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Compensation Today: How to Calculate Employee Turnover
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February 1, 2010 management, and more.
Costs of Employee Turnover - Part 2
In our first post on the costs of employee turnover, you learned why hanging onto your employees is important to the
financial well-being of your organization, as long as those employees are a good fit.
In part 2, I will show you some twists and variables on those calculations that you must make to see the full picture that
employee turnover in your organization is telling you. I will also cover a few of the many variables that can affect your
turnover rate and affect how you choose to interpret results of your employee turnover calculations.
Further Analyzing the Cost of Employee Turnover Rates Earn HCRI/CHRP
Re-certification Credits
Beyond just looking at your overall employee turnover rate, taking the time to Do you fret over losing your top
look closely at certain segments of your organization will provide you even employees? Feel confident you're Developing Your
more insights into your organization’s health. paying and managing them better Compensation Philosophy &
than anyone else in your industry. Policy
For example, you could focus on employees who leave in the first-year of View our webinar Employee Retention: Part 2 of 3 in a Series
employment. From hiring to firing to replacement, losing employees in the first High Impact Performance Management Learn how a compensation plan
year can be costly. for Engaging and Retaining Your Top can encourage retention and
Performers and get ahead of the morale.
Some employee replacement costs include:
competition. Tue, Feb 9, 10:00 PST
sourcing (how you find applicants and how they find you)
interviewing A Fresh Tool for Your HR
hiring expenses Toolkit
Learn about a new HR tool that
On-boarding costs include: helps you benchmark salaries
accurately.
training the new employee
Wed, Feb 10, 11:00 PST
acculturation of the employee to the organization’s culture and expectations
Employee separation costs include: Mission Impossible:
Managing and Mitigating
unemployment compensation Internal Pay Issues
COBRA benefit continuation costs Part 3 of 3 in a Series
conducting exit interviews How can you avoid trouble from
internal pay inequities? Learn
As a side note, effective orientation programs in the first several months after a hire have been proven to have a direct,
more.
positive impact on the employee’s choice to stay with the organization.
Tue, Feb 16, 10:00 PST
How to Calculate Employee Turnover by Month
See All Webinars
Let’s revisit an employee turnover calculation I explained in my previous blog: monthly turnover. This turnover calculation
can be used to learn more when employees leave in their first year.
To calculate monthly employee turnover rates, divide the number of employee separations in one month by the average
number of active employees at the worksite during the same period. We’ll say we have one site of operations. PayScale Compensation Data
For example, let’s say we lose four employees out of 200.
See how having access to the largest
online compensation database can help
you with your salary benchmarking
That gives us an employee turnover rate of 20 percent. What if we repeated this employee turnover calculation to highlight project. Request a private PayScale
the turnover rate just in the new hires, not in the whole company, over the course of a year? demo today.
How to Calculate Employee Turnover Rates within the First Year
Have you wondered if employees leaving in less than 12 months have a bearing on your business? What about on your
business practices? You can learn both by learning about first year employee turnover.
To compute this, divide the total number of employees who leave in less than one year by the total number of employees PayScale provides an inexpensive and
who leave in the same period. easy benchmarking solution for HR
Professionals. Free report for qualified
Here’s what the formula looks like:
employers.
See our upcoming HR webinar
Now to pull numbers into our formula for first year employee turnover:
Compensation Today: How to Calculate Employee Turnover
schedule.
Review our HR webinar archive>
What Can Employee Turnover Calculations Tell You About Your Organization?
How do 26.7 percent first-year employee turnover rates compare to the industry standard, or to your local area? If it is
consistent with those measures, your organization may be fine. CATEGORIES
The following questions and answers will be important to note and act on, regardless if 26.7 percent is a good number or a Compensation Data
bad one.
Compensation Plans
If 26.7 percent is higher than your overall employee turnover rate, the industry standard, or the standard turnover in
the area, you might want to review your selection or on-boarding process. Employee Labor Laws
For instance, what questions were asked when the employee was hired? Did the questions relate to the job? If not, they Employee Performance Reviews
may have set up the application for the job to be quite different than the job really is. If so, why was that done?
Employee Retention
Did those who sorted applicants by their responses understand what skills the job required? Did they end up looking
for or finding the wrong things? Executive Compensation
Did the employee get an orientation? Was the employee made to feel comfortable in the organization after the HR Management
orientation? Why or why not?
HR News
How did the employee’s supervisor interact with the employee?
HR Recruiting
How did the existing workforce interact with the new employee? With acceptance and assistance, or with a cold
shoulder? How did the supervisor react to that? Did the supervisor take any steps in response to the workforce Job Descriptions
interaction with the new employee?
Salary Benchmarking
How might the supervisor’s training have contributed to this percentage?
Salary Ranges
Regards,
Talent Management
Joe Gross
HR & Policy Solutions, PLLC
Note: Even though I have worked with employment laws for over 20 years, I am not a lawyer. Nothing in this blog should FEED
be taken as legal advice or interpretation of laws.
Sources:
1. “How do we calculate turnover costs?” March 2004; Society for Human Resources Management Subscribe to this blog's feed
2. “Turnover Rate- SHRM Human Capital Measure of the Month”, November 2005; Society for Human Resources
Management
3. Ibid.
4. “First Year Turnover Rate- SHRM Metric of the Month”, October 2006; Society for Human Resource Management
Related Articles:
The Costs of Employee Turnover WWW
How to Explain Employees’ Total Compensation Compensation Today
Innovative Salary Programs
Google Search
Employee Retention Tips for Managers
Cost-Effective Employee Training Methods
Do you have any salary range topics you would like to see covered here on Compensation Today? Write us a
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