Calculating employee turnover involves dividing the number of employees who left by the average number of employees for a period. Tips include calculating company-wide and departmental metrics, asking employees why they left, and calculating direct turnover costs. Exit interviews and analyzing trends in responses can help identify problems.
Employee turnover is a basic HR metric that determines the number of employees who leave a company in a given period of time. Calculating employee turnover involves dividing the number of employees who have left the company by the average number of employees for that particular period of time. The best tips for calculating employee turnover include calculating a company-wide and departmental metric, asking employees why they chose to quit, and calculating total direct turnover costs. This provides more information than a baseline turnover rate. Associating an effective cost with this metric can help a company focus on retaining employees.
An example for calculating employee turnover requires only two numbers. A company has 15 employees who have left the company in the last month. The company averaged 90 employees during the same time period. The staff turnover rate is 17 percent for this time period. Companies often need more information to better understand and evaluate this HR metric.
Using a company and department level metric helps a company determine why or where a large portion of employee revenue exists. Using the previous example, five of the 15 employees were from the manufacturing department. The production department had a total of 20 employees. Thus, the employee turnover calculation for the manufacturing department indicates a turnover rate of 25 percent, well above the company’s total monthly rate. The company’s management team may need to review what conditions have led to this excessive turnover in the production department.
Many companies offer or require exit interviews. This allows the employee to file grievances or discuss why they chose to leave the company. In other cases, the company may ask specific – albeit general – questions about why the employee left the business. When calculating employee turnover both for the whole company and for individual departments, HR managers can review the answers provided by employees. Any trends or other significant problems that are consistently found in employee responses may indicate a problem in the company.
Calculating direct turnover costs is another useful process in calculating employee turnover. Common costs in this process include job postings to attract prospective employees, costs of interviewing candidates, time and money spent on employee retraining or retraining, and money spent on administrative costs, such as document processing. Another cost that inclusion may involve is the cost of severance of previous employees, such as severance pay or overtime from other employees picking up the slack. Companies can multiply total costs by the number of employees leaving the company. This adds another layer of insight into calculating employee turnover.
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