Employee Turnover Calculation

It’s a fact that people will leave your company, but it’s important you measure this correctly.

Measuring employee turnover can highlight any issues and help you to improve staff retention.

By using a simple employee turnover calculation, you can get on top of your staff turnover. This will also help you maintain your business reputation and avoid unnecessary hiring and training costs.

In this guide we’ll explain the costs of employee turnover, what a good turnover rate is, and how to calculate your own.

What is employee turnover rate?

Employee turnover rate is the number of employees that leave your business in a specific amount of time. This rate is typically calculated annually, but you can also calculate it quarterly or six-monthly.

For example, if you operate in the hospitality or retail industry, you may want to know your turnover rate following the holidays. This will give you an employee turnover calculation for a specific quarter of the year.

How to calculate employee turnover rate

Calculating your employee turnover rate can seem a scary thought. But don’t worry, the employee turnover rate calculation and formula are simple to follow. The below labour turnover calculation will give the annual rate for your business.

  1. Find the average number of employees in a year. Do this by adding the number of staff at the beginning and end of the year, and divide by two.
  2. Divide the total number of leavers in a year by the average number of employees in the same period.
  3. Multiply the number by 100, this gives the turnover rate as a percentage.

By using the above annual employee turnover calculation formula, you can see how many staff are leaving each year. You can also use the calculation to break it down into a quarterly or monthly basis.

Costs of employee turnover

Employees leaving your company bring both financial and non-financial costs. Financial outgoings will come from hiring replacements, advertising the job and onboarding new starters.

Non-financial costs could be a loss of morale and productivity in remaining employees or a loss of knowledge and expertise.

Keeping your employee turnover rate as low as possible should be one of your main priorities. A team that works together over a period of time will have stronger working relationships.

How to calculate the cost of employee turnover

Calculating the cost of an employee leaving is a simple process, but can go a long way to understanding how much it actually sets you back.

Working out the cost can show you how important it is to reduce your staff turnover as much as possible.

Employee turnover costs can be broken down into five areas:

  • Benchmark employee costs: The total amount of the employee’s compensation (salary and benefits owed).
  • Vacant position costs: The number of days the position remains vacant multiplied by the rate of benchmark costs. Simply, it’s the amount it costs your company to cover the empty role.
  • Cost to rehire: The total amount it costs to hire a replacement (advertising, background checks and recruitment fees).
  • Onboarding costs: Any costs incurred for training and any uniform required.
  • Productivity ramp-up cost: The cost of a new employee learning the ropes and training (measured by their salary and benefits expense). This is typically because a new starter is doing more learning than producing.

Add these five totals up to find the total cost of employee turnover. This should make you aware of how costly and important employee turnover is to your business.

Get help with employee turnover today with BrightHR

Ensure you manage your employee turnover correctly, saving you time and money in the long run. The last thing you want to be doing is increasing your outgoings when you could actually be saving money for your company.

BrightHR can help you reduce your employee turnover, streamline your interview and onboarding process. Getting on top of your employee turnover should be one of your main priorities.

Contact us on 18882204924 or book a demo today.


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