Over the past few years, company turnover has increased substantially. With high turnover rates, 47.2% in 2021 and continuing through 2022 — now may be the most important time ever to calculate your turnover rate.
Just as one bad seed can destroy the bunch, a high turnover rate can take down a workforce. While some turnover is unavoidable, excessive turnover can have detrimental repercussions. Understanding how to calculate your turnover rate helps you see where and why people are leaving your company.
Once you understand your turnover rate, you will be better equipped to understand the why and take steps to address it.
Employee turnover is the rate at which employees leave your company. It is usually measured by a certain time period (years, normally). Your overall turnover rate includes retirement and involuntary separations, but does not include in-company promotions or transfers.
Losing employees is not only incredibly inconvenient, it results in low productivity from lack of experience, and becomes expensive. The rule of thumb is that it costs you 1.25 to 1.4 times the salary to recruit and hire one new employee. So if the position pays a salary of $50,000, it will cost you roughly $65,000 to recruit them (factoring in loss-of-productivity, recruiting costs, and onboarding).
Low productivity and high recruitment costs are reasons alone to be paying close attention to your turnover rate and working to improve it.
What constitutes a good turnover rate depends on the industry. In K-12 education, employees tend to stay at their organization for much longer than, for example, retail workers. The Bureau of Labor Statistics produces a detailed yearly report so you can see how your company measures up.
Here are some current employee turnover statistics for individual industries:
To calculate your turnover rate, you only need three numbers: the number of employees on the first day of your analysis, the number of employees on the last day of your analysis, and the number of separations that occurred over that duration.
Now, put those numbers into this turnover rate formula to find your turnover rate:
# of separations/average # of employees x 100
Let’s break this down with an example of a made-up technology company; we will call it Lightbulb Inc. Lightbulb Inc had 300 employees on day one of their analysis, 294 employees on the last day of their analysis, and 26 separations over that span of time. Here’s a graphic to show you how to calculate:
Lightbulb Inc has an impressive low turnover rate (for their industry) of only 8.75%. We can hope that your turnover rate adds up to also be low for your specific industry, but if it comes in high, you need to take a deeper dive.
There are three types of turnover – voluntary, involuntary, and retirement.
Having employees resign is unavoidable. People will not always stay in the same company for their entire careers, but there are ways to make sure you’re engaging your employees and creating a great work environment.
Reasons employees choose to leave can be:
All these reasons for voluntary turnover are preventable. Keeping track of why an employee leaves will help your company see places they can improve.
Involuntary turnover is when the company asks the employee to leave. There are a number of reasons this happens.
There will always be reasons for involuntary turnover, however, some are preventable. Poor performance and behavioral issues can stem from a poor employee experience or burnout.
Some may say turnover due to retirement is unavoidable, but that is not always the case. Employees may become disengaged and choose to retire early. Collecting exit interview data on retirees is equally important because that data can help strengthen your workplace and keep other employees for the long haul.
Employee retention takes a consistent effort. It requires you to check in with your current employees regularly, improve your hiring practices, and improve processes when turnover does occur.
interviewstream helps companies reduce turnover by helping you hire the right candidate, the first time. Through video interviews and interview scheduling, you can grow your candidate pool 30% and get a better image of your candidate from the first interview. More hiring choices means better informed hiring decisions and ultimately, less turnover. If you’re interested in learning more – see how we can help you here.
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Caroline Chessia is the Marketing Operations Specialist at interviewstream. She loves color-coordinated graphs, hiking in the mountains, and every dog she meets—especially the Golden Retrievers.