Quick Summary
We break down the process of calculating employee turnover into clear, actionable steps, and highlight best practices to maximize insights and address workforce challenges effectively. With expert guidance and tools like Checkwriters, you’ll learn how to simplify complex HR processes and transform turnover metrics into actionable strategies. Check out our blog and podcast to gain the knowledge and resources needed to drive organizational success.
Looking to Calculate Employee Turnover for Your Organization?
Replacing an employee can cost organizations between 50% to 60% of the their annual salary, with total turnover costs ranging from 90% to 200% of the annual salary. This indicates why calculating employee turnover is a must, so that you can pinpoint trends, reduce costs, and improve retention strategies.
In this Checkwriters guide, we’ll break down everything you need to know about calculating employee turnover, but first…
Why Listen to Us?
At Checkwriters, we simplify tracking and reporting turnover with our comprehensive HR platform.
For instance, Berkshire Hills Music Academy maintained compliance in securing grants by utilizing our custom reporting and analytics tools, maximizing the benefits of our user-friendly interface and visual data presentation.
What Is Employee Turnover?
Employee turnover measures the rate at which employees leave your organization within a specific timeframe. It includes voluntary exits, such as resignations, and involuntary exits, like layoffs, providing a clear picture of workforce stability.
The formula for calculating employee turnover is:
(Number of Separations ÷ Average Employee Count) × 100 = Turnover Rate (%)
The outcome is expressed as a percentage, making it easy to compare over time.
Employee turnover is a critical indicator of workplace satisfaction, organizational health, and the effectiveness of recruitment and retention efforts.
Why Should You Calculate Employee Turnover?
- Identify Retention Issues: High turnover rates signal underlying issues such as poor job satisfaction or management challenges, enabling you to address them effectively.
- Control Costs: Employee turnover is expensive. Tracking it helps quantify hiring, training, and productivity losses, allowing for better budgeting and cost control.
- Improve Recruitment: Turnover analysis highlights patterns, helping refine hiring strategies to attract candidates who are more likely to stay.
- Boost Employee Engagement: By understanding why employees leave, you can develop targeted initiatives to encourage engagement and loyalty.
6 Effective Steps to Calculate Employee Turnover
1. Define the Time Period
Accurately measuring turnover starts with defining a clear timeframe for analysis. Common intervals include monthly, quarterly, or annually, depending on your organizational needs and goals. Select a timeframe that aligns with your operational cycles and workforce dynamics.
Ensure consistency in your chosen timeframe across all metrics to avoid misinterpretation of data. For instance, you can compare monthly turnover rates if you are assessing short-term changes, or annual rates for long-term trends.
We can also look at it like this:
A mid-sized software development company is facing high turnover among its junior developers, prompting the HR team to analyze and address the issue. To start, the company can examine employee turnover over the past year to identify long-term trends. By selecting January 1 to December 31 as the timeframe, they align the analysis with their fiscal year and hiring cycles, ensuring a clear picture of patterns over time.
Key Considerations:
- Align the timeframe with hiring and separation trends (e.g., seasonal employment patterns).
- For multi-location organizations, ensure timeframes account for differences in regional workforce dynamics.
- Document the timeframe in your records for repeatability and transparency.
Consistency in timeframe selection allows for meaningful trend analysis and actionable insights. Our data tracking features can help you easily standardize and document your timeframe selection process.
2. Gather Separation Data
Accurate separation data is critical for calculating turnover. This includes voluntary exits, such as:
- Resignation for career advancement or better opportunities elsewhere.
- Retirement after reaching eligible age or tenure.
- Personal reasons, such as relocation or caregiving responsibilities.
- Voluntary buyouts or incentivized early exits.
- Departure for educational pursuits or skill development.
It also includes involuntary exits such as:
- Termination due to poor performance or misconduct.
- Layoffs caused by budget cuts or restructuring.
- Workforce reductions during mergers or acquisitions.
- Contract expiration without renewal.
- Health-related discharges when the employee cannot continue working (non-voluntary).
It’s best to classify each departure to understand the root causes of turnover and identify patterns that may require action.
When gathering this data, ensure consistency by using clearly defined criteria for what constitutes a “separation.” Make sure to exclude temporary leaves (e.g., parental leave) and focus only on permanent departures.
If we continue the previous example, let’s say the HR team of the software development company pulls data from their HR software and identifies 25 separations during the year, of which 20 are voluntary resignations and 5 are terminations. They would classify these separations for deeper insights.
Steps for collecting data:
- Pull separation data directly from HR systems or payroll reports to ensure accuracy.
- Verify that exit dates are aligned with the reporting period.
- Break separations into categories (e.g., voluntary, involuntary) for deeper analysis.
Our Tracking and Compliance system simplifies this process. It provides an organized repository of employee records and automated reports, ensuring you capture comprehensive and accurate separation data.
