Employee Turnover Rate refers to the number of employees who left the company in a given period.
- choose a time frame
- identify the number of employees that left the company within the time frame
- identify the average number of employees within the company
- divide the number of employees that left by the average number of employees
- express the value as a percentage
We divide by the Average number of employees because:
- The average number of employees should capture the size of the workforce during the chosen period
- The calculus was simplified due to the complexity of the calculation of the exact number of people working in the chosen period. It is considered not to be a derailer from drawing the right conclusion.
When the number of people who left the company is greater than the average number of employees for the same period the turnover rate will be above 100%.
Usually Turnover Rate is calculated monthly, quarterly, mid year, annually.
Calculation for employee turnover:
Reference period: 1 month
Employees in the company at the START of the month: 100
Employees in the company at the END of the month: 110
Employee leaves during the month: 10
In order for this situation to happen you need 20 people to start working in the company in the same month.
Calculation for turnover above 100%
Reference period: 1 year (12 months)
Leaves during each month: 10
Employees at the start of the year: 100
Employees at the end of the year: 100
Looking just at this numbers we are not able to understand what happened: did the company replaced all employees that left? did the company grew with new hires and the positions for all the employees that left are open?
To be able to understand the bigger picture we need to look also at retention rate.