In a world where high employee turnover rates have become pervasive, 
more and more managers are regularly monitoring their employee turnover. On the face of it, the calculation of employee turnover should be straightforward. Nevertheless, we will be showing you that matters are not always quite so simple.
Employee Start or End Dates?
The first decision you need to make to calculate employee turnover rates correctly is whether to base your calculations on employee start or end dates. In this regard, we suggest you follow the practice set down by the Society for Human Resource Management (SHRM) and always use employment end dates. Because this has become the accepted standard, following this practice will make it easier when it comes to benchmark comparisons.
SHRM suggests you calculate your employee turnover rate as a percentage by using the following formula:
Number of Separations x 100
Average Number of Employees
Review Period
The second decision you need to make relates to the review period. While most organizations are interested in annual employee turnover figures, they usually track employee turnover on a monthly basis. Unless you have a very specific reason for doing otherwise, we suggest that you follow this practice also.
Average Number of Employees
While there are a wide variety of ways to calculate the average number of employees for the period under review, most organizations use the following formula:
Number of Employees at Start of Period + Number of Employees at End of Period
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In our experience, more complex methods to calculate employee turnover rates, including averaging daily figures, add more effort for little or no return. The important thing when calculating employee turnover rates is to be consistent.
Growth Situations
The employee turnover rate calculation formulas discussed so far work well in situations where the organization has a relatively stable number of employees. Additionally, because they are based on the number of separations, it turns out that these same formulas also work well in Growth situations. The reason for this is that where the organization is adding to its workforce, its number of separations will not be affected. As we will see below, however, the same is not true for Retrenchment situations.
Retrenchment Situations
In retrenchment situations, where employees are being laid off because operating entities are either being closed down or reduced in size, the number of separations will be affected as follows:
Number of Separations = (Normal Employee Turnover Rate / 100)
x Average Number of Employees + Number of Employees Retrenched
As a result, the following formula should be used in Retrenchment situations:
(Number of Separations Number of Employees Retrenched) x 100
Average Number of Employees
Using this formula will ensure that the resulting figure for employee turnover will be representative of the true underlying level of employee turnover.
Global and Non-Global HR Initiatives?
One of the key reasons that organizations calculate employee turnover rates is to measure the influence of HR initiatives by comparing before and after rates. Typical situations where this is the case include the evaluation of:
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In order to calculate the impact of any such initiatives on employee turnover rates, a clear demarcation has to be drawn between Global and Non-Global initiatives. A Global initiative is one in which all employees will be included whereas in a Non-Global initiative only some employees will be involved.
In general, while Training and Performance Appraisal initiatives may be either Global or Non-Global, any change to recruitment methodologies will always be Non-Global. The reason for this is that the organization will have two classifications of employee:
- Pre-existing employees recruited using prior methodologies
- New employees appointed using the new methodology
In Global initiatives, the formulas already discussed can be used. In Non-Global initiatives, employees within the organization need to be classified as either Included or Excluded and the formulas applied to each group as a separate entity.
It should also be noted, that when employee turnover rate comparisons are part of the process through which the effectiveness of an initiative is being evaluated, then expectations have to be set carefully otherwise the evaluative process can be adversely impacted.
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