How to Calculate Employee Turnover
The constant influx and outflow of employees can negatively impact even the most carefully planned company strategies. In such situations, it’s important to calculate employee turnover to ensure the company’s growth.
Employee turnover rate is a measure of the number of employees leaving a company in a given time. The turnover rate is calculated by dividing the number of employees who left by the average number of employees. This measure can be useful for evaluating the efficiency of the company’s management and its retention rate.
Continue reading to learn more about employee turnover and how to calculate it.
What is Employee Turnover?
Employee turnover refers to the proportion of employees who leave a company within a specific time. Businesses usually calculate turnover rates on an annual or quarterly basis.
They can also calculate turnover rates for newly hired employees to evaluate the efficiency of their recruitment policy. Employee turnover is also an excellent indicator of the efficiency of HR departments and HR management software at the workplace.
Why is Employee Turnover Important?
Retaining employees is more cost-effective than replacing them. Starting the recruitment process from scratch also wastes precious company time and resources. If a company’s turnover rate is high, it can impact the business in the following ways:
- Additional costs incurred in the process of finding a replacement
- Low morale among those who are still present
- A shortage of competent and skilled staff
- A lack of confidence in the ability of the team
Since employee turnover can have far-reaching effects, it is important for businesses to monitor it and address it in time.
Difference between Voluntary and Involuntary Turnover
A voluntary turnover occurs when an employee voluntarily leaves an organization, usually to work for another company or move to be with their family. Involuntary turnover occurs when employees are forced to quit a company, sometimes against their will.
Involuntary turnover can take several forms, the most common of which are retirement and termination. Businesses can get more insight into their turnover rate by calculating voluntary and involuntary turnover rates independently.
How to Calculate Employee Turnover
Before you begin calculating the employee turnover rate, you must first determine the period over which you want to perform the computations. The turnover rate can be calculated on a monthly, quarterly, or yearly basis.
Next, follow these three easy to calculate your employee turnover rate:
Gather Necessary Information
In order to determine the employee turnover rate, you must gather three types of data:
- The total number of employees your company had at the beginning of the specified time period
- The total number of employees that your company had at the end of the specified time period
- The total number of employees who left your firm during the specified time period
Once you have gathered this information, you can move on to the next step.
Calculate the Average Number of Employees
Before you can proceed with calculating your employee turnover rate, you must first determine the average number of employees in your organization.
To do this, you need to add the number of employees at the start of the period (for example, the beginning of the year) to the number of employees at the end of the period (for example, the end of the year).
The following formula can be used to obtain the average number of employees:
Avg. employees = [(number of employees at the beginning + number of employees at the end)/2]
For instance, let’s say your company had 42 employees at the beginning of the year and 62 employees at the end.
During the same time period, 13 employees quit their positions. You can easily determine your average employee count by adding 42 and 62 and then dividing the result by 2. Average number of employees = 62 + 42/2 = 52
Calculate the Turnover Rate Percentage
The next step is to determine your turnover rate by using the average number of employees. To do this, all you have to do is divide the number of employees who left by the average number of employees in your organization. You can then multiply the resultant value by 100 to obtain the percentage for employee turnover.
You can calculate your turnover rate percentage with this formula:
Annual turnover = [(number of employees who left/average number of employees)*100]
How to Reduce Employee Turnover Rate
While a certain amount of employee turnover is expected, it is necessary to analyze the reasons behind your higher turnover rates and take prompt action to address this issue. The most effective strategy for reducing high turnover is to set up a metrics-collecting system.
You can easily calculate your employees’ payroll, but you need to devote more attention to determining where the breakdown occurs in the organization.
How to Improve Employee Turnover Rate
You can improve your company’s turnover rate by following the guidelines below:
- Gain a better understanding of the inner workings of your company by implementing an employee monitoring system such as Wolfeye.
- Recognize that there is room for improvement in your employee turnover rate and begin communicating with your staff to address the issue.
- Provide training and career development opportunities for your employees.
- Analyze the hiring processes to identify and address potential roadblocks causing employee attrition, such as poor hiring practices.
- Evaluate current working conditions and make any necessary adjustments, such as revising job descriptions, changing titles, allowing for more leeway in scheduling and work formats, and so on.
How to Utilize Wolfeye to Address High Turnover Rates
Wolfeye is an employee monitoring software that can help combat and gain a better understanding of the high employee turnover rate at your company.
This software provides employers with various metrics that help them gain a better understanding of the inner of their company. It can also help businesses track metrics related to employee turnover, such as dissatisfied workers, low productivity, and so on.
Calculating the turnover rate is crucial for diagnosing any potential company problems. You can use employee monitoring software such as Wolfeye to identify and address high turnover rates at your company.