Turnover Rate Calculation

In the field of human resources, employee turnover is an important concept due to the rise in attrition rate and the costs incurred by an organization to hire new employees. Simply defined, employee turnover rate means the percentage at which an organization loses and gains employees. Different industries have different turnover rates and it also varies for individual companies. If the turnover rate is high in an organization, it means that the average term of an employee is shorter than that of other companies. If the turnover rate is high, it can harm the company as the productivity would decrease, and the cost of hiring and new employee training would increase. In the following paragraphs we give you the steps of employee turnover rate calculation and the costs associated with it besides ways to prevent turnover.

Calculating Employee Turnover
The first step to calculate employee turnover rate is determining the duration for which you want to calculate the turnover rate. At times several organizations use monthly turnover rates as they convey a deeper meaning than calculating the long-term turn-over rates. Once you have determined the time frame, the next step would involve getting details of the number of employees working in the said period. If the number of positions are fixed, calculation becomes easier as you just need to subtract the number of vacancies from the total positions. The number of people who have left should then be taken into consideration during the said period. Then you need to divide the number of employees who have resigned by the total number of employees during the said period, the result of which would be in decimals, after which you need to multiply that number with 100 which would give you the percentage value. Let's take an example. Say you want to calculate the turnover rate in a year. Let's assume that there are 200 employees of which 10 have left. So, by the calculation mentioned above, the turnover rate would be 10/200 = 0.05 x 100 = 5%.

Costs of Employee Turnover
The costs associated with employee turnover can be both direct and indirect. Direct costs include cost of leaving, which includes stationery cost, transition cost and replacement cost. On the other hand, indirect cost includes low morale, unnecessary overtime payment to other employees, reduction in performance of other employees due to low morale and productivity loss. Moreover, there are other costs such as time taken to recruit and select a new employee and most importantly costs of new employees.

Preventing Employee Turnover
Organizations have devised several ways to prevent employee turnover. It is provided on a continuous basis, so that employees develop their skills and take up higher responsibility. Moreover, employee motivation measures have also been implemented by several employers so that they do not leave the organization. From the first day onwards, when an employee joins, the hiring manager explains the policies of the company so that employees knows what their roles and responsibilities are. Strategy and networking for the development of the company helps build a bond among the employees. Many times, employers involve their employees in the growth strategy and the future plans of the company. Moreover, new employees can be introduced to employees who have reached responsible positions after years of hard work, which in turn would motivate new employees and show the way forward. Engaging new employees early and rewarding employee performance are some of the other strategies that companies use to prevent turnover. The management listens to the grievances of each employee, thereby making them feel involved, which in turn would create a sense of loyalty towards the company.

Employee turnover rate calculation has become very important, especially these days where employees are continually looking for better opportunities. By calculating the turnover rate, employers can analyze the trends and frame policies accordingly.