Employee Turnover Rate Calculator - Is it Necessary to Know?

Employee turnover is a crucial measure of a company’s work culture, human resource management, and employee policy. Studies show companies lose about $25,000 to $100,000 on replacement costs per employee exit. 

High employee turnover rates can also lead to decreased productivity, negative brand reputation, and low morale among existing employees. On the other hand, low turnover rates indicate employee satisfaction and engagement, which can contribute to business success. 

Therefore, knowing how to calculate your employee turnover rate, who should calculate it, and why it matters to your business, is essential.

What is turnover, and how is it calculated?

Employee turnover refers to the number of employees who leave a company within a specific period and are replaced (or will be) within a particular time frame. Turnover can be voluntary or involuntary and can occur for various reasons, such as poor working conditions, low pay, lack of growth opportunities, or better offers from competitors.

To calculate turnover rate, divide the number of employees who left the company during a given period by the average number of employees within the same period. Then, multiply the result by 100 to get a percentage.

Two prominent figures are essential in the above equation:

1. Number of employee separations in a given period
2. The average number of employees within the same period

How to determine the number of employee separations

The number of employee separations should not include independent contractors or temporary workers. You shouldn’t add employees who are temporarily laid off or who went on a leave of absence.

This is the same with calculating the average number of employees in that period.

For example: If in a year, a company lets go of three employees, fires two contractors, and puts four other employees on unpaid furlough, what is the number of employee separations?

The answer is 3 (the three employees they let go)

How to determine the average number of employees

Follow this formula to calculate the average number of employees within a specific timeframe.

Average number of Employees = (Sum of headcount from each report) / number of reports made or used)

For instance:

Company B does three headcount reports in one month. The first head count is at the beginning of the month with 150 employees, the second in the middle with 145, and the third head count is at the end with 155. They’d need to find the average number of employees to calculate employee turnover for that month. Which is:

(150 + 145 + 155) / 3 = 150

This is the same with annual headcount reports too. 

However, suppose you don’t have an accurate or comprehensive headcount report(s) for that period. In that case, you can use the (total number of employees for the beginning of that period + the total number at the end) / 2. This method will give you a rough estimate

Using the first and last counts in the above example, you’d have 152.5 as your estimate.

Now that we have found our relevant numbers let’s move on to calculating your turnover rate.

How is turnover calculated? With an example

Employee turnover calculation follows a simple formula. Divide the number of separations within a period by the average number of employees in that period and multiply the result by 100.

Turnover Rate = (Number of Separations / Average number of Employees) x 100

Let’s say your organization had 40 employees at the beginning and 65 at the end of the year. And 10 employees left during the same period. Your annual turnover rate would be:

# of separated employees = 10

Avg # of employees = (40 + 65) /2. Which is = 52.5

Turnover rate = (10/52.5) x 100

=19.04%

How do you calculate monthly turnover?

Calculating monthly turnover follows the same formula as yearly turnover but with a shorter time frame. To calculate monthly turnover, divide the number of employees that left during a month by the average number of employees remaining at the end of that month. Then, multiply the result by 100 to get the monthly turnover rate.

For example, let’s say that a company had 100 employees at the start of the month, 10 left during that month, and at the end of the month, we had 95 remaining employees. The monthly turnover rate would be calculated as follows:

Turnover rate = (10 / 97.5) x 100 = 10.2% 

How do you calculate turnover per day?

Calculating turnover rate per day is similar to calculating monthly turnover but with an even shorter timeframe. To calculate turnover per day, divide the number of employees who left that day by the average number of employees on that same day. Then, multiply the result by 100 to get the daily turnover rate.

For example, if a company had 50 employees at the start of the day and 2 employees left on the same day, the daily turnover rate would be calculated as follows:

Daily turnover rate = (2 / 49) x 100 = 4.08% ≅ 4%

Calculating your daily turnover rate might be tasking and unhelpful unless you operate in an industry with high employee churn, like the hospitality and retail space. It is advisable to calculate your employee turnover across substantial timeframes to obtain more insightful data.

When is it best to calculate the employee turnover rate?

The best time to calculate the employee turnover rate depends on the company’s needs and resources. 

Many companies perform an annual turnover calculation to get a big picture of the company’s workforce trends, and how much turnover costs them. On the other hand, calculating the monthly or even weekly turnover rate might give more current insights into the company’s work dynamics.

Generally, the ideal time for turnover calculation is per quarter.

Which department calculates turnover?

Employee turnover rate calculation can involve different departments depending on the company’s size and structure. 

In smaller companies and as a norm in many other businesses, the human resources department will likely be responsible for tracking turnover and calculating the turnover rate. This calculation is made per department or for the whole company. It’s better to figure out your turnover by department so you’d know where your employee pain points are.

At bigger firms, the finance or accounting department may be responsible, especially if the company has a specialized payroll department.

What is a normal turnover rate?

There is no one-size-fits-all turnover rate benchmark for organizations. As your businesses differ, so do your turnover rates. The average turnover rate varies by industry, company size, department, and geographic region. For instance, the turnover rate in a high-churn sector like retail and hospitality won’t be the same as government organizations.

According to LinkedIn Research, the average annual turnover rate across all industries on LinkedIn globally was 10.6% in 2022. However, this rate can vary significantly depending on the industry, with accommodation and retail having higher turnover rates of 11.8 and 11.4%, respectively.

Therefore, a standard or acceptable turnover rate is subjective and would depend on the average amongst your competitors.

Note that if you want to demonstrate competitive employee retention and flex how good your company is for prospective hires, you should use voluntary separations when calculating your turnover. This is because non-voluntary separations and retirements don’t necessarily mean that your employees are looking for greener pastures or better working conditions with your rivals.

But, if you want to know how well you’re doing regarding general staff retention, you should include all separations — minus the number of retirements. 

It is not just about the numbers, though. Ultimately, your turnover calculation should show you insights into the following:

• Who is leaving? Separations by seasonal staff shouldn’t bother you too much. However, when new hires keep jumping ship, pay attention to your onboarding process and work culture. Same with top performers.
• When are they leaving? Increased employee separation after performance reviews might indicate a flaw in your review and recognition system.
• Why are they leaving? This is where surveys and exit interviews come into play. If your employees keep mentioning one problem, you should tackle it ASAP.

Companies should generally strive for an employee turnover rate of less than 10%.

Learn More About Your Turnover Rate With Assembly

Employee turnover rate is a crucial metric that provides valuable insights into an organization’s retention strategy. Understanding how to assess their turnover rate and when to do so may help businesses recognize possible problems and proactively reduce turnover. By prioritizing employee engagement, career development, and well-being, organizations can improve their retention rates and achieve tremendous success. Often this strategy might prove tasking to implement. Still, with intuitive employee management tools, you can provide a productive and open workplace for your on-site and remote employees.

Assembly delivers a complete suite of solutions for employee engagement, performance reviews, and career development to help organizations keep their employee turnover rate in check and retain top talent. By combining all of these tools in one platform, Assembly provides businesses with an edge in talent retention and helps them achieve greater success. Sign up for a demo today to learn more about Assembly and how it can help your organization thrive.