Turnover Rate Calculation

Turnover Rate Calculation

Employee turnover rate calculation helps an organization to have an estimate of the costs, which have been incurred by it in a financial year, to hire new employees. Here is some information on employee turnover, and steps of turnover calculation that is followed by most organizations.
Workspirited Staff
Last Updated: Jul 21, 2018
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 this rate is high in an organization, it means that the average term of an employee is shorter than that of other companies. This can harm the company, as the productivity would decrease, and the cost of hiring and training of new employees would increase.
Calculations
The first step is to determine the duration, for which you want to calculate the turnover rate. At times, several organizations use monthly rates, as they convey a deeper meaning than calculating the long-term ones.
Once you have determined the time frame, the next step would involve getting details of the number of employees that are working in this particular 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, and  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. Thus, by the given calculation, the turnover rate would be 10/200 = 0.05 x 100 = 5%.
Costs
The associated costs can be both direct and indirect. The former ones include cost of leaving like stationery, transition, and replacement costs.
The latter include 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.
Prevention
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.
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 the employees know what their roles and responsibilities are.
Strategy and networking for the development of the company, help to build a bond among the employees. Many times, employers involve their employees in the growth strategy, and the future plans of the company.
New employees can be introduced to the ones who have reached responsible positions after years of hard work, which in turn would motivate the former, and show them the way forward. Engaging new employees early and rewarding their 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 the policies accordingly.