How to Calculate the Cost of Employee Turnover

Tapping into business insights is one of the best ways to grow your business organically. A useful way to determine your business’ health, is by understanding your employee turnover rate.

Here we’re going to delve deeper into key insights, discuss valuable tools such as employee turnover calculators online, and look at how to calculate cost of employee turnover.

Why is it important to measure employee turnover?

Employees are the beating heart of an organisation. People are responsible for creating and maintaining a culture, cultivating relationships with customers and clients, and for being brand ambassadors for a company. Simply put, they’re a company’s greatest asset. Which is why employee retention is so important, and understanding employee turnover rates is beneficial. What’s more, the cost of hiring new talent is expensive, estimated to be 6-9 months of an employee’s salary.

With growing employee turnover rates in Ireland 2021, it’s an issue that business can no longer afford to ignore. Especially as 42% of Irish workers expect to resign from their current jobs within the next year.

How to calculate employee turnover ratio?

In order to set a benchmark and understand what’s a healthy labour turnover for your business, it’s useful to track turnover figures. But, knowing how to calculate employee turnover rate by year or month can be tricky without the right software.

Thankfully, you don’t need to install anything technical, there’s plenty of simple employee turnover calculators online, including this free and easy-to-use version.

Simply input the figures requested and let the calculator crunch the numbers. This will present you with an employee turnover calculation that you can take forward and use internally. In just a few clicks of a button, it will produce an employee turnover rate in annual figures, showing the true cost of lost talent to your business.

How much is employee turnover costing you?

Once you know your employee turnover calculation, you’ll be able to benchmark against competitors, as well as your own sector.

Understanding the true cost of lost talent will allow you to make the necessary tweaks to your business. It’s also advisable to undertake exit interviews, as well as regular pulse surveys to monitor employee engagement and nip issues in the bud.

 How to calculate employee turnover rate per year

Another method is to measure employee turnover rates manually. This will allow you to understand monthly and annual rates.

To do this, simply divide the turnover number over a year, by the number of original employees at the start of that period. For instance, if the year starts with 100 employees and you lose 5 employees over the course of the year, the figure is 5 divided by 100 which is the equivalent of 0.05 or 5%. This is a well-used figure taken from Human Capital Reporting.

 Employee turnover calculation methods

Of course, this isn’t the only way to calculate employee turnover ratio. If you prefer to use a laptop, here’s how you calculate employee turnover in Excel.

You’ll need to create a formula first. If employee turnover rate is the equivalent of those who left the company divided by the original number of employees, the following formula can be applied:

Cell A1 – figure of original employees

Cell A2 – figure of turnover

Cell A3 – input “=sum(a2/a1)” and then convert the number into percentage (eg, 0.05 = 5%)

In Summary

Business insights can provide a wealth of valuable information into the health of your company. This allows you to make adjustments and improvements for business growth. Learning how to calculate employee turnover rate is one of the most important ways of understanding turnover levels. Master this, and you can start to make progress into reducing your employee turnover rate.