How to Calculate Employee Turnover Rate

Calculating employee turnover rate involves dividing the total number of employee separations in a given year by the average total number of active employees working in the organization over the same period of time. This simple equation yields a percentage value that may be more or less than the industry norm.

Employee turnover rate can be analyzed in a number of variations that shed light on the weaknesses of the business in question, isolating the what, the why and the how of voluntary quits.

Employee Turnover by Location: Employee turnover percentages should be calculated by the individual branch for companies with several locations. This will give you an idea of how the turnover rates vary by each location.

New Employee Turnover: Dividing the total number of new hire quits in a year by the average number of active new hires over the same duration can indicate the effectiveness of your orientation program. If the result is less than the general employee turnover rate then it may be the line managers and work environment that are disillusioning recruits. Or maybe it is the onboarding process that needs to be improved.

Retainment Strategies

While you can’t stop employee turnover completely, you can take steps to diminish it. 

• Examine your company culture for ways to improve employee engagement.
• Find ways to inspire employees to take more pride in their job by asking them for input on how to do their tasks more efficiently. 
• Survey employees and ask their thoughts on how the workplace can be improved (and then implement do some of the suggestions!). 
• Create an employee recognition platform that recognizes people for their effort, and awards them regularly and consistently.

It’s a proven fact: When employees are engaged, they work harder, are more efficient, and take pride in what they do. A world-class atmosphere of teamwork develops, and a cooperative, competitive spirit blossoms—encouraging everyone to be a better employee and a better person. People stop coming to work because they have to, and start coming because they want to. They are more productive and happier. That means fewer performance-based layoffs and fewer top producers leaving your company for greener pastures.

Engaged employees have significantly lower levels of absenteeism, on the job accidents, and fewer HR issues. What is that doing to your bottom line every year? According to Gallup Research, companies with high levels of employee engagement are 400 percent more profitable. Yes, 400 percent!! Pair that increase in productivity and profitability with the savings from reduced turnover, and your business can expect exponential growth in sales and profits.

Many of the factors affecting true employee engagement need to be customized for each business. A great place to start is an employee survey. Find out what employees think about the business and work environment. You may uncover hidden systemic issues that contribute to your high rate of employee turnover.

Another excellent place to start is a consistent recognition platform. One of the most basic human needs is to feel appreciated. From a business perspective, a recognition program can reward and inspire employees while at the same time achieving company goals and objectives. It’s not magic; it's all about criteria.

Bottom Line
Employee turnover is an infection, but it doesn’t have to be a killer. The first step is using a simple employee turnover calculator to put a dollar amount on just how much it costs your business. Once you understand that, you can easily justify any investment in employee engagement and employee recognition to shrink your turnover rate drastically. Not only will you be saving the headache of replacing many of your employees, but you’ll be investing in the massive growth potential and profitability of your business.