How To Calculate Your Organization’s Turnover Rate
Turnover is just part of doing business. Some employees aren’t a good fit, while others find new opportunities. While some turnover is normal, too much can damage your organization’s performance, lower morale, and even interrupt important projects.
That’s why, as an HR professional, you need a simple way to calculate, analyze, and manage your turnover rates.
Where are you at with turnover, and how can you do even better?
Understanding Turnover Rate
Turnover rates represent how many people leave your organization over a specific period as a percentage of your total workforce. This data is used by HR professionals to plan and budget for recruitment, gauge the effectiveness of employee retention efforts, and more.
The Impact of Turnover on Organizational Performance
Excessive turnover can make it seriously difficult for an organization to crush its goals. Here’s just a short list of the ways that can happen:
- Too much turnover can seriously lower morale.
- Constantly replacing employees can be a drain on resources.
- Building and maintaining a healthy company culture is difficult.
- Important deadlines (and even entire projects) can be jeopardized when key employees leave.
Key Metrics for Calculating Turnover
To calculate a simple turnover rate, you only need two figures:
- Employee departures: The number of employees that left within the period you’re calculating for.
- Workforce size: How many total people worked at your organization in that same period.
That being said, depending on how precise you want your turnover rate to be, things can get a little more complicated. You may also want to factor in seasonality, specific changes within your organization, or even periods of rapid growth.
A note on employee departures
When determining how departures into your turnover formula, you first need to choose the types of employee departures you’ll include.
For instance, many organizations avoid including new hires in their turnover rate, since this can skew rates higher.
There are many other types of employee departures you can include or exclude:
- Voluntary departures
- Involuntary turnover
- Avoidable turnover
- Healthy turnover
- Regrettable turnover
Easy Turnover Rate Formulas
Most organizations will calculate turnover rates either monthly or annually. A monthly turnover rate can be used to track changes through recruitment periods or rounds of layoffs while an annual turnover rate gives you a better sense of your organization’s baseline.
Monthly turnover rate
Here’s a simple formula for calculating monthly turnover rates:
Monthly Turnover % = (Employee Departures / Total Number of Employees) x 100
So let’s say an organization has 500 employees by the end of January and lost 20 employees during that month. You’d calculate your turnover rate this way.
20/500 = 0.04
0.04 x 100 = 4
So your monthly turnover rate for January would be 4%.
Do this for every month in the year, and you’ll be able to track how various organizational changes affect your turnover rate over time.
Annual turnover rate
If you instead want to calculate your annual turnover rate, here’s a formula you could use:
Annual Turnover Rate % = (Employee Departures / Number of Employee on Month 1) x 100
Let’s take that same 500-employee organization from before. Over the course of a full year, they lose a total of 55 employees. Here’s how you’d calculate this organization’s turnover rate.
55/500 = 0.11
0.11 x 100 = 11
That would make your yearly turnover rate 11%.
What about other methods?
These two formulas are simple, precise, and effective, but know that you can find alternatives for both monthly and annual turnover rates. You could, for instance, replace your workforce size with averages instead of absolute values. This can help you account for changes in your workforce over the month or year, but a particularly strong value (like your workforce size just after a round of layoffs) could skew that average.
How to Analyze Turnover Patterns
Now that you know how to calculate turnover rates, here’s how to turn that data into insights for HR, your leaders, and the rest of the organization.
A single month’s turnover rate won’t tell you much in isolation. But when you start compiling months (or even years) of turnover rates, you’ll notice patterns. Try looking out for:
- Seasonal spikes: Some industries see increased turnover rates at certain times of the year. But if you’re not in an industry where that’s expected and you’re still seeing spikes during certain months, you’ll know that’s something to watch out for in the future.
- Recurring events: When turnover rates change the same way at the same time year after year, you likely have a recurring trigger. For example, if you give out raises at the same time each year and turnover rates change consistently at this time, you might learn if your raises are competitive or forcing employees to leave.
- Turnovers in certain segments: While the formulas above are used to calculate your overall turnover rate, you can use them as a jumping-off point to dig deeper. By looking at turnovers for specific roles, seniority levels, or departments, for instance, you’ll know if your organization can do more for some of your employees.
If you’re concerned about your organization’s turnover rate, recognizing patterns is the first step to figuring out what’s going on.
Compare your turnover rate to industry benchmarks
Identifying patterns is one thing, but the best way to know if your turnover rates are worth investigating is by comparing them to benchmarks specific to your industry. There’s a huge degree of variation between industries, so a high turnover rate for one organization may be absolutely normal for another. The U.S. Bureau of Labor Statistics is a great resource for benchmarking.
Strategies for Reducing Turnover
Analyzing turnover rates gives you the information you need to keep employees engaged—and keep them around longer. Here are some strategies for doing that.
- Identify the root causes of your turnover rate: Analyzing your turnover rates is just the first step. Once you have a few theories, you can drill down to start exploring the root causes behind those theories.
- Review your onboarding process: While new hires aren’t usually counted in turnover rates, you should still treat a high rate as a potential warning sign that your onboarding process needs some work.
- Use a performance management platform: Having the right employee retention strategy in place is essential to reducing turnover. A winning strategy starts with a performance management platform like 15five. With real-time feedback, customizable engagement, manager effectiveness surveys, you can spot potential turnovers before they happen.
- Upgrade your compensation package: Keeping your compensation package competitive is essential to preventing turnover. Review it regularly to get in front of potential spikes in your turnover rate.
- Make employee recognition more frequent and impactful: Some employees are more concerned with feeling like they’re part of a team that cares about them than higher compensation or extra perks.
Keep your high performers longer
Your organization’s turnover rate is often one of the first signs of underlying issues. With just a few metrics, a bit of data, and a simple formula, you can calculate exactly how much of your workforce heads out the door every year. It’s an essential part of building your employee retention strategy and gauging its effectiveness.
The best way to retain your employees is with real-time data. Try 15Five for free and see the difference the right data makes!