Understanding How to Calculate Turnover Rate
Employee turnover rate is a critical human resources metric that measures the percentage of employees who leave an organization during a specific time period. Understanding this metric allows businesses to assess their retention strategies, workplace culture, and overall operational stability.
The Turnover Rate Formula
To calculate your employee turnover rate accurately, you need three key data points: the number of employees at the start of the period, the number at the end, and the total number of separations. The standard formula used by HR professionals is:
Where Average Number of Employees is calculated as:
Example Calculation
Let's look at a practical example to illustrate how the math works:
- Beginning Headcount: 200 employees
- Ending Headcount: 210 employees
- Separations: 15 employees left during the period
First, calculate the average workforce size: (200 + 210) / 2 = 205.
Next, divide separations by the average: 15 / 205 = 0.0731.
Finally, multiply by 100 to get the percentage: 7.31%.
What counts as a "Separation"?
When inputting data into the turnover calculator, "Separations" typically includes all departures:
- Voluntary Turnover: Resignations, retirement.
- Involuntary Turnover: Terminations, layoffs.
Note: Generally, temporary layoffs, furloughs, or internal transfers are not counted as separations for the standard turnover calculation unless the employee completely leaves the payroll.
Interpreting Your Results
A "good" turnover rate varies significantly by industry. For example, the retail and hospitality sectors often see rates upwards of 60% annually, while government or utility sectors might see rates below 10%. Consistent tracking helps you benchmark against your specific industry standards and identify trends within your own organization.