How to Calculate Employee Turnover
The Society for Human Resources Management (SHRM),advises calculating employee turnover rate by dividing the number of separations during a month by the average number of employees on the payroll, multiplied by 100. Thus, to figure your employee turnover rate, you need to calculate
Total headcount: This includes all employees on payroll and direct-hire temp workers, as well as those on a temporary layoff, leave of absence or furlough. It should not include temporary workers or independent contractors on a separate agency’s payroll.
Average number of employees: From there, calculate the average number of employees per month by taking each month’s total and dividing by the number of months or the total headcount from each report if run more than once a month/number of reports used.
Total separations: The number of separations during a month includes both voluntary and involuntary terminations, but employees who are temporarily laid off, on furloughs or on a leave of absence are not included.
That yields this formula:
Turnover Rate = # of Separations / Avg. # of Employees × 100
To calculate annual turnover rate (TR) or year-to-date turnover rate (YTD), add the monthly turnover rates together.
YTD Turnover Rate = January TR + February TR + March TR
Alternative ways to calculate employee turnover
Another, less detailed way to calculate turnover rate is to take the number of employees who left during a specific period and divide by the number of employees at the beginning of the period.
There are also ways to calculate different dimensions of turnover, for instance:
Involuntary turnover = (Number of Involuntary Employee Separations / Average Number of Total Employees) × 100
Voluntary turnover = (Number of Voluntary Employee Separations / Average Number of Total Employees) × 100
How does the Bureau of Labor Statistics calculate turnover?
The Bureau of Labor Statistics releases a “Job Openings and Labor Turnover” (JOLTs) report each month that classifies data by job openings, hires and separations. Total separations include quits, layoffs, discharges and retirements, deaths, disabilities, and separations due to transfers to other locations of the same firm.
The quit rate serves as a measure of workers’ willingness or ability to leave jobs. For instance, the quit rate for September 2020 was 2.1%. The sample size is approximately 8 million establishments on the Bureau of Labor Statistics' ES-202 Quarterly Census of Employment and Wages file.
References
Holliday,M.(2021)What is employee turnover & why it matters for your business.[Online]Available at https://www.netsuite.com/portal/resource/articles/human-resources/employee-turnover.shtml.Accessed on 17th April2022
U S Bureau Of Labor Statistic.(2020)Employee tenure summary.Economic news release [Online]Available at https://www.bls.gov/news.release/tenure.nr0.htm. Accessed on 17th April 2022
In addition to methods mentioned by you, following are some alternative and commonly apply methods which you can use for calculating employee turnovers,
ReplyDelete1. Flux Method
Labour Turnover = (No.of workers separated in a period + No. of workers replaced in the same period) / Average number of workers on role during that period x100
2. Replacement Method
Labour Turnover = No. of workers replaced during a period / Average number of workers on role during that period x 100
3. Separation Method
Labour Turnover = No. of workers left or separated during a period / Average number of workers on role during that period x 100
Average No.of. Workers = (No. of workers at the beginning of the period + No. of workers at the end of the period) / 2
Thank you for sharing this since it's a great addition.
DeleteIn my opinion, management should use employee data and external environmental data in order to predict up coming employee turnover.
ReplyDeleteYes. It too can be used to calculate turnover.
DeleteAn employee's departure creates a vacancy for the company to fill. In particular, recruiting and training new staff is more expensive than retaining old staff. At the same time, Calculate Employee Turnover can help organizations determine who is leaving their company at some point and for what reasons. Analyzing the employee turnover rate can help a company determine its financial wellness.
ReplyDeleteOf course. Because skilled & experienced employees are a asset to the company.
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