How to Calculate Employee Turnover Rate per Year

Employee Turnover Rate Calculator

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Understanding Employee Turnover Rate

Employee turnover rate is a critical metric for any organization, reflecting the percentage of employees who leave a company within a specific period. A high turnover rate can signal underlying issues within the workplace, such as poor management, inadequate compensation, lack of growth opportunities, or a toxic work environment. Conversely, a moderate or low turnover rate generally indicates a healthy and stable workforce.

Why is Calculating Employee Turnover Important?

  • Cost Savings: Replacing employees is expensive. Costs include recruitment, hiring, onboarding, training, and lost productivity. Understanding turnover helps companies identify areas to reduce these costs.
  • Employee Morale: High turnover can negatively impact the morale of remaining employees, who may feel overworked or uncertain about job security.
  • Productivity: When experienced employees leave, there's often a dip in productivity as new hires get up to speed.
  • Company Culture: A stable workforce contributes to a stronger company culture and institutional knowledge.
  • Identifying Problems: A high turnover rate, especially when broken down by department or reason for leaving, can pinpoint specific problems that need addressing.

How is Employee Turnover Rate Calculated?

The most common formula for calculating employee turnover rate is:

Employee Turnover Rate = (Number of Employees Who Left During Period / Average Number of Employees During Period) * 100

The Number of Employees Who Left During Period includes all employees who separated from the company, whether voluntarily (resignations) or involuntarily (terminations, layoffs).

The Average Number of Employees During Period is typically calculated by summing the number of employees at the beginning of the period and the number of employees at the end of the period, and then dividing by two.

This calculator allows you to input these values to get your annual employee turnover rate. For more granular analysis, you can also differentiate between voluntary and involuntary departures, as the reasons behind these can offer different insights into organizational health.

Example Calculation:

Let's say your company had:

  • 100 employees at the beginning of the year.
  • 90 employees at the end of the year.
  • 15 employees were hired throughout the year.
  • 10 employees resigned (left voluntarily).
  • 5 employees were terminated (left involuntarily).

First, calculate the average number of employees: (100 + 90) / 2 = 95 employees.

Next, calculate the total number of employees who left: 10 (voluntarily) + 5 (involuntarily) = 15 employees.

Finally, calculate the turnover rate: (15 / 95) * 100 = 15.79%.

This means that approximately 15.79% of your workforce left the company during that year. Analyzing this rate and the reasons behind it can guide your HR strategies.

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