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Calculating turnover of employees can be a tough task for managers, especially when the manager does not how to react to turnover rates or how to accurately calculate them. There are several ways of calculating and understanding the repercussions of turnover, which is not necessarily a bad thing. Calculating turnover can be done for all employees equally, just new employees, or just certain positions, and the turnover can be calculated on a monthly, quarterly, or annual basis. Along with calculating turnover, there are other calculations that managers can use to find out how much money they are losing from losing employees.
The first thing a manager needs to do is determine the time period for calculating turnover. He or she will get varying answers depending on whether the calculation is done for the month, the quarter or the year, and picking the amount of time is necessary for starting the equation. Most managers focus on quarterly and annual calculations, and tend to do both.
Performing the turnover calculation takes just a few seconds. First, the manager should take the total number of employees at the beginning of the time period, and then the number of employees lost during that period, whether the employee was fired or quit. The lost employees should then be divided by the total number of employees. For example, if there are 1,000 employees and 400 are lost, then this equals a 40 percent turnover rate.
While calculating turnover based on all employees is helpful to a business, most managers will perform more specific calculations based on employee types. New employees can be hard for a business, because they are new and do not fully know how to do the job, so keeping new employees and allowing them to gain experience is crucial. If the manager does a new employee calculation and finds out there is a high number of new employees leaving, then he or she should find out what is causing the problem. This step, which can help save a business, also can be done for managers and other employee positions.
Along with turnover, managers will often calculate the cost of the turnovers. If a new employee leaves after using $40 US Dollars (USD) for training and $35 USD for the uniform, another $100 USD in wages were spent interviewing and checking references, and it took $5 USD to print all the necessary paperwork, then that new employee costs the company $180 USD before he or she even started working. These figures will help a business understand how crucial it is to keep employees.
Reacting to turnover rates also is important for managers. While high turnover can be hazardous, it also can be good. If there is not enough income being made to pay for the employees, or if the employees were poor performers, then their departure may actually help the business. If the turnover is coming from high performers who take valuable skills when they leave, then this can cause an issue that should be addressed.
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