What's the Best Way to Calculate Your Employee Turnover?
HRDQ StaffWhen you track your employee turnover, it usually helps you manage your workforce more effectively. When you keep an eye on these numbers, you can get a clearer picture of how your company is doing and how stable your operations are, which then can affect your bottom line.
Make sure that you have a steady way to track all departures and clear categories for the different types of exits. Believe it or not, when you calculate the turnover, you can turn those basic numbers into information that your leadership team can actually use. Just remember that you can only make decisions about your pay structures and improve your workplace culture when you have accurate turnover numbers to help you.
Businesses that have quality turnover data tend to manage their talent better, and they generally see increased profits as a direct result. Also, try looking at your latest tracking methods to see if there's some room for improvement.
Let's get started with the real stories behind these numbers and try to understand what actually happens when your employees leave.
- Improves mentor-mentee communication
- Boosts teamwork productivity
- Promotes continuous learning
Table of Contents
Employee Turnover
People generally come and go from your team all of the time – that's employee turnover. This workplace reality can affect how your business runs in many ways. Turnover is when your employees choose to leave or when you have to let them go for some reason. Any time that someone chooses to walk away for a new job or for personal reasons, they become part of your voluntary turnover numbers in your company.
In most cases, you create involuntary turnover when you need to fire someone or remove their position in the organization. Maybe they weren't meeting your expectations, or maybe you had to downsize your team because of circumstances. Both voluntary and involuntary departures tell you something important about your company's health. Try tracking these numbers separately so you can get a clearer view of what's actually happening in your workplace on a regular basis.
Remember that you can manage your budget much better when you keep an eye on your turnover. Each time an employee walks out the door, you'll spend time and money to find and train someone new to take their place. In the retail and hospitality industries, these costs tend to pile up fast for businesses. Some businesses in these fields replace their entire workforce yearly, with their turnover rates climbing above 100% in some cases – it's new faces and training sessions to work with in just twelve months.
You'll commonly see much lower turnover numbers in tech businesses and professional services firms. They still often feel the pain when their people leave the company, though. Imagine losing a software developer with very specialized skills – you might spend months looking for someone who fits the bill well. The projects sitting on hold during that search frequently cost you more than the hiring process does.
Figuring out your own turnover rate isn't very tough at all. Just divide how many employees have left by your average number of total employees, then multiply by 100 to get your percentage. Many businesses run these numbers every quarter or year to track patterns. Also, if you want to find some issue areas in your organization, try breaking down your calculations by each department to see where your people leave most frequently.
The thing is, exit interviews frequently show the real story behind departures – maybe there are some challenges with how your teams are managed or challenges with your workplace culture. Some people naturally move on for better pay or more opportunities to grow in their careers. Others basically want to escape from a negative workplace environment or from expectations they feel they can't meet on a regular basis.
Turnover Calculation Methods
To track employee departures, you need an easy way to calculate turnover. The basic formula generally works for most businesses – you just take the number of people who left, divide it by your average employee count, and multiply by 100 to get your percentage.
Let me show you how this works! Say that 5 people quit your company last month. You had about 100 employees throughout the month. Your turnover rate would be 5 divided by 100, then multiplied by 100, giving you 5%.
In many cases, monthly turnover can give you a quick look at what's happening. You'll find the sudden changes that might need your attention. You should run the numbers each month to see if anything unusual pops up that you should address.
However, looking at annual turnover will teach you the bigger picture of your company's stability.
HR teams usually use a rolling 12-month turnover for their standard tracking – this updates monthly but always looks back over a full year. You can get fresh data while still seeing the longer patterns in your workforce.
You'll actually need accurate record-keeping to get numbers you can trust. Keep track of when people leave and your latest headcount figures. Your turnover calculations will become more helpful when they're based on accurate data.
Different departments show different turnover patterns. While the company-wide number matters, you should also try calculating separate rates for all your teams – this helps you find the problem areas where your managers might need to focus.
As a best practice, when you get together all your data, count the types of departures correctly – voluntary quits, retirements, and terminations. Businesses tend to track these categories separately. You can break down your turnover by identifying the different reasons why people leave.
Types of Employee Departures
Your company is the one that makes the call in these involuntary turnover situations – this usually happens when you need to let someone go because of their performance problems or make some layoffs to help cut costs. Your HR team will probably track these two types of situations separately because they can tell you different facts about your workplace. When one of your people chooses to leave on their own, you might need to look at how involved your employees feel or if your pay rates match what they can get elsewhere in the market.
You should pay some attention to early turnover – when your new hires leave within their first year with you. These quick goodbyes can hit your budget very hard. Just think about the money that you spend on hiring and training someone new. It generally takes months before they can reach their full productivity, and if they walk away before that happens, all your investment goes right with them. Try tracking these early departures separately so you'll find any problems in your onboarding process.
You might want to separate what some people call "regrettable" and "non-regrettable" turnover in all your tracking. When your star performers or people with rare skills leave, that's what we call regrettable turnover. It hurts your team and takes time to recover from. Non-regrettable turnover tends to happen when your lower performers move on, which sometimes actually helps your team to be more productive together. Both of these types will show up in your numbers, but they affect your day-to-day operations in completely different ways.
You should check some industry benchmarks to see how your turnover rates compare to other similar businesses. You'll find some differences between the fields. Tech businesses often have much higher voluntary turnover than manufacturing plants. If you run a seasonal business, then you'll probably see some standard patterns of people coming and going throughout the year. Keep in mind that learning about what's normal for your own industry helps you set more realistic goals.
You should look at the turnover numbers for each department to find some telling patterns. When one team loses more of its people than the others, something concerning could be going on there. Maybe the manager needs some support with their leadership style, or the team faces a much heavier workload than everyone else does. These department-level insights help you fix the problems before they can spread.
What Does Turnover Rate Indicate?
Your employee turnover can give you a clear look at how healthy your company is. When people are leaving, it means that something probably isn't working well in your organization. Most employees don't just walk away from jobs that they like unless they have a strong reason for it.
High turnover hits your wallet in ways that you might not always see. You'll spend more money to find and train new people. Your team naturally gets less done while the new hires learn their jobs. The employees who stay often end up with too much work on their plates and might start thinking about whether they should leave, too.
Employees leave for different reasons that you should be aware of. Your pay might not match what other businesses offer in your field. Your workplace might feel too stressful or negative from day to day. People also walk away when they can't see a clear path to grow or move up in their careers with you.
Just remember to listen closely during the exit interviews to learn why your people leave your company. Former team members commonly mention not feeling liked by their direct managers. They talk about important messages lost or confused between the different departments. Many of them say they didn't have what they needed for quality work in the first place.
When fewer people leave your company, it usually means that your employees feel happy and connected with everyone. They can see the worth in their work and honestly feel that you esteem them, too. Your workplace probably helps people work together well while respecting their personal time. Managers give clear input to everyone and let people know how they're doing.
You should take a close look at your company's turnover patterns over time. Some of the departments might lose more people than others. You might see employees leaving right after their first work anniversary or once they hit the three-year mark. These patterns help you find the challenges that you need to fix.
Remember that some amount of people leaving is normal and can actually help your company grow. New hires bring in fresh thinking and prevent teams from getting stuck in their old habits. Don't shoot for zero turnover – instead, find the right balance that works for your business.
Create a Stronger Workplace
Remember how you can see deeper patterns about how healthy your workplace is and what your employees are experiencing. In reality, your latest tracking methods might not be showing you the full picture. Businesses generally find they've been using limited data to make decisions, which, in most cases, can give you some strategies that miss the mark and get turnover challenges going.
Remember that you get the real ability to make helpful changes when you have clear data about why and when employees leave. Just look at the manufacturing company that found they were spending millions on employee replacement costs. Once they knew this, they could normally take steps to retain their talented people instead of losing staff and money. Actually take some time to look more at your turnover data. You might find seasonal patterns or challenges in departments that need your attention, though.
Businesses that keep their best people don't just gather the turnover numbers – they use what they learn to build better work environments. Getting to the root causes of why people leave helps you fix challenges instead of just dealing with the results. Your organization might do better with more structured mentoring and growth opportunities for staff. Workplaces usually see fewer people leaving when they connect experienced team members with newer employees.
Just see that when you build strong connections between team members, it can help people at your company. At HRDQ, our Mentoring 101 Customizable Courseware teaches the skills people need for strong mentoring relationships. This training program helps you create mentoring pairs where people can gain better opportunities for promotion and develop stronger workplace connections.
You can also use the materials for online or in-person training; we give you everything you need to build mentoring skills that help solve common reasons why employees leave.
