# How to Calculate Employee Turnover

Written by: Seth Richtsmeier

### Are you looking to improve your employee retention rate? The first step is to understand just how many of your employees are leaving and why. Use this simple formula to get a better grip on the people side of your business and make better, data-driven decisions.

For any business, it's important to understand the percentage of people who leave your company over a given time period. Knowing your employee turnover percentage and comparing it from year to year can help you improve your recruiting and retention strategies, as well as clue you in to management or personnel changes that need to be made to prevent expensive employee turnover. There’s a simple formula you can use to calculate your employee turnover rate. You can adjust the formula to calculate monthly, quarterly, or annual turnover rate. You’ll need three numbers to calculate your monthly employee turnover rate:
1. The number of active employees you had at the beginning of the month (A)
2. The number of employees you had at the end of the month (B)
3. The number of employees that left the company during the month (C)
Get your average number of employees (D) by adding A + B and dividing by two. (A+B)/2 = average number of employees (D) Then divide the number of employees who left the company (C) by your average number of employees (D), and multiply by 100% to get your final turnover percentage for the month: [C/D] x 100 = final turnover percentage

#### What time period should I use to calculate employee turnover?

Large companies might calculate employee turnover every month, especially those with many locations. Calculating on a month-to-month basis can help you spot patterns within your organization and take action to increase employee retention sooner rather than later. Smaller companies, like startups, might want to hold off on monthly analysis and instead do quarterly or annual turnover calculations. It can take some time to see patterns. The good thing is you can use this same formula to calculate monthly, quarterly, or annual employee turnover. You’ll just need to use the number of employees you had to begin the quarter or year (as A) and the number of employees you ended the quarter or year with (as B).

#### Should I calculate new employee turnover as well as overall turnover?

You should calculate new employee turnover if you want to make sure you’re keeping up with your industry’s standards of new employee retention. If you have a high new employee turnover rate, it might be time to rethink your onboarding or orientation methods and investigate other reasons new employees might be leaving. To calculate new employee turnover, add up the number of new employees who left within a given time period (whether that’s a month, a quarter, or a year). Then divide that number by the total number of employees who left the company within that same period to get your new employee turnover percentage.

#### Should layoffs or terminations be included in my calculation?

When you want to get an overall percentage of the amount of turnover you had, you need to include turnover of all types, including voluntary and involuntary turnover. Involuntary turnover (also called desirable turnover) is when a company replaces employees who are underperforming with employees who have greater performance. Voluntary turnover (also called undesirable turnover) happens when high performing employees leave the company, which causes expensive, time-consuming recruitment and training to replace them. Employees who retire would fall into the voluntary turnover category, since they were not terminated. You can do separate calculations to determine your voluntary and involuntary employee turnover rates. Simply replace the total number of employees who left the company (C) with the number of first employees who left voluntarily and then employees who left involuntarily. So, let’s assume you had 100 employees at the beginning of the year and 96 employees at the end of the year. During this time, five quit and 12 were fired. You should have these calculations: (100+96)/2 = 98 average number of employees (5/98) x 100 = 5.1% voluntary employee turnover (12/98) x 100 = 12.2% involuntary employee turnover [(5+12)/98] x 100 = 17.3% total employee turnover

#### Should I include temporary workers in my employee turnover calculation?

Turnover refers to the number of employees who held a position within a given time frame, factoring in employees who left voluntarily or involuntarily. Temporary workers who are hired to fulfill one position and then aren’t replaced once their contract is over, should not be factored into your overall employee turnover calculation since the turnover rate for this one position would be zero. However, direct-to-hire temporary workers should be factored into your calculation since your goal is to hire these employees full-time once their contract period is over.

## What is a 'Good' Employee Turnover Rate?

Gallup recommends employers aim for around 10% turnover rate, but that rate could be a high or low target for your company depending on your industry. The best way to determine what a healthy turnover rate is for your company is to see what the average employee turnover is at other companies in your industry, and you can do this by looking at trends in employee turnover in major industries from the Bureau of Labor Statistics. This list can give you an overview, but it’s still broad – for instance, professional and business services is listed as one category when there are at least a dozen sectors that can be classified as professional and business services. The best way to see how you’re doing as an organization is to compare your employee turnover rate year over year. If you’re a new company, you can look at monthly or quarterly turnover rates to see if there are trends or patterns.

#### Industries with high employee turnover rates

Industries with the highest turnover rates over the last few years are mainly service-based. These include staffing (352%), hospitality (60%), retail (59%), and fast food (100%). There are many reasons for high turnover in these industries. It’s not uncommon that folks enter the workforce through one of these industries, only to move into another industry for career advancement. It can also be easy to move from one company to another in these industries, as adequate training and career growth opportunities aren’t always provided. If your company is in one of these high turnover industries, know that turnover is common. Providing thorough training, competitive salaries, and career advancement opportunities can help lower your employee turnover and make your company more appealing to quality job candidates. Jobs in the technology sector are also starting to see high turnover, as are jobs in the healthcare industry. In 2017, the healthcare industry’s turnover rate was over 20% and that percentage is expected to continue to climb. Employee turnover in tech companies has been around 13% with employees leaving due to poor leadership, an unhappy environment, and a lack of career advancement opportunities.

#### Industries with low employee turnover rates

There are several industries with low turnover rates, some at almost zero. Government jobs, somewhat unsurprisingly, have the lowest turnover. Government pensions and straightforward paths to retirement can make staying more appealing for employees. Federal government jobs have a low 1.3% turnover rate, while local education and state government jobs have a 1.4% turnover rate. Finance and insurance jobs also have low turnover (1.7%), as do wholesale trade jobs (1.9%). If your business is in either of these industries, your turnover rate should be in the single digits. If it isn’t, it’s likely that issues with culture or career growth are to blame.