When it comes to the number of employees who leave an organization, this is not a matter to take lightly. While it is a dream to hire employees who will stay happy with one organization until retirement, that is all there usually is to it. A dream. Employees leaving a workplace is part and parcel of the business. Nowadays, where every company relies on data to improve efficiency, measuring employee turnover does not go unnoticed.
What is a “turnover rate”?
A turnover rate refers to the percentage that reflects the number of workers who left an organization and were replaced with new employees within a specific period. Usually, companies measure turnover rate over a year.
Why is it important for organizations to measure turnover rates?
Companies can benefit from keeping an eye on turnover rates. Gaining an understanding of turnover rate will also lead to understanding the reasons behind why employees leave. For example, a small company of ten people who lose one employee over a year may not seem alarming. However, if the same company often has three or more people leave the company in a year citing the same reason, this may warrant a more thorough investigation and address problems as necessary. Overall, staying on top of turnover rate helps companies in the long run.
How do you compute turnover rate for a company?
Here are the steps to compute a company’s turnover rate:
Find out the average number of employees during the year.
Take the sum of the number of employees at the start of the year and the number of employees at the end of the year.
Divide this number by two.
Take the number of employees who left the company. Divide this number by the average number of employees during the year (you got this number in Step 1).
Multiply this number by 100 to get the employee turnover rate in percentage form.
Another way to compute for employee turnover rate is by using this formula:
Number of Employees Who Left Within a Specific Period
Average Number of Employees Within a Specific Period
To illustrate further, let’s have an example:
Company A had 45 employees at the start of the year and 55 employees at the end of the year. Throughout the year, 5 employees resigned for personal reasons. What is the turnover rate?
Find out the average number of employees for the year.
45 + 55 = 100
100÷2 = 50
(50 is the average number of employees for the year)
Divide the number of employees who resigned by the average number of employees for the year.
5 ÷ 50 = 0.1
Multiply this by 100 to get the employee turnover rate in percentage form.
0.1 × 100 = 10%
Company A’s turnover rate is 10%.
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