How to Calculate Employee Turnover at Your Company

Published May 27, 2015

Numerous reasons can be listed for employees leaving their workplace. Some are positive and some, not so much. Sometimes the departures are voluntary and sometimes employees get fired. But the focus of this article is on how to calculate employee turnover, so we won’t dwell on the reasons for staff departures in this particular post.

You can calculate the rate of turnover on either a monthly or an annual basis.

To demonstrate, let’s do an example of an annual calculation for a small company. For example: the company has 10 employees and over the course of the year, 2 staff leave. That’s a turnover rate of 20%.  If we take a much larger company, with 500 employees, and 5 employees depart every month, that translates into an annual turnover rate of 12%.

Once you begin to gather and examine the numbers on a routine basis, you can begin to use them to make important business decisions about your company’s workforce.

A key distinction can be made between voluntary and involuntary departures. It’s important to know your overall turnover rate, but you should track your voluntary turnover separately. This number can be quite different than the overall number. When an employee chooses to leave voluntarily, the factors might include job dissatisfaction or unexpected working conditions, the lack of training, advancement or performance feedback, or stress and family demands, although compensation and benefits shouldn’t be factors if these were well-explained at time of hire. By examining reasons for departure in light of the numbers, you can identify problem areas and make adjustments in your company.

What drives discussions about employee turnover in the HR world? It’s costs, of course. The cost of losing an employee and having to hire another one are high and estimates are that one departure represents a cost of 50% of that employee’s salary. And that affects your bottom line. The cost of losing employees during their first year is even higher. That’s because staff aren’t fully productive in the initial months on the job. To replace an employee, your company may have to advertise the job or otherwise recruit applicants, interview candidates, and train and orient them after hiring.

You can benchmark your turnover rates against those of your competition to get some idea of how you’re performing. The comparison should give you some clues and enable you to make better decisions about the whole range of staffing and HR matters from your hiring processes to your compensation and benefits package.

At Punchtime, we’ve documented the benefits of our app for you and your employees. We think it could help reduce your turnover rates and improve your company’s overall viability. Check it out!