How To Calculate Turnover Rate Percentage
A business can analyze its turnover rate by dividing the number of terminations by its average number of employees. Should the turnover exceed industry norms or come out to be higher than previous years, the company should then consider analyzing the reasons for the high turnover rate, particularly since time spent recruiting and the additional training required for new employees can become rather costly for a business.
The turnover rate represents the percentage of employees that the company loses during that period of time. Turnover can happen for any number of reasons, including a lack of transparency or diligence in the hiring process, employees failing to have the correct skills for the position or employees who begin the job with misleading wrong expectations of what is to be expected of them. Likewise, employees may also leave a job for more interesting work, a greater work-life balance or for a higher salary. In other cases, the high turnover rate could result from employees who are unhappy with management or co-workers as well as from employees who are simply aging and ready to retire.
The basic formula for calculating a company’s turnover rate is to take the number of losses such as individuals who are dismissed, who quit, who have been transferred or those who have retired, and divide this number of employees by the average number of employees at the company. It is important to refrain from including employees who were transferred to another department or those who were promoted.
In other words, you can find the average number of employees by taking the number of workers at the start of the term and adding it to the number of workers at the end of the term and dividing that number by two. For instance, if you had 20 employees at the start of the year, 50 employees at the end of the year and seven separations, you would add 20 and 50 to get 70 total employees. Then, take the seven separations and divide it by your total number of employees, 70, in this case, to get 0.10, or 10 percent.
External and internal sources can be used to analyze a company’s turnover rate, so compare your statistics to averages in your industry, if possible. You can compare your rates against other companies and time periods to see how your company has grown or decreased, and if your rate is higher than most, you might have a systemic problem within your business.