Employee turnover rate is the percentage of employees that leave a company in a specific period, such as for the month, quarter, or year. The process for how to calculate employee turnover rate is fairly straightforward. Simply divide the number of employees that leave within a specific period by the average number of employees that work during that period and multiply the result by 100. You can also use the free calculator below for an easier time.
Knowing your turnover rate helps you identify potential issues, assess employee satisfaction, and check how your company compares to industry benchmarks. It also allows you to evaluate your recruitment efforts, especially if many of your leavers are new hires. This can save you time and money from constantly hiring and training new employees.
Steps to Calculating Employee Turnover Rate
The computation is fairly simple, provided you have all the necessary data on hand and know the formula to use. Here’s how to calculate your employee turnover rate in four easy steps.
Step 1: Identify the Measurement Period
You need to decide the measurement period for which you want to calculate. Employers typically use quarterly or annual durations—but you can also measure this on a monthly basis.
Step 2: Collect the Required Data
The staff turnover calculation formula requires three data items:
- Number of employees who left the company for a specific period
- Number of employees at the start of the period
- Number of employees at the end of the period
After you have collected the necessary information, you can start with the employee turnover rate calculations.
Step 3: Compute the Average Number of Employees
The first thing to calculate is the average number of employees for the selected period. So, if you decide to measure staff turnover every month, you need the total worker count at the beginning and end of that month and then divide it by two.
Here’s the general formula and a sample scenario.
Ave. # of Employees = | Number of Employees at Start of Period + Number of Employees at End of Period |
2 |
Scenario: Let’s say you had 105 workers at the beginning of May and 99 employees at the end of the same month. Your average number of employees would be 321.50. The computation would look like this:
(105 + 99) ÷ 2 = 102 Average Worker Count
Step 4: Compute the Employee Turnover Percentage
Now that you have your average worker count, you can use the below equation to determine employee turnover rates.
Turnover Rate % = | # of Employees Who Left Over a Specific Period | × 100 |
Average Number of Employees for the Period |
Employee Turnover Rate Calculation Examples
To help you apply this formula, I’ve prepared scenarios for monthly, quarterly, and annual computations. Click on the tabs to view how to calculate the employee turnover rate by these periods.
Analyze Your Employee Turnover Rate
Now that you know the basic turnover rate formula, you can assess whether that number is high or low for your company. Generally, a high turnover rate is bad news, while a low turnover rate indicates a healthy organization. To get a more accurate picture, consider the following factors:
- Your rate over the past couple of periods: It will help you determine the baseline and see if your turnover rate is trending up or down.
- Any unique or outlier events: Any difference in your turnover rate may be a result of certain outlier events, such as a merger or restructuring.
- Whether employees are leaving voluntarily vs involuntarily: Voluntary turnover is when employees leave the organization on their own accord, whereas involuntary turnover happens when an employee gets fired or laid off. If there are more employees who leave voluntarily, it could be a reflection of dissatisfaction or lack of engagement among employees.
- Industry your organization belongs to: Some industries have a higher turnover rate than others. You can visit the Bureau of Labor and Statistics (BLS) website for the latest separation statistics or check related surveys and studies from reliable companies, such as LinkedIn. Once you compare your data with the industry average, you can determine if you have high or low turnover rates.
To get more insight into your company’s turnover rate, you should also ask the following questions:
- What types of employees are leaving? Are they senior employees or new hires?
- Why are they leaving? If the senior employees are quitting, they might have experienced a plateau in their career or need an upskill. If it’s the new hires, perhaps there are unmet job expectations. You may also want to take a look at your hiring process, including the position description used for the job posting, as there might be inconsistencies between what’s on paper and the actual job responsibilities.
- When do they leave? Is there a pattern in which particular employees quit? Do they leave after their performance review or several months after a restructuring?
- What department has the most number of quits? Are they dissatisfied with their salaries, positions, or managers?
If you want to get a clearer picture of your company’s overall organizational health, you should also consider doing surveys and stay interviews with your current employees. This will help you determine what motivates them to stay in their jobs, enabling you to identify the qualities of your business that impact overall employee engagement, satisfaction, productivity, and turnover.
Is Employee Turnover Bad?
Even with the negative impacts in mind, not all turnover is bad. There are instances in which turnover can be beneficial for a company. Those benefits may include the following:
- Strengthened company culture: If you have employees who do not believe in your mission, vision, or core values, it may help your company culture for those employees to move on.
- Increased opportunities: Employees leaving creates opportunities for the organization and current workers. It may enable a high-performing employee to move into a role with greater responsibility. Additionally, it can allow the company to avoid complacency and group thinking by bringing in fresh perspectives and ideas from new employees with diverse backgrounds and experiences.
- Exposes hidden problems: When a high-performing employee leaves, many companies learn that the employee may have been covering for issues that need fixing—lack of people management skills, inadequate systems, nonexistent processes, or underperforming co-workers, to name a few. Being alerted to these issues now may prevent bigger problems later.
Frequently Asked Questions (FAQs) About Employee Turnover Rate
Employee turnover is typically overseen by the human resources (HR) department of an organization. The HR department is responsible for managing all aspects of the employment lifecycle, including hiring, onboarding, performance management, and offboarding.
Employee retention is important as it helps contribute to your company’s financial success and organizational health. By investing in employee retention, you can save money, increase productivity, foster a positive work atmosphere, and build a reputation as an employer of choice.
A “good” rate can vary widely depending on the industry, with some industries experiencing much higher or lower turnover rates. You should track your company’s turnover rates and compare them to industry benchmarks to determine what a good turnover rate is for their particular situation.
Bottom Line
Knowing how to calculate the employee turnover rate allows you to determine the frequency of staff separations. Understanding why this happens also enables you to make the adjustments necessary to retain your valuable workers and manage employees, which helps boost staff morale and provides savings on employee replacement costs.
