Employee turnover is a key metric that provides insights into the health of your organization. Understanding how to calculate employee turnover rate and what it means can help you develop effective employee retention strategies and foster a more engaged workforce. In this blog, we'll break down everything you need to know about turnover rates, from calculations to actionable solutions.
The employee turnover rate refers to the percentage of employees who leave an organization over a specific period. This metric includes both voluntary departures (employees resigning) and involuntary departures (terminations or layoffs). High turnover rates indicate underlying issues such as low job satisfaction, inadequate compensation, poor company culture or a lack of career advancement opportunities. Conversely, low turnover rates suggest that employees are satisfied, engaged with their work and comfortable in their workplace environment.
Understanding employee turnover rate is essential for businesses to maintain a productive workforce, reduce hiring costs and improve employee engagement. By tracking turnover trends, organizations can identify patterns and then take proactive steps to enhance the employee experience by crafting the best retention strategies.
Tracking employee turnover rates is essential for several reasons:
Identifying Workforce Trends
Monitoring turnover reveals patterns, such as seasonal fluctuations or issues specific to certain departments or demographics. For example, turnover may spike at certain times of year due to workload changes or personal factors. Analyzing department-specific turnover can also highlight areas needing attention, like leadership problems, work-life balance issues, or limited career growth. This insight helps in making informed decisions and implementing targeted strategies to address concerns before they escalate.
Cost Management
High turnover leads to increased recruitment, training, and onboarding costs, affecting the organization’s bottom line. Each employee departure adds costs such as job postings, training programs, and lost productivity. Monitoring turnover rates helps identify cost-saving opportunities and create retention strategies to keep top talent, ultimately protecting your financial resources.
Employee Engagement Insights
A rising turnover rate often signals employee disengagement or dissatisfaction. Understanding why employees leave through exit interviews and data analysis can uncover issues like lack of advancement, poor compensation, or unsatisfactory work conditions. Addressing these concerns builds a positive work culture, improves satisfaction and reduces turnover.
Strategic Workforce Planning
Knowing turnover rates helps in workforce planning, allowing for better resource allocation and avoiding talent shortages. It provides clarity on staffing needs, helps forecast hiring requirements, and ensures that critical roles are filled. This proactive approach ensures a steady, capable workforce.
By focusing on these areas, you create a positive work environment that drives organizational success.
Calculating employee turnover rate is a straightforward process that requires basic data on employee departures and workforce size.
An easy way to calculate your monthly employee turnover rate is to divide the number of employees who left during the month by the average number of employees for that month, then multiply by 100 to get a percentage:
Number of employees who left during the month ÷ average number of employees during the month = monthly turnover rate.
The annual employee turnover rate provides a broader view of workforce stability. To calculate your annual turnover rate, divide the total number of employees who left during the year by the average number of employees for that year, and then multiply by 100 to get a percentage.
Number of employees who left in one year ÷ average number of employees during that same year = annual turnover rate.
Monthly example: let's say three (3) employees left in July and the average number of employees that month was 150: The formula works like this: 3 ÷150 = 2%
Your monthly turnover rate for the month of July was 2%.
Annual example: Imagine 36 employees left over the course of one year and the average number of employees that same year was 300, the same formula works: 36 ÷300 = 12%
Your annual turnover rate was 12%.
The Bureau of Labor Statistics (BLS) publishes monthly, estimated turnover rates by state, here.
Once you've calculated your turnover rate, the next step is analyzing it to discover insights into your workforce and workplace:
Understanding how to calculate employee turnover rates helps with accurate tracking, offering many benefits, including:
Several factors contribute to employee turnover, including:
Reducing employee turnover requires a proactive approach that begins with understanding how to calculate employee turnover rates. Strategies could include:
Circles understands the importance of retaining top talent and fostering a thriving workplace culture. Our workplace experience solutions are designed to:
By understanding how to calculate employee turnover rate and addressing the underlying causes, businesses can create a more engaged and future-proof their organization. Tracking employee turnover rate allows organizations to implement targeted employee engagement strategies that drive long-term success and employee satisfaction.
