Employee turnover has been on the rise for many years now in the US, and that trend isn’t set to change anytime soon. In fact, voluntary turnover is set to hit 35% in 2023, which has been steadily rising since hitting an all-time high in 2018. The pandemic and the Great Resignation of 2021 didn’t help matters, so HR departments need to stay on top of their turnover rates.
That’s where essential turnover metrics come into the picture, as they can help you assess the effectiveness of your company culture, human resources department, hiring process, onboarding, and management. While calculating overall turnover can be helpful, companies typically need more specific data than that.
For instance, it’s common for organizations to want to know how effective they are at retaining high performers. In this situation, you’d need to calculate your top talent turnover instead of your overall turnover rate. That involves tweaking the traditional formula for calculating annual turnover, which can be a bit tricky if you don’t have a guide.
That’s why we put together this article to make calculating the proper HR metrics related to turnover as quick and easy as possible.
These metrics include:
New hire turnover rate
Stay tuned to learn how to calculate the most important turnover metrics for your organization.
What’s employee turnover rate?
First, you need to understand how to calculate your overall turnover rate. Employee turnover refers to the percentage of employees that have left your company for various reasons. If you don’t calculate your turnover rate, you’ll never know if you have a problem with retaining your best employees.
As stated in the intro, turnover in the United States has been rising since 2018, with employees leaving organizations that don’t meet their preferences in record numbers. There are a variety of reasons for this, including the prevalence of remote/hybrid work after the COVID-19 pandemic. Many employees grew accustomed to working remotely, and they aren’t willing to return to normal office work.
58% of Americans now have the ability to work from home at least once a week, which has become one of the most prominent workplace demands. If new hires aren’t able to enjoy flexible schedules and a peaceful work-life balance, they will likely voluntarily quit in favor of working for an organization that meets their preferences.
Providing perks like occasional remote work will increase employee satisfaction levels, which can reduce turnover.
Calculating overall employee turnover
Here’s the formula for calculating your overall employee turnover:
Turnover percentage = Employees that left/average number of employees x 100
To plug your numbers into the formula, you’ll need three components – a time period, your total number of employees before the time period, and the number you had after (including how many left).
Let’s say you had 5,000 employees at the beginning of the year, 5,500 at the end, and 1,000 employees left the company.
In this scenario, we’d calculate the average number of employees by adding the beginning number of employees (5,000) with the ending number (5,500) and then dividing by 2.
5,000 + 5,500/2 = avg. number of employees (5,250)
Now that we have the average, we can plug it into the rest of the formula:
1,000/5,250 x 100 = 19.04%
And voila, we now have the annual turnover rate for our fictional company, which is 19.04%.
This is the base formula that you’ll use to calculate other turnover metrics besides your overall turnover.
You can also use any type of time period you want for the formula, enabling you to calculate your monthly, quarterly, and annual employee turnover rates.
Essential turnover & employee retention metrics
Retention and turnover metrics serve as crucial KPIs (key performance indicators) for the effectiveness of your human resource management. For instance, if your voluntary turnover rates are especially high, it’s a sign that something is wrong with your work environment.
Yet, voluntary turnover encompasses a lot, including employees that are leaving for reasons outside your company’s control. Some employees retire, others leave to take care of sick family members, and some leave because they’re relocating to a new city or state.
To pinpoint the issue that’s causing your voluntary turnover to spike, you’ll need to use more specific turnover metrics.
If you suspect the problem lies with your recruitment and onboarding processes, you can calculate your new hire retention rate. This metric will let you know if a large number of new employees are leaving your company, which is a clear sign that you need to work on recruiting and onboarding.
That’s only one example of how you can use retention and turnover metrics to improve your employee experience and work environment.
There are plenty more important metrics related to turnover, so let’s take a look at them all.
Overall turnover rate
First, let’s start with the formula that you already know, your overall turnover rate.
In case you forgot, here’s a quick refresher on what it looks like:
No. of employees that left/ avg. no. of employees x 100 = overall turnover percentage
This is a broad measurement that gauges the turnover rate for your entire organization over a given period of time, and it includes employees that left for a wide variety of reasons — both voluntary and involuntary.
Why is it worth calculating your overall turnover rate?
Knowing your overall turnover rate will let you know if you have a problem with retention or not, so calculating it should always serve as your starting point. If you discover that you have a high turnover rate, you can get more specific and dive deeper with other metrics to uncover the root cause.
