Staffing: Why and how to calculate turnover rate

Staffing: Why and how to calculate turnover rate

Staffing why and how to calculate turnover rate

Employee turnover rate is an important indication of a company’s success. It is perhaps the basic way to provide a quick overview of how engaged your employees are in their work environment, and it can be a useful indicator of business performance.

Keeping track of this figure is vital in stabilizing your company and preempting any potential future setbacks. To ensure effective company management and positive momentum, you’ll need to be able to calculate your turnover rate.

This article will show you how to calculate your employee turnover rate, and how you can use this figure to gain insights into the success of your business.

Table of contents

What is employee turnover rate?

A company’s turnover rate measures the number of employees leaving the company over a given period of time. This figure often includes dismissals, voluntary resignations, and retirements, but does not involve promotions and demotions within an organization.

Turnover is often combined with employee retention rates to give an indication of how your company is performing. Low turnover rates and high retention rates are key to managing a successful business.

When one rate dips, the other spikes. In other words, a low turnover rate means high employee retention, while a high turnover rate indicates that a large proportion of your staff is leaving the company. If you notice your employee retention rates are low, you should aim to reduce turnover within the company.

It’s important to track your turnover rate because it can have a major impact on your company. Your brand’s reputation is always at stake, and a high turnover rate can deter candidates from applying to your vacancies. And the longer these positions stay open, the larger the revenue loss.

What’s more, an open position is an expensive role to fill. As hiring managers will know, the cost of replacing an employee is significantly higher than ensuring they stay. Hiring the best candidates is great, but you need to make sure you keep them.

How is turnover rate calculated?

To calculate the employee turnover rate, first you need to determine a few variables. Before you can work out the final figure, you need to define the following factors:

  • The period of time you want to calculate the turnover for
  • The average number of employees for this period
  • The total number of separations (including resignations, dismissals, and retirements) for this period

Next, you need to input these variables into the turnover rate formula. This equation is outlined below.

Turnover rate = (number of separations / average number of employees) x 100

For instance, if you were a company of 90 employees, 12 of whom left within the past year, you would calculate (12 / 90) x 100. This would give you a turnover rate of 13.3%.

Graphic showing hot to calculate turnover rate

Analyzing your turnover rate

Once you’ve calculated your turnover rate, you’ll want to analyze the figure to identify where your problems – or successes – lie. In some cases, turnover rate may not be a fair reflection of how your business is performing. That said, it’s often a good indication of your output and future success.

By comparing your turnover rate to your industry’s averages, you can get a sense of your company’s performance. Some industries – like BPOs and call centers – have much higher turnover rates than others. For contact centers, the average turnover rate will be 30-45%.

Aside from industry comparisons, it’s important to look at the specifics behind the overall figure. Asking yourself who, when, and why is often a far better indication of any issues or successes.

Who is leaving your company?

A low turnover rate doesn’t grant you immunity from problems. A high turnover rate can be significantly more problematic for some companies compared with others – it largely depends on who is leaving the business.

Identifying exactly which people and positions are leaving the company is crucial. If you notice that your top performers and upper management are frequently coming and going, immediate action is almost certainly required to stabilize the firm, even if you boast a low overall turnover rate.

Conversely, if you suffer from a high turnover rate but find that it’s primarily your lowest performers who are leaving, you might even see an upturn in your fortunes. Employee engagement and productivity may improve, and the workplace atmosphere can become brighter and your company’s profits could increase.

When are your employees leaving?

The timing of resignations is often a good indication of your hiring process. If your employees are leaving soon after their onboarding, they may feel that the job description to which they applied was misleading.

In this case, implementing new hiring strategies – such as skills-based hiring – can lead to more realistic job expectations and increase employee retention.

Why are your employees leaving?

Understanding your employees’ reasons for leaving is a crucial part of mitigating any turnover issues.

If you want to improve your turnover rate, you must conduct exit interviews to gauge exactly why staff members are resigning.

There may be issues with your work environment, a lack of diversity, a toxic culture, or inadequacies in staff training. Employee turnover rates can uncover these internal problems that may otherwise remain hidden. To build a successful, thriving business and reduce turnover, you must fully analyze the details behind the figures and resolve any covert issues.

Reduce your turnover rates with TestGorilla

Increasing employee engagement and reducing your turnover rate starts with the initial hiring process.

CVs and cover letters are no longer enough to find great employees who fit your company’s atmosphere and values.

Instead, skills-based hiring is fast becoming the future of recruitment. With our pre-employment assessments, you can be sure that your new employees possess precisely the right skills for your open role, enabling a smooth onboarding process and a positive impact on your organization.

Check out TestGorilla to see how we can help you reduce your turnover rate. Register for free today.

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