HR Metrics: How and Why to Calculate Employee Turnover Rate?

They normally don’t include internal movements like promotions or transfers. The employee turnover rate is a metric of the effectiveness of the human resources management system and the overall management of an organization. If the percentage of new employees who left vs. more tenured staff is a high figure for your industry, you may have some problems retaining new staff. For example, a high voluntary turnover rate might suggest that you aren’t providing employees with enough opportunities for long-term growth.

  • In order to keep track of it, you need to have a formula for calculating employee turnover.
  • In addition to this loss, employees take knowledge when they leave.
  • Turnover rate is arguably one of the most important HR and recruitment metrics to track.
  • She is a former Google Tech Entrepreneur and she holds an MSc in International Marketing from Edinburgh Napier University.

This information is easy to obtain — check your payroll system to determine the number of individuals in your employment on both days. Include all full-time, part-time and direct-to-hire temporary employees on payroll. Do not include any independent contractors; their departure from your company is a result of their contract ending, not a form of turnover.

Consult with your staff.

If you need to calculate your company’s employee turnover rate quickly, you’re in the right place – our turnover rate calculator will do it for you. Use it to figure out the value of this important HR metric, and read on if you want to find out more about it. In the article, we will describe how to calculate turnover rate, explain what is turnover rate in the first place, and show you the turnover rate formula. At first this formula sounds pretty simple, but deciding which data to include and when can be confusing.

  • One interesting and useful way to measure turnover is to see whether your new hire turnover rate is higher or lower than your overall turnover rate.
  • Your human resources department needs to design policies and develop frameworks to keep the employees engaged and satisfied so that they remain with the company for a long time.
  • Employee turnover is the percentage of employees that leave your organization during a given time period.

Most employers report turnover rates as a percentage; therefore, HR would multiply the answer in Step 4 by 100 to arrive at the monthly turnover rate. Companies with a high employee turnover rate may suffer from an unfavorable public image. For example, working in the fast-food industry is seen as undesirable due to its notoriously high turnover rates. Even if your turnover rate is lower than your industry’s average, there’s no reason to celebrate unless you can identify who leaves you. If your top performers are leaving, then you should take immediate action, otherwise your company’s performance will flag.

What is turnover rate, and what does it tell you?

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How to calculate employee turnover rate?

Our second concern is that this alternative approach allows for a changing denominator within the calculation time period. Mixing hires and terminations in a rate calculation might muddy the interpretability. One potential way to deal with this might be to include a predictor which accounts for this factor but the importance of keeping the analysis in mind is true regardless. This brings us to the turnover rate formula that we recommend for use. It is ideal to conduct market research on the pay and benefits offered by competitors for similar positions.

How to Determine Turnover Rate

A low turnover rate compared to industry standards might look awesome at first glance, but what if it’s only your best employees that are leaving? To avoid making assumptions and overlooking pervasive problems, consider the context of your turnover rate by answering the following three questions. Employee turnover is usually mentioned in a negative context.

One reason is that they typically rely on part-time and student workers who eventually move on to other jobs. Typically, positions that require high levels of skill and responsibility have lower turnover rates. Getting an accurate employee turnover rate calculation is important.

Therefore, it should be compared to the average within the company’s industry. It should not be compared across industries, as the turnover rate differs significantly in various industries. Next, use your average number of employees to calculate your turnover rate. To do so, divide the number of employees who left by your average number of employees. Then multiply that answer by 100 to get your turnover rate percentage. Naturally, every company wants to achieve the lowest employee turnover rate possible.

In July of this year, more than 4 million US employees handed in their resignation letters and started looking for other opportunities. According to the US Bureau of Labor Statistics, there were almost 11 million job openings at the end of July. Voluntary turnover is when an employee quits or leaves on their own terms. This could include but is not limited to, poor working conditions/culture, insufficient career planning that is offered, or poor compensation. James Elliott is a Strategy Manager and Writer from London, UK.

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