Conversely, if you calculate your overall turnover rate and discover that things are running smoothly, you won’t have any need to do any further calculations, which is why it’s worth knowing. If you do want to dig deeper, the next step is to separate your overall turnover rate into two groups — voluntary and involuntary turnover.
Voluntary turnover rate
Turnover is considered voluntary whenever an employee chooses to leave your company of their own will. There are two types of voluntary turnover, push reasons, and pull reasons.
Pull reasons are factors that your organization can’t control since outside forces are ‘pulling’ employees away from you.
Pull reasons include:
Employees choosing to retire
Going back to school
Taking care of a sick loved one
Relocating to a new city, state, or country
Since you can’t control these factors, you shouldn’t view pull reasons in a negative light.
When an employee leaves for push reasons, on the other hand, they are well within your organization’s control – since you’ve ‘pushed’ them out.
Common push reasons include:
As you can see, push reasons require your immediate action to resolve. Otherwise, your turnover rate will continue to rise.
Here’s the formula for calculating voluntary turnover:
No. of employees that voluntarily quit/avg. no. of employees x 100 = voluntary turnover rate
Note that you need to include only the employees that quit voluntarily instead of including all employees that no longer work for you.
Involuntary turnover rate
Turnover is considered involuntary whenever you choose to part ways with an employee due to a lack of resources or poor performance. That means all your terminations and layoffs count towards your involuntary turnover. If you discover that your involuntary turnover is higher than your voluntary turnover, it’s typically a sign that you need a better recruitment strategy.
However, that’s only the case if your terminations are higher than normal, as layoffs usually indicate a larger problem with the organization as a whole (such as decreasing revenue).
Here’s the formula for the involuntary turnover rate:
No. of layoffs and terminations/avg. no. of employees x 100 = involuntary turnover rate
This time, you divide the total number of employees you let go by your average number of employees. That ensures that you only count instances of involuntary turnover, which is what you want.
Top talent turnover
Do you have a hard time retaining your top performers? If so, then you’ll want to calculate your top talent turnover. This metric represents how many high-performing employees have left your company, and it’ll let you know if you have a problem with attracting and retaining top employees. It could be that a specific department is turning away high performers, or the issue could be organization-wide.
Calculating your top talent turnover will help you pinpoint the issue so your HR professionals can work on retention strategies. First, you’ll need to consult your records or HRIS system to find the number of top performers that have left your company recently. After that, you’ll be able to plug those numbers into the formula for top talent turnover:
No. of top performers that left/avg. no. of employees x 100 = top talent turnover percentage
Employee satisfaction rate
Is your staff satisfied with the work they do at your organization? To find out, you can calculate your employee satisfaction rate by using a simple formula. This one is a bit trickier to track, as you’ll have to uncover which employees are satisfied and which are not.
How do you do that?
The most reliable way is to send out anonymous employee surveys that gauge their satisfaction levels. It’s crucial that these stay anonymous in order to encourage the most honest answers from your team. Once the surveys are in, count the number of highly satisfied employees and then plug them into this formula:
No. of satisfied employees/total number of employees x 100 = employee satisfaction rate
Note that you use your total number of employees for this calculation instead of the average number, which makes it unique.
Overall retention rate
Besides turnover metrics, there are vital retention metrics that you should also use, especially if you’re having trouble retaining team members. Your overall retention rate will give a large-scale overview of how you’re retaining employees across your entire organization, regardless of department.
Similar to the overall turnover rate, it’s the starting point for calculating other retention metrics. Not only that, but you need to know your overall turnover rate to calculate your retention rate in the first place.
Here’s the formula you need to use:
Retention rate = 100 – Overall Turnover Rate
New hire retention rate
Lastly, knowing how to calculate your new hire retention rate will provide insights into your onboarding process. Primarily, you’ll be able to figure out how many new hires stay with the company vs. the ones that leave. If your new hire retention rate is low, it’s time to speak with your hiring managers to find out what’s going wrong.
Here’s the formula for calculating your new hire retention rate:
New hires that stayed/total new hires x 100 = new hire retention rate
Wrapping up: The essential employee turnover metrics
If you don’t analyze your turnover metrics, you’ll have no way of knowing if you have issues with retention or not. That’s why it’s crucial to know how to perform all the calculations found in this article.
With the proper metrics by your side, you’ll be able to audit and improve the effectiveness of your HR department, onboarding process, recruitment, company culture, management, and more.