Understanding turnover percentage is essential for managers and business owners alike, as it helps them keep an eye on employees’ engagement and overall company health. Also referred to as employee turnover or attrition rate, turnover percentage determines the number of employees who leave an organization over a given period relative to the average employee count. In today’s competitive market, high turnover can result in inefficiency, reduced productivity, and substantial recruitment costs. Here’s a step-by-step guide on how to calculate turnover percentage.

Step 1: Determine the Reporting Period

To begin calculating your company’s turnover percentage, first establish a specific time frame for your analysis. Some organizations calculate turnover on an annual basis, while others may assess it monthly or quarterly. Deciding on a consistent reporting period allows you to track changes in employee retention over time.

Step 2: Calculate the Number of Employees at the Beginning and End of the Period

Next, figure out how many employees were working at your organization at the start and end of your reporting period. These figures can be found in human resource records or payroll software. Add both numbers together and divide by two to obtain an average number of employees:

Average Number of Employees = (Number of Employees at Beginning + Number of Employees at End) / 2 

Step 3: Determine the Number of Separations during the Reporting Period

Identify how many employees have left your organization during the reporting period. This includes voluntary separations such as resignations or retirements and involuntary separations like terminations or layoffs.

Step 4: Calculate Turnover Percentage

Now that you have all necessary figures, calculate your company’s turnover percentage using this formula:

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

The resulting figure indicates what percentage of your workforce has been replaced during the specified time frame.

Example:

Let’s assume a company started the year with 100 employees and ended the year with 120 employees. During this period, there were 25 employee separations. First, we calculate the average number of employees:

Average Number of Employees = (100 + 120) / 2 = 110

Now we can determine the turnover percentage:

Turnover Percentage = (25 / 110) x 100 = 22.73%

In this example, the company’s annual turnover rate is approximately 22.73%.

Conclusion:

Regularly monitoring your organization’s turnover percentage helps detect potential issues early on and allows you to implement strategies to improve employee retention. High turnover rates may signal underlying problems with company culture, management, or employee satisfaction, while low turnover suggests a stable and content workforce. Be sure to compare your results to industry standards for a complete understanding of your company’s performance.