Find out the definition of employee turnover, the formula used in its calculation and examples.

Employee turnover definition, formula and examples

Employee turnover refers to the number of employees leaving an organization and are replaced in a particular period. This could be voluntary or involuntary. Involuntary turnover occurs when employment is terminated due to poor performance, workplace policy violation, and absenteeism.

Voluntary turnover occurs when employees leave employment on their free will due to reasons such as relocation, personal matters or being employed in another company.

Some employee turnover definition also refers to the number of employees who leave an organization through termination, resignation and attrition. However, you should note that in most cases attrition does not require a new hire to take over since it involves an employee retiring, death or job elimination.

Employee turnover is usually considered as a percentage rate.

Employee turnover formula

The calculation for employee turnover can either be simplified or more specific. A simple calculation takes the number of employees who have left either voluntary or involuntary and divides by the total employees in a period. For instance, if a company has 50 employees at the onset of the year and 4 employees quit or they were dismissed, then annual employee turnover rate is 8.333%.

Employee turnover rate = {employees fired or dismissed / average number of employees} x 100

Average number of employees = (employees at the beginning of the year + employees at the end of the year)/2

(4/48) x 100 =8.333%

However, organizations can also have more detailed calculations such as monthly turnover, voluntary and involuntary turnover.

Employee turnover rate can be high, low or reasonable. A high turnover rate means that employees are leaving their jobs at a high rate a situation that can raise red flags. A company should aim for average employee turnover rate, although this also varies between industries. For instance, manufacturing may have a lower average rate of turnover than in the hospitality industry.

While employee turnover is associated with high costs of filling the positions, training the new hire, advertisement fees and other associated costs, usually, organizations can experience desirable turnover. This occurs when a non-performing employee leaves and is replaced by a better-performing employee. On the other hand, in an undesirable turnover, the company loses high performing employees.

High employee turnover rate can be detrimental to any organization. It is, therefore, crucial that a company should find ways to reduce it and encourage employee retention. This is by giving employees attractive remuneration packages, recognition, career development, and incentives.