How To Calculate Turnover Rates

No one likes to talk about the high cost of employee turnover, but knowing where you stand is half the battle of improving.

Here's how to calculate employee turnover rates and what to do once you know your numbers.

Reviewing the rate calculation

Turnover rates are generally calculated on a regular basis such as quarterly or annually, which can show meaningful patterns.

Calculation Formula

Start by calculating the average number of employees for the period. To do this, add: (# of employees at the beginning of the period) + (# of employees at the end of the period) and divide by two.

1. Divide: (# of employees who separated from the company during that period) by (average # of employees)

2. Multiply: (# calculated in step 2) x 100 = turnover percentage

First-year turnover rate

The first-year turnover rate for new hires is a simple calculation. Use only the number of separated employees who worked at the company for less than a year. Replace the average number of employees with the total number of separations for one year.

1. Calculate the total number of employee separations within a 12-month period.

2. Divide: (# of separated employees who worked at the company less than 1 year ) by (# of all separations)

3. Multiply: (# calculated in step 2) x 100 = turnover percentage

OK, I know my numbers...now what?

Each company should determine its ideal turnover rate, especially if a higher rate has led to an improved workplace. Turnover should effectively accomplish two things: decrease the flow of top performers leaving the company and increase the flow of top performers brought into the company. The turnover rate for top performers should ideally be as close to 0% as possible, and the rate for under performers should ideally be above 10%.

Regularly completing an employee turnover calculation as a business owner or manager also:

• Provides a better understanding of the time and money you spend looking for, interviewing and hiring new employees.

• Assists in pinpointing where your company may be lacking in terms of employee satisfaction and engagement.

• Brings awareness to employee separation costs such as unemployment compensation.

• Allows you to assess your talent acquisition strategy and determine its effectiveness.

The turnover rate calculation provides valuable insight into your company’s leadership, procedures and culture. It can show you how much money you’re spending on hiring and training new employees as a result of turnover.

One way to improve costs associated with high turnover rates is to partner with a firm that offers a Monthly-based Recruitment Platform that integrates well with your currently existing team. It can be a much more cost-effective solution than paying a percentage for each individual Direct Placement or paying multiple Referral fees.

Want to know more? Contact the team at B3 Resource Solutions today! We can work directly with your organization to fulfill all of your hiring requirements without the excess overhead to your bottom line.