How and Why to Calculate Employee Turnover Rate?
The
importance of employee turnover for an organization
Employee
turnover is one of the most significant and normally used HR metrics.
Employee turnover is frequently defined in
a negative context. This is because of high costs related
to high turnover rates.
One study by Harvard Business School researchers,
published in the January-February 2008 issue of the journal "Organization
Science," estimates that the turnover costs from just one departing
employee -- earning approximately minimum wage -- could amount to as much as
$25,000. These figures are primarily based on direct costs, including any
severance costs plus the expense to recruit and train a new employee, but can
also incorporate indirect costs such as a resulting decline in productivity or
employee morale.
According to The Society for Human Resource Management
(SHRM) research, direct replacement costs can reach as high as 50%-60% of
an employee’s annual salary, with total costs associated with turnover ranging
from 90% to 200% of annual salary.
Employee
turnover is one of the most significant and normally used HR metrics.
Employee turnover is frequently defined in
a negative context. This is because of high costs related
to high turnover rates.
What is a healthy employee turnover rate?
Due to the high cost of
replacing employees, employee turnover typically has a negative association. However, employee turnover isn’t essentially a negative item.
If the high turnover is the effect of the fact
that poor performers are leaving a company, it can
really be a best thing. On the other hand, if top performers are leaving, this can be harmful for an organization. This is why it is tough
to state what a healthy turnover rate is. It depends on an organization and its
specific circumstances. Consequently, an employee turnover
ought to constantly be assessed contextually.
What is the employee turnover rate?
Employee
turnover rate is the percentage of employees who left a company within a certain period of time.
Calculation of Employee Turnover Rate
The average number of employees is
calculated by adding the number of
employees the company was employing at the beginning of
a definite period and the number of employees the company was employing at
the end of a definite period, and dividing the result by 2.
To calculate the employee rate below 3 variables are needed:
1. The number of employees who left (voluntary and involuntary)
the company in a certain period of time
2. The number of employees the company was
employing at the beginning of a certain
period.
3. The number of employees the company was
employing at the end of certain period.
Final formula is as below:
References:
Zojceska, A. (2018). HR Metrics: How and Why to Calculate Employee Turnover Rate?. [online] Available at: https://www.talentlyft.com/en/blog/article/242/hr-metrics-how-and-why-to-calculate-employee-turnover-rate [Accessed 20 Feb. 2020].
Benjamin, T. (2017). The Importance of Employee Turnover to an Organization. [online] Available at: https://bizfluent.com/info-8124606-importance-employee-turnover-organization.html [Accessed 20 Feb. 2020].
In the context of human resources, turnover is the act of replacing an employee with a new employee. Partings between organizations and employees may consist of termination, retirement, death, inter-agency transfers, and resignations
ReplyDeleteYes that's true. There are other factors too.
DeleteRetention of a positive and motivated employee is very important for the organization's success. High employee turnover increases the expenses and also has a negative impact on the organization's morale. Employee retention practices help support an organization's productivity.
ReplyDeleteA high employee turnover rate is an expensive problem.
DeleteBetter article tohave knowledge about to calculate Emloyee turnover..
ReplyDeletethanks...
Deletegood article
ReplyDeleteEmployee turnover rate is calculated by dividing the number of employees who left the company by the average number of employees in a certain period in time. This number is then multiplied by 100 to get a percentage
It is a simple formula.But can get good data about turnover of employees in a company
DeleteVery important note.
ReplyDeleteTurnover represents a significant cost to the organization. Good article.
ReplyDeletehigh costs always related to high turnover rates.
DeleteThis is indeed a valuable topic. An easy summarization for the importance of employee turnover and to find the employee turnover rate.
ReplyDelete
ReplyDeleteStaff turnover is an important way to measure both the effectiveness of the HRM system and the overall management of an organization or program.
Employer turn over has to be calculated for further improvement of the institution. It will shows the setback and needy update about the instituion.
ReplyDelete