Recognising that you have a problem is often the first and most important step to solving it. But with so much else to keep track of in a small business, it can be difficult to identify staff turnover as an issue.
This all changes when you are able to quantify your staff turnover rate and better understand the state of your business.
Here, our team of accountants explore what staff turnover is, its causes and solutions, and how to calculate your staff turnover rate.
Staff turnover is the number or percentage of employees leaving your organisation during a certain period.
Particularly high or low staff turnover generally indicates that you need to make some changes within the business.
Companies tend to assess employee turnover on a monthly or annual basis, but you can choose whichever time period is most useful to your business.
High or low staff turnover often means you need to make some changes.
You can express staff turnover in different ways. It’s often helpful to represent it as a percentage of your total workforce.
Alternatively, you could simply represent it as the number of employees who left in that time period.
What’s more, categorising staff turnover as voluntary/involuntary and desirable/undesirable will help to produce useful insights into staff retention.
Analysing the turnover rate of employees leaving before 12 months also helps to indicate whether retention is an issue or not.
You may hear the terms staff turnover and staff attrition used interchangeably.
They are actually two different things. Staff attrition occurs when you do not fill a position with a new employee.
It also occurs naturally, when you lose employees due to personal health, retirement, resignation or eliminating a position, for example.
For such a useful figure, the good news is that it’s fairly easy to calculate your staff turnover rate. Here’s how you can work it out by month or by year, with some examples.
Let’s use January as an example.
Add the number of staff you had at the beginning of January to the number of staff at the end of January
Divide that number by two. You now have the average number of employees in January
Divide the total number of leavers in January by the average number of employees in January
Multiply that number by 100. You now have your January staff turnover as a percentage
Now let’s say four of your 202 employees decided to leave in January.
Add 202 to 198 = 400
Divide 400 by 2 = 200
Divide 4 by 200 = 0.02
Multiply 0.02 by 100 = 2%
The calculation for annual staff turnover is the same. Here’s 2018 as an example:
Add the number of staff you had at the beginning of 2018 to the number of staff at the end of 2018
Divide that number by two. This is your average number of employees in 2018
Divide the total number of leavers by the average number of employees
Multiply that number by 100. You now have your 2018 staff turnover as a percentage
Now let’s say five of your employees decided to leave in 2018. You had 45 employees at the beginning of 2018, and 55 at the end.
Add 45 to 55 = 100
Divide 100 by 2 = 50
Divide 5 by 50 = 0.1
Multiply 0.1 by 100 = 10%