Cross-check data for anomalies, such as missing dates or incorrect classifications. Reliable separation data forms the foundation of an accurate turnover calculation and deeper organizational insights.
3. Calculate Average Employee Count
The average employee count is essential for accurate turnover calculations. This figure reflects the typical workforce size during the reporting period, accounting for fluctuations such as hires or separations.
To calculate:
- Add the number of employees at the beginning and end of the period.
- Divide the sum by two.
Suppose that, at the beginning of the year, the software development company had 120 employees. By the end of the year, they had 140. The average employee count is calculated as:
(120 + 140) ÷ 2 = 130 employees
You can make these common adjustments:
- For large organizations, calculate averages per department or location for detailed insights.
- In seasonal industries, calculate separate averages for peak and off-peak periods to maintain accuracy.
Ensure your data reflects only active employees during the timeframe. For instance, exclude temporary contractors unless they impact turnover analysis.
Using our reporting and analytics, you can streamline this process by accessing employee headcount data over custom timeframes. The system’s automated reporting minimizes errors and simplifies adjustments for accuracy.
Cross-check the calculated average with other HR records, such as payroll, to ensure consistency. A precise average employee count ensures the next steps in your turnover analysis yield actionable results.
4. Apply the Formula
With separation data and the average employee count prepared, you can apply the turnover formula:
(Number of Separations ÷ Average Employee Count) × 100 = Turnover Rate (%)
Ensure all data aligns with the same timeframe to maintain accuracy. For instance, using the data from the previous step, the HR team of the company calculates the turnover rate:
(25 separations ÷ 130 average employees) × 100 = 19.23% turnover rate
Key considerations:
- Calculate turnover separately for voluntary and involuntary exits to uncover specific trends.
- Break down turnover by departments or roles to identify problem areas.
- Consider calculating both gross and net turnover if internal transfers impact your workforce significantly.
Our automated reporting capabilities can handle these calculations for you, saving time and ensuring precision. Our system can also categorize turnover for enhanced analysis.
Double-check your results to avoid discrepancies. Accurate calculations provide the foundation for actionable turnover insights, helping you understand and address workforce stability issues.
5. Analyze the Results
Turnover percentages are most valuable when they are contextualized. So, you will need to compare your calculated turnover rates against industry benchmarks and internal historical data to assess performance. Identify the trends over time and look for fluctuations tied to specific events or seasons.
Break down the results to uncover actionable insights:
- By Department: High turnover in a specific department may signal management or workload issues.
- By Role: Positions with high turnover could indicate poor job fit or lack of advancement opportunities.
- By Time Period: Compare periods to identify seasonal patterns or impacts from organizational changes.
Suppose the HR team compares their turnover rate of 19.23% to the industry benchmark of 15% for similar software development companies. They may notice most separations occurred in the first six months of employment among junior developers, signaling issues with onboarding or job satisfaction.
Interpreting turnover data accurately requires some nuance. A slight increase in voluntary turnover could be acceptable during periods of industry-wide growth, whereas a spike in involuntary turnover might signal deeper challenges.
Fortunately, our analytics features enable easy visualization of trends, such as turnover spikes by location or tenure. This helps pinpoint exact areas needing improvement.
Finally, engage leadership and HR teams in discussions around the results. Use the analysis to drive targeted interventions, such as improving recruitment, enhancing employee engagement programs, or addressing workload imbalances. This step turns data into actionable strategies for long-term organizational health.
6. Identify Actionable Insights
Interpreting turnover data is only valuable if it leads to action. You can use the insights from your analysis to address challenges and improve employee retention.
It’s best to focus on trends that directly impact business performance, such as high voluntary turnover in critical roles.
Start by identifying root causes:
- Conduct exit interviews to understand why employees are leaving.
- Analyze correlations between turnover and factors like tenure, department, or workload.
- Assess employee satisfaction surveys for recurring concerns.
For roles with persistently high turnover, consider adjusting job responsibilities, improving compensation, or offering professional development opportunities. For voluntary turnover spikes, focus on employee engagement initiatives to boost satisfaction and loyalty.
For example, let’s say the software development company implements a mentorship program for junior developers and revamps their onboarding process to address the previous findings. They might also use a performance review and management platform to track employee engagement and satisfaction in real time, targeting issues early to reduce future turnover.
It’s important to communicate the findings and proposed solutions clearly to leadership. Prioritize strategies with measurable outcomes, such as reducing turnover in high-value positions or increasing tenure in key departments.
Finally, create a regular review process for turnover metrics. Ongoing evaluation ensures that retention strategies remain effective and adaptable to workforce changes. By using your turnover analysis as a foundation for continuous improvement, you can transform workforce challenges into opportunities for growth.
