What Employee Turnover Is and How to Calculate Turnover Rate

In Canada, turnover continues to be one of HR’s most persistent organizational issues. The median rate of employees who voluntarily left a company rose from 11.6% in 2020 to 15.9% in 2021. These numbers reflect all industries across the country. Turnover increases recruiting demands, and some respondents even admitted to leaving job postings up semi-permanently because a role had such high turnover rates. The revolving door of turnover also has damaging effects on the workforce overall, as employees need to continually adjust to new workloads, workflows, and teammates. In this article, we discuss strategies you can use to understand your organization’s turnover trends, calculate turnover rate, and make positive changes for better future retention. 

What does turnover mean? 

Turnover refers to employees leaving a company. A company’s turnover rate is the number of employees who leave your organization during a specific period, often represented as a percentage. Organizations typically calculate their turnover rate annually or quarterly to assess retention within their company and recruitment needs. 

There are two types of turnover: 

  1. Voluntary turnover refers to employees choosing to leave an organization. They may decide to resign for any number of reasons, such as for a new job elsewhere, educational pursuits, or personal matters. This is the type of turnover employers are most concerned with and can prevent through employee retention programs. 
  2. Involuntary turnover refers to when an employee’s career at a company ends because of their employer’s decision. Involuntary turnover happens in cases of termination and layoffs. 

Companies are interested in turnover rates because they are good indicators of how well a company is doing in a number of areas, including employee satisfaction, performance management, policy design, career development, and compensation and benefits. 

How does turnover affect an organization? 

Turnover is natural, but high turnover puts additional stressors on companies and their workers. Nearly two thirds (64%) of employers stated that turnover puts a heavy burden on current employees. Large employers (those with 100 or more employees) felt these burdens more than small businesses (those with fewer than 10 employees)—75% and 50%, respectively. Extra workloads, lack of support, and perceived job insecurity can cause low morale in employees of high-turnover organizations. 

Turnover also negatively affects: 

  • Company finances: Turnover is expensive. From recruitment costs to lost productivity, employers spend an average of over $41,000 each year on turnover, while 16% spend as much as $100,000 or more. Investing in employee retention pays off in the long run. 
  • Employee productivity: Staffing shortages, changes in workflows, and a lack of available knowledge and skills can result in poor quality work or decreased output. 
  • Company reputation: Employees who leave the company for negative reasons may share stories of their poor work experiences online through company review pages or social media. Job seekers may also recognize a company with high turnover by their frequent job postings. 
  • Future retention: Employee departures may influence others to leave the company, too. 

To avoid these negative consequences, organizations aspire to have low turnover rates, but “low” differs across industries, job roles, company sizes, regions, and more. Recent insights from Saratoga revealed that the highest rates of voluntary turnover appear in the following sectors: 

  • Hospitals and health systems (19.8%); 
  • Professional services (19.5%); 
  • Technology (14.5%); 
  • Financial services (12.8%); and 
  • Manufacturing or engineering (11.8%). 

Knowing your organization’s turnover data is the first step to making far-reaching positive changes throughout your organization. 

How to calculate turnover rate

Step 1: Gather data 

Before using the formulas in this section, you’ll need a few pieces of information. Define your given period (for example, January 1 to July 1), then collect the number of employees: 

  • At the beginning of the given period (“beginning employees”); 
  • At the end of the given period (“end employees”); and 
  • Who left the organization during the given period (“departed employees”). 

Be sure you don’t include any temporary hires or the number of employees who went on temporary leave. This data will skew your results. 

Step 2: Calculate using a situational formula 

Average turnover rate

Turnover rate percentage = Departed employees / [(beginning employees + end employees) / 2] x 100 

Year-to-date turnover rate 

Calculate the average turnover rate for each month of the year so far. Then, combine these rates. To calculate the year-to-date (YTD) turnover rate in March, you would calculate: 

YTD turnover rate = January turnover rate + February turnover rate + March turnover rate 

Voluntary vs. involuntary turnover rate 

To calculate the company’s voluntary turnover rate specifically, collect only the number of employees who voluntarily left the organization in step one. You can do the same to calculate the company’s involuntary turnover rate. 

Reasons for high turnover 

In general, employees aren’t staying at their jobs as long as they used to. But there are certain predictors for higher turnover. 

Consider, for example, your workforce’s demographics. The people who make up your workforce may affect your turnover rates. Saratoga’s insights revealed that Millennial employees (those born between 1982 and 2000) had a voluntary separation rate that was 5.3% higher than the rate for all employees. On the other hand, Gen X employees (those born between 1961 and 1981) had a voluntary separation rate that was 5.4% lower than the rate for all employees. 

Additionally, 21.8% people of working age in Canada are nearing retirement age (55 to 64 years old)—an all-time high. Companies with a workforce including individuals in this age group can expect higher rates of turnover due to retirement. 

You may also experience higher rates of turnover if your employees are dissatisfied with: 

  • New workplace changes; 
  • Their compensation; 
  • Their management team; 
  • The company’s culture; or 
  • Career development opportunities (or lack thereof). 

Turn over the tables by improving employee retention 

Employers can change the trajectory of their workforce by investing in employee retention. Turnover is preventable, and understanding your organization’s turnover trends is the first step to making meaningful and positive organizational changes that improve future retention. 

Analyse your company’s turnover data to find patterns. In your analysis, compare data over two or more periods to answer the following questions. 

  • Who is most likely to leave the company? Determine whether employees who have left are generally high or low performers, conduct certain job duties, or are members of an equity-deserving group. 
  • How long are employees with the company before they leave? The number of employees who left a company within their first year increased by 12% in 2021. Employees may also quiet quit because they are not immediately satisfied with their job, which may indicate that they expected something else and that job descriptions and interviewing practices should be revised. 

Looking at numbers and employee data alone won’t give you the full picture, though. To determine why employees leave, conduct exit interviews with each employee who voluntarily leaves your company. 

Turn analysis into action 

Analysis won’t do much unless you put a retention plan in place. Reviewing turnover data regularly lets you quickly address sudden changes in turnover so you can prioritize retention. You can also find out what matters most to employees through stay interviews, including what each individual is willing to stay with the company for. Implement employee feedback as much as possible to improve employee engagement and satisfaction. 

Employers often put off deploying new or additional benefits and programs because of their associated costs. But the future costs of turnover often outweigh the original investment. Put number-crunching behind you with our Turnover Calculator, which accurately assesses the cost of employee turnover within your organization using your existing employee data. You can access the worksheet through HR Fundamentals, our one-stop shop for everything HR. Through Canada’s leading HR content library, you get unlimited access to customizable document templates, including policies, compliance checklists, employee surveys, interview forms, and much more. Request a demo today