How to Calculate Employee Turnover

High employee turnover is a problem faced by many industries these days. It is a matter of concern as it can affect the profitability of a firm in a negative way. Knowing how to calculate employee turnover is essential for human resource managers to keep a tab on the growing expenses of an organization. However, before we discuss that, let us first know the importance of controlling employee turnover.

Importance of Controlling Employee Turnover

Why should employee turnover be controlled? The answer is simple, to make the working of an organization more efficient. It requires a lot of money and time for offices to recruit their staff. A lot of thinking is required in recruitment and employee training processes, and if employees keep quitting the job at regular intervals, then the high costs of employee recruitment will eat into the profits earned by a firm. Since profit maximization is the aim of business firms, they will have to check their employee turnover. Employee turnover is nothing but a simple ratio of the total number of employees who leave the employment (either voluntarily or involuntarily) to the total number of employees on the board in a specific period.

Calculating Employee Turnover

The first step involves finding out the average number of employees present in an organization during a given period. This can be calculated by adding the employees at the start of the year to the number of employees at the end of the year and then dividing the sum by two. The mathematical formula for average number of employees for the period 1st January to 1st April can be given as follows.

Average number of employees = number of employees on Jan 1 + number of employees on Jan 2 / 2.

Then, once this is done, you can easily calculate the voluntary as well as involuntary separations during the specific period. Then, there are three methods of how to calculate employee turnover which have been given below.

Voluntary employee turnover = Voluntary separations/ Average number of employees * 100.

Involuntary employee turnover = Involuntary separations / Average number of employees * 100.

Total employee turnover = Total separations / Average number of employees * 100.

Employee turnover calculation can be done on a monthly, quarterly, half-yearly or an annual basis. If yours is a firm wishing to know how to calculate employee turnover on a monthly basis, then the formula given below will help you.

Monthly turnover = Separations in the month / Average number of employees in that month * 100.

Employee Turnover Ratio = Separations in the month / Average number of employees in that month.

Employee turnover costs typically depend on the style of recruitment implemented by you. You need to cut down expenses on the interview and selection process to lower the employee turnover costs. However, the best solution for lowering employee turnover costs is recruiting the right candidates by going through their resumes and studying their attitude perfectly. Intelligent decisions can help save millions of dollars in the long run. Calculating employee turnover rate in an accurate way helps managers to be fully aware of the situation in their organization.