Calculating Employee Turnover Rate in Your Business
Leadership Development

Calculating Employee Turnover Rate in Your Business

BH
Bonnie Hagemann • October 14 , 2022

Employee Turnover Rate in Your Business

Employee turnover and rate is a topic that is frequently discussed in the workforce. When people leave an organization it creates turmoil within the organization, creates stress among employees, and results in a loss of institutional knowledge which can be very detrimental. However; businesses and their leaders tend to not always know what to do about it. This lack of action can be due to businesses and their leaders feeling turnover issues are beyond their control. If businesses wish to hire and retain top talent when facing current employee retention issues, they will be forced to change their ways to sustain and succeed within the marketplace.  

With employees leaving their roles at a 44% rate in today’s workforce according to a Harvard Business Review, businesses and their leaders need to consider their organization’s own employee turnover rate and how they have arrived at this rate. This rate can help organizations and leaders better understand the number of turnovers in their business, determine if it is a healthy and natural turnover rate or not, and guide them to act in making changes to better serve their business and its people. 

Calculating the employee turnover rate of a business not only helps organizations gain a deeper awareness of their employee turnover ratings but can also lead to greater insights into potential organizational challenges and needs. This can help leaders recognize the need for change and guide them in their leadership roles to effectively support their employees. These actions from leaders can help to enhance their leadership skills and competencies, and overall improve the employee workplace experience for all. Leaders can use this information to their strategic advantage to guide and lead more effectively and take the necessary actions to reduce further employee turnover issues within their business.  

How to Calculate Turnover Rate

Employee turnover exists in every organization and industry, so businesses and their leaders must understand the employee turnover rate and how to calculate this rate for their business.  

Calculating employee turnover and the rate is based on a formula that allows you to calculate the average of your staff and the turnover within your business. The formula below is how your business can calculate its employee turnover.  

 

                                                              Number of Employees Who Left your Business 

Employee Turnover Rate =    _____________________________________      X 100 

                                                              Average Number of Employees at your Business 

  

The employee turnover rate formula is essentially designed to divide the total number of employees who left the organization by the average total number of employees within the business. After dividing these two numbers, you then multiply their total by 100 to gain a percentage of your turnover. The final calculation result will be demonstrated by a percentage, which will be your employee turnover rate.  

 It is important to note that the employee turnover number and the employee average number need to be from the same period (e.g., the same year or from the same timeline your business selects) for this calculation to effectively represent your business’s employee turnover results. It is more effective to measure the turnover rate of your business within a specific period to narrow down potential events, needs, or challenges your organization may have faced in that timeframe. The turnover rate calculation will also help your organization better understand employee retention and how this is impacted by the turnover and rate. 

Most companies will benefit from calculating their turnover and rate on an annual basis. An annual  calculation helps to provide organizations with a set amount of time to analyze their turnover and determine how many employees leave their business in a particular period of time. This can also provide your business with a baseline for future turnover calculations for comparisons, as well as noticeable increases and decreases in your turnover numbers over time. If your business continues to calculate its  turnover rate on this form of a consistent basis, it will also demonstrate any patterns or needs your business may need to consider for increasing retention and reducing further turnover issues. 

Advantages of Calculating Turnover Rate

Based on the total annual separations report from the Bureau of Labor Statistics, it is critical for businesses to gain more insight into their employee turnover and employee retention needs.  

 The following are two examples of how calculating the employee turnover rate of your business can be beneficial to increase employee retention and reducing employee turnover: 

1. Having Metrics for Your Business – Creating business metrics surrounding core areas that impact your business, such as an employee turnover rating, can be utilized to benefit your organization and its employee retention. 

Calculating your employee turnover rate may seem simple, however, the action that is needed will be the critical approach to making changes within your business. Your organization’s metrics can help confirm your needs and help drive your business and its leaders forward on what to do next. In addition to the average turnover rate, other metrics relating to turnover can include positions employees leave (e.g., job roles, department areas), types of turnover that exist within your business (e.g., voluntary vs. involuntary), and the average employee tenure and how long employees stay at your business. These additional insights can help organizations and their leaders dive deeper into their business and how to effectively address these needs, which all can factor into turnover and retention issues. 

2. Initiating Action for Your Business and Its People – An organization must do more than just collect data and track its results. Leaders need to take action based on the data if the leadership would like to guide and initiate any true and effective changes surrounding this discovery.

 To hire and retain top talent in the marketplace, businesses must pay attention to their approach and examine their priorities in their business goals. This can lead to better knowledge surrounding individuals and their talent pools, and guide action for innovation and creativity with improved offerings for current employees and for new potential incoming talent. Gaining new top talent is great for a business and its future initiatives, however, businesses and their leaders must care to keep their current talent motivated and engaged.  

People should be every business’s top priority and are critical to the growth, success, and development of a business. Leaders must better understand their people, their needs, and how they feel in their workplace. If an employee does not feel invested in or taken care of in terms of well-being, benefits, and general needs, the likelihood of that employee turnover can increase. The higher the turnover and rate of a business, the lower its employee retention will be, which can lead to bigger challenges and risks for businesses in their marketplace.  

Conclusion

Overall, calculating and tracking the employee turnover rate in your business is valuable for consistency and to gain deeper insights into both the business and its people’s needs. Leaders and businesses can utilize this calculation to stay informed and to yield change in needed areas of their workplace. These findings should initiate actions among all leaders across your business. Managing turnover is a big responsibility of the business’s leadership, so enhancing your leaders’ knowledge and competency surrounding their impact on the employee’s workplace experience is critical. Without deeper insight and awareness of turnover and what impacts this issue, leaders will not have the knowledge or tools to effectively make the changes needed to improve the workplace experience.  

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