The percentage of employees in a workforce that leave during a certain period of time is known as the turnover rate of a company or organization. This is mostly calculated during a fiscal or calendar year. Every business, large or small, has to keep everything in check. This post will enable you to work through your turnover rate effectively.
Both voluntary and involuntary employee information including retirements, resignations, dismissals, and layoffs fall under the heading of turnover. Turnover rates affect profitability rates and define staff morale. Redesigning the human resource planning process is required in cases where the turnover rate is higher than the relative industry average. Calculate the turnover rate on an annual basis by determining the annual separations and the average monthly employment.
Turnovers are expensive because you have to recruit and train new employees. According to The Wall Street Journal, strategies for reducing turnover include hiring the right people from the start, setting competitive salaries and benefits, fostering positive environments, recognizing accomplishments and providing clear career paths.
Ways for Calculating the Average Turnover Rate Annually1. Adding up the monthly employment for the previous 12 months and dividing it by 12 to calculate the average monthly employment. The monthly employment could simply be the average number of payrolls that have been deposited on a monthly basis. If your employees are paid twice a month, add the total number of deposits for each payroll and divide it by two in order to get the average employment for a particular or specific month.
2. Determining the total number of separations for the preceding 12 month period. You can add up the separations for an accounting period, a quarter for example, and project the total for the year. However, this may distort the numbers because of the variations in seasonal employment and layoffs.
3. The calculating ratio of the total number of separations to the average monthly employment for the preceding 12-month period which is expressed as a percentage.
Rules you Should Follow when Calculating your Turnover Rates
Know your Cost of Turnover
The initial step to understanding the cost of employee turnover is determining your total annual cost for an employee. Take your employees’ annual wages and add 30% in order to include benefits and payrolls. Multiply the number by 25% which will include the hiring costs, orientation and training costs, uniforms, benefit set up and administration, wages, etc.
Budget for Turnover
The turnover rate or the percentage of your employees that you lose in a year is an important number to know. This number is needed as a benchmark, especially if you are an owner/manager. In order to calculate your turnover rate, take the number of employees who have left in the year (for whichever reason) and divide by the average number of employees for the year. Your result is your turnover rate. The main reasons that employees leave any organization are:
- Low compensation
- Lower perceived amount of job security or room for advancement
- Lack of proper training
- Poor leadership or management
- Bad hire
- Not enough benefits
Your people are the biggest advantage that you have over all other competing organizations that are working in the same industry as you.
Offering the Best Benefits and Compensation in your Market
Often, small-scale businesses like retail stores have a limited financial budget due to which they complain that they cannot afford to pay more to their employees. This is a very negative point for any business and you just cannot afford not to pay the maximum amount of money possible to your employees.
Offering the best compensations and benefits is compulsory and very critical to hire effective employees. Charge the correct selling price in your business and determine what the best compensation price is. When you offer a high rate of your product or service, customers expect better services which is a positive effect on any business. The bottom