Best Practices for Calculating Employee Turnover
1. Maintain Data Integrity
High-quality data is critical for reliable turnover analysis. Inaccurate or incomplete information skews results and leads to ineffective decisions. It’s important to regularly audit your HR systems to ensure data integrity. For instance, confirm that separation dates, headcounts, and employee classifications are correct and up to date.
At Checkwriters, our automated platform can help by providing streamlined data collection and reporting. Ensure everyone involved in data entry and management understands the importance of accuracy and consistency. Train your HR staff to follow standard operating procedures, particularly when categorizing separations or updating headcount data.
Data integrity also involves regularly reconciling turnover calculations with other metrics, such as:
- Total Employee Separations: Accurate count of employees who left during the period.
- Employee Classification: Differentiation between full-time, part-time, and contractors.
- Separation Types: Breakdown of voluntary vs. involuntary exits.
- Headcount at Start and End: Verified numbers for beginning and end of the selected period.
- Duration of Employment: Average tenure of employees who left, ensuring accurate categorization.
- Department or Role Data: Accurate assignment of employees to specific teams or positions.
- Exit Dates: Precise dates of separations to align with the reporting timeframe.
- Rehire Data: Inclusion of employees who rejoin after leaving to avoid double-counting.
Cross-verifying this data ensures that turnover insights align with broader organizational goals.
2. Focus on Contextual Analysis
Turnover data rarely tells the full story on its own. To draw actionable insights, consider the context surrounding your numbers. Think, for instance, if you’re experiencing high turnover due to external factors like industry-wide talent shortages or economic fluctuations.
Contextual analysis can also include benchmarking against competitors or industry standards. A turnover rate of 15% may seem high in isolation but might actually be lower than the average for your sector. Similarly, seasonal patterns— such as higher exits in retail after holiday seasons— must be factored into your conclusions.
Dive deeper into internal contexts, such as organizational changes. Have recent restructuring efforts or policy shifts affected retention? By asking these questions, you can avoid misdiagnosing turnover causes and create targeted strategies based on nuanced insights.
You can also compare your new hire turnover rate to your overall turnover rate. This can provide valuable insights into your hiring and onboarding processes. A higher new hire turnover rate may indicate issues that need addressing to improve employee retention.
3. Segment Data Strategically
If you take a one-size-fits-all approach to turnover analysis, there’s a possibility of missing critical details. Segmenting data allows for a more targeted understanding of trends and challenges.
Divide turnover rates by role, department, location, or tenure to identify specific areas of concern.
For instance, if entry-level positions show high turnover, it might indicate poor onboarding or unrealistic job expectations. Conversely, high turnover in senior roles could highlight leadership issues or insufficient opportunities for career growth.
Segmentation also helps in prioritizing solutions. A 20% turnover rate in a low-impact role might be acceptable, while the same rate in a key department could require immediate intervention.
Strategic segmentation should also account for performance levels. Analyzing turnover among high-performing employees versus low performers provides deeper insights into retention strategies. Retaining top talent is more critical to long-term success than reducing overall turnover indiscriminately.
4. Leverage Predictive Insights
Turnover data isn’t just for retrospective analysis— it can also serve as a predictive tool. Use historical trends to forecast future challenges and prepare proactive solutions.
For example, if you notice consistent turnover spikes during certain periods, you can plan ahead by ramping up recruitment efforts or implementing employee engagement initiatives before the problem escalates. Similarly, tracking how turnover correlates with job satisfaction scores or exit interview feedback allows you to identify potential risks early.
Modern HR tools can assist in developing predictive models by integrating turnover data with other metrics, such as employee engagement and performance reviews. Predictive insights empower organizations to move from reactive to proactive retention strategies, ultimately saving time and resources.
5. Integrate Feedback Mechanisms
Turnover analysis should never happen in a vacuum. Direct employee feedback provides invaluable context to complement your data. Use tools like exit interviews, stay interviews, and satisfaction surveys to uncover underlying causes of turnover.
For example, if turnover data highlights an issue with a particular department, feedback mechanisms can reveal whether the problem stems from leadership, workload, or other factors. Stay interviews, in particular, allow you to address concerns of current employees before they decide to leave.
Ensure that feedback collection is ongoing and systematic. You should periodically reassess your methods to make sure you’re asking the right questions and capturing meaningful insights. Integrating this feedback into your turnover analysis creates a holistic approach to workforce management, allowing for more informed and effective decisions.
Streamline Your Employee Turnover Calculation with Checkwriters
Calculating employee turnover is a powerful way to understand workforce dynamics and improve retention strategies. By following the outlined steps and best practices, you can gain actionable insights to enhance your organization’s performance. Using tools like Checkwriters make this process seamless and efficient.
Our all-in-one HR and payroll platform simplifies data collection, reporting, and analysis. With features like employee tracking and advanced analytics, we can help you uncover and act on turnover trends with confidence.Contact Checkwriters today to turn down turnovers and transform your workforce management!