workers come and employees go in a constantly shifting dance as new positions open and veteran staffers move on to other opportunities. Employees are the foundation of any business, and business leaders sometimes take that foundation for granted - specifically, that it will always be there.
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