What is the turnover rate?

The turnover  rate  is a percentage that shows how many employees left an employer in a given period of time, usually a year.

Use the following steps to calculate your turnover rate:

• Determine how many employees left your organization in a certain time period.
• Determine the average number of employees your organization employed during that same period. You can do this by adding the number of employees you had at the beginning of the period to the number of employees you had at the end of the period. Divide this number by two for the average.
• Divide the number of employees who quit by the average number of employees.
• Multiply this result by 100.

For quick reference: (Leaving Employees/[(Initial Employee Number + Final Employee Number)/2]) x 100 = Turnover Rate %

So if an organization has 50 employees at the beginning of the year and 100 remain at the end of the year, the average number of employees for the year would be 75 (50+100=150, 150/2=75). If 15 employees leave the organization that year, the turnover rate would be 20 percent (15/75 = 0.2, 0.2 x 100 = 20 percent).

What is an acceptable turnover rate?

Like many other people-based statistics, determining an acceptable turnover rate is highly dependent on context. Measuring the company-wide turnover rate tells only part of the story. Using the formula to measure a combination of certain employees and certain periods of time can uncover turnover hot spots.

Continuing the previous example, an employee turnover rate of one in five may seem manageable for a small company. But if five of those employees leave the same position and the same manager in the span of a year, this reflects a worrying trend that needs to be resolved at the managerial level rather than implementing universal changes.

What is a good cadence for measuring turnover rate?

Many organizations take into account their overall turnover rate in annual reviews. However,  with the support of  software-based reporting, managers and executives can review turnover trends more frequently without significant time costs. Calculating turnover rates  can provide additional information for quarterly planning, managerial performance reviews, and  semi-annual employee satisfaction measurements .

How does employee turnover affect an organization?

High employee turnover can have far-reaching effects on an employer, including:

• Decreased overall productivity within the organization
• Increased cost of hiring and training new employees
• Putting extra pressure on remaining employees to handle the workload of departing employees
• Decreasing employee confidence in the organization
• Poor company culture and morale
• Creating tension in relationships among employees and between employees and managers