How to calculate employee turnover, and why managers should

Written by: Stacy Pollack | Edited by: Nora St-Aubin | Illustrated by: Officevibe
Updated on: Published on: August 3, 2021 |  Reading time: 6m

Employee turnover is the number or percentage of workers who leave an organization during a specific period of time (typically one year) and are replaced by new employees. In 2021, employers can expect a serious spike in their turnover rates, if they’re not already seeing one. This is because after a year of uncertainty, employees feel secure enough to quit their jobs. They’ve had time to reevaluate and start looking for something new.

It’s estimated that over half of employees plan to quit their jobs in 2021.

The Society for Human Resources

This trend is especially prominent in the tech industry, where employers were already fighting for highly coveted tech and IT skills before the pandemic. Tech companies experience the highest amount of employee turnover, with an average rate of 13.2%.

A certain amount of turnover is to be expected at every company. But as a manager, you want to avoid losing your top performers by reducing turnover on your team. The first step is learning how to calculate turnover and understand your turnover rate. From there, you can take active steps to improve your retention rate, which is the other side of the coin.

Why should managers calculate employee turnover?

Many businesses calculate staff turnover company-wide. But understanding the turnover on your own team can really help you in your role as a manager. If you have high turnover, your team could experience the true employee turnover cost in ways like:

  • Lower engagement and morale: People leaving the team can impact team spirit. Saying goodbye to colleagues, disruption of regular team work cycles, and taking time out of your team’s calendar to help with backfilling roles on your team can all lead to employee disengagement if it’s happening too regularly.
  • Fear and uncertainty: When people frequently leave your team, employees might wonder if they should leave, too. People might even fear that they could be next to be let go. This kind of uncertainty can cause your employees to start losing trust in management and leadership.
  • Decreased productivity: Work gets shuffled around and projects are impacted when someone leaves the team. And when employees go, they take valuable skills and knowledge with them. This can even lead to burnout as team members who stay start taking on extra work.

You can’t always stop employees from leaving. However, knowing your rate of turnover will help you identify any problems that might be happening on your team. If you notice that people are leaving your team at a more-than-regular rate, you can spend some time understanding why, and work on your employee retention strategy.

How to calculate employee turnover

Math might not be your thing, but it’s important to understand how to calculate turnover. You want to know what’s behind the number, exactly. Follow these steps to calculate your annual turnover rate.

example of a formula to calculate employee turnover
A visual of how to calculate employee turnover

Step one

Add the number of employees at the start of the year with the number you had at the end of the year.

For example: 20 employees at the start of the year + 18 employees at the end of the year = 38 employees.

Step two

Divide the total you got from step one in half (by 2).

For example: 38 total employees ÷ 2 = 19 employees.

Step three

Divide the number of employees who left during the year by the outcome of the first equation.

For example: 2 employees left during the year ÷ 19 employees = 0.105

Step four

Multiply this final number by 100, and you‘ve got your employee turnover rate.

For example: 0.105 × 100 = 10.5% turnover rate.

If you want to keep a more active pulse on this number, you can calculate your turnover rate more often. All you have to do is follow the same equation but with shorter time intervals, such as bi-annually or quarterly. Checking in on your monthly turnover rate can also be a good approach.

How often should I be calculating turnover?

Between having 1-on-1s, training and coaching employees, and putting out fires, it can be tough to keep up with how your team is feeling. But staying in touch with employee engagement levels can help you spot risk factors for turnover early. It’s good to send out regular employee surveys to have an overview of what’s supporting or blocking your team’s success.

Making time to calculate employee turnover on a regular basis is one way to understand employment patterns and engagement on your team. Consider calculating your turnover rate at the end of each quarter, so that you can have a fluid and up-to-date comparison over time. You might spot trends from seasonality or company changes that could give you valuable insights into what contributes to employee retention.

What is a good employee turnover rate?

When it comes to employment data, it’s hard to pinpoint a golden number or benchmark. You need to look at your employee turnover rate from a few different lenses to get a real sense of what it means to you.

Factors to consider:

  1. How much voluntary turnover do you have (people choosing the leave the organization)?
  2. How much involuntary turnover do you have (people being fired or laid off)?
  3. Are people switching teams, but staying within the organization?

Worldwide, organizations see an average number of 10.9% turnover, according to Linkedin. They define turnover as “the percent of LinkedIn members who indicated they left a company in 2017.”

Understanding your team’s turnover rate

Remember there is more to this number than meets the eye. It’s really important that you contextualize your turnover rate within the reality of your team and organization. Start with this when you’re trying to understand turnover.

If you see that people on your team quickly get promoted up and out, it could indicate that you’re doing a great job coaching and supporting career development. But if you’re experiencing turnover because people are leaving the organization and you’re not sure why — or if everyone is citing the same reasons for their departure — this could be a red flag.

Another good way managers can better understand their team’s turnover is to ask. Make sure you have an exit interview for every employee departure. This can be a formal or informal discussion with a departing employee to get a sense of what led them to make the jump and whether they have specific feedback for you as a manager.

Pro tip: Don’t just wait until people are packing up their desks, you can also have ‘stay interviews‘ with your team to understand the employee experience. Get to know what’s keeping them happy, engaged, and motivated at work.

Be mindful that the size of your team will have an impact on your turnover rate. If you’re managing a 20 person team, it might not feel like as big of a deal when someone leaves. But if you’re managing a 4 person, closely knit team, the impact on you and your team will feel greater.

This is also reflected in your turnover rate. When you calculate your turnover on a smaller team, the percentage could be higher. 1 person leaving on a 20 person team will leave you with a smaller turnover rate than 1 person leaving on a 4 person team.

To learn more about why employees are leaving their jobs, check out the top causes of employee turnover.

Calculate employee turnover to keep a pulse on team health

Like tracking engagement metrics or asking for feedback from your team, calculating turnover is one more tool you can use as a manager to understand what they need from you. People switch jobs for many reasons, and it can be healthy to have fresh the perspective of a new employee joining your team. But to keep everyone working well together and avoid constant setbacks, you want to see a healthy amount of turnover.