How to Calculate (and Analyze) Employee Turnover Rate

December 18, 2023

Turnover rate keeping you awake at night? Let’s talk about how to stop your team from resembling a revolving door of faces.

Office productivity has taken a nosedive. Your team is sneakily updating their LinkedIn profiles. And budgets are feeling the pinch from sunk investments into workers who don’t stick around.

If this sounds eerily familiar to your everyday office experience, then you’ve got a serious issue. To address it, you have to start by answering why staff are saying goodbye in the first place.

Let’s talk about analyzing employee turnover — and then explore what you can do about it.


Key Takeaways

  • Keeping a pulse on your employee turnover rate is a vital part of your larger retention strategy. Benchmark your rate against other companies in your industry to help contextualize your data.
  • You can quickly calculate your organization’s turnover rate by dividing the number of separations by the number of employees at the company. Multiply this number by 100 to get a percentage.
  • Knowing the employee turnover rate is only half the battle. Be sure to segment your turnover rate by department, position, and team to learn where retention problems are most severe.

What is Employee Turnover Rate and Why Is It Important?

“Employee turnover rate,” or separation rate, is just a fancy HR analytics term for how many people are coming and going in your workplace.

Every company has one, of course. But you don't want it to be so high that your staff are walking into the office each week saying, "Wait, who's that?" or "Where did John go?"

The reasons for monitoring this number should be obvious. If your office is a revolving door of faces, workflows will be difficult to maintain, team morale will likely be low, and your training and onboarding budget will be inflated.

It's not just about the numbers, either — it's about the why. Why are people heading for the exit? Are they unhappy? Is there something better out there?

Only when you have the answer can you make changes to keep your team happy and ensure they stick around.

How to Calculate Employee Turnover

If you want to tame the turnover beast, you've got to start with analyzing your baseline turnover rate. And for that, you just need a few key numbers and formulas.

Turnover Rate Formula

This employee turnover rate formula is a trusty wand for revealing your rate. It works like this:

Employee turnover rate = (Number of Employee Separations / Average # of Employees ) x 100

Turnover rate calculation formula

Simple, right? Now, here’s how to find the information you need to calculate it.

  1. Gather Employment Data
    • Count employee separations — Start by counting the number of employment contracts that were terminated during the period you're analyzing.
    • Know your average number of employees — You’ll also need to calculate the average number of employees for that same time period.
    • For example, if you’re looking for annual turnover, add up your total number of employees for each month in the year, then divide by 12 to get the average.  
  2. Calculate the Ratio
    • Divide the number of terminated contracts by the average number of employees.
  3. Convert the Ratio to a Percentage
    • Multiply the result by 100 to see your turnover rate as a percentage.

Example of Turnover Rate Calculation

Let’s put this into practice. Let’s say you’d like to examine your turnover rate for the first quarter of the calendar year.

First things first: gather the data:

  • Separations: 10 employees left your organization in January through March
  • Average number of employees: Your headcount was 134 in January, 140 in February, and 130 in March.
    • 134 + 140 + 130 = 404.
    • 404 ÷ 3 = 134.6
    • Your average number of employees per month was 134.6.

Break out your calculator and perform some quick math:

Turnover Rate

 (10 / 134.6) x 100 = 7.4%

You discover that during Q1, your company's employee turnover rate was 7.4%. Nicely done!

Learn More: 10 HR Metrics That Matter to Your C-Suite

How Do I Analyze Employee Turnover Rate?

Now, grab your detective hat. Because what's the point of all these figures if you don't know what they mean or how to make them work for you?

So, why is turnover happening in your business? Let's look at some hotspots and start asking the right questions.

Is a Certain Position in the Hot Seat?

Imagine you're a marketing maven running a digital marketing agency, and you've noticed that the turnover rate is higher in your internship program. Every intern who walks through your doors seems to be sprinting out before their internship ends.

It's a curious case, and you need to get to the bottom of it by looking at data or maybe even conducting a stay interview or two. Is it the workload, the compensation, or the nature of the job that's sending these individuals packing?

Identifying the problem is the first step toward finding a solution.

Is Turnover Higher in Certain Departments?

Take the time to break down your turnover rate by department. Does one department have a turnover rate that’s higher than the others? What's causing this? Is it a toxic work culture, a case of poor management, or something else entirely? It's time to uncover the mystery.

Are Managers Playing a Role?

Don't forget about your business leaders. Sometimes, it's management who needs to change their tune.

Break down turnover even more by looking at it on a team-by-team basis. If turnover is higher under a specific supervisor, figure out why. Is it their management style, a lack of support, or something else making people head for the hills?

Learn More: Decoding the Employee Experience: Top Retention Factors

What Is the Average Turnover Rate in 2023?

Based on the latest data from the U.S. Bureau of Labor Statistics, average turnover sits at 3.6% (as of October 2023).

It’s important to note that that’s a national average, and turnover rates can vary widely based on industry, role, and location. Even macro-economic trends can cause rates to ebb and flow.

If you’re looking for a benchmark, examine industry-level averages instead. This data is a better corollary for your own workforce.

Average Employee Turnover Rates by Industry

That being said, let’s examine turnover rates by industry (based on 2022 annual averages):

  • Construction: 4.5%
  • Manufacturing: 3.3%
  • Professional and business services: 5.3%
  • Leisure and hospitality: 6.9%
  • Government: 1.7%
  • Retail: 5.0%
  • Finance and insurance: 2.3%
  • Education: 2.4%
  • Health care: 3.4%

So, what can we learn from this? Well, understanding employment trends among similar industries can help HR leaders tailor their strategies to keep teams happy, engaged, and on board.

Improve Employee Turnover Insight with HR Reporting Software

At the end of the day, it all boils down to understanding your workforce and knowing if they're content, appreciated, and eager to stay for the long haul.

But what if your turnover rates aren't quite up to par? How do you make your workplace more appealing and retain top talent? Paylocity's HR and Payroll software has your back. With its data-driven approach, you can take a deep dive into understanding your team and supercharge your HR strategies for better days ahead.

  • Understand Your Workforce — You can also turn everyday work activities into measurable data. By understanding how your team uses tools and systems, you can better engage with them. You know what happens when people enjoy what they do? They're less likely to head for the door because they're all in for the long haul.
  • Plan for Changes — With detailed position-level data, you can also proactively plan for role changes, make informed staffing decisions, and predict workforce shifts. So, when change is on the horizon, you're ready for it — no last-minute scrambles. This kind of preparation can help keep your turnover in check because everyone knows what's coming.
  • Increase Retention - Identify employees at risk of leaving by analyzing turnover trends. This will allow you to make changes to keep them on board and show your team you're there and supporting them all the way.
  • Custom, Real-Time Reporting — Access employee data and performance metrics to uncover and analyze trends that may be affecting turnover. Creating custom reports tailored to your workforce can provide actionable insights to help retain your top talent, ensuring they feel heard and appreciated.

Don't let HR challenges slow you down — trust Paylocity's HR system to give you the boost you need. Contact us today to request a demo and explore how we can transform your workplace.


Make Data Work for You

Are you still relying on instincts or assumptions to help you make decisions? Your workforce is changing fast. It’s time for a better approach. With a real-time, easy-to-understand analytics dashboard, you can see what’s really going on in your company and make smart moves based on data. Share insights and results quickly with tailored reporting, and get to know your employees better to improve your overall experience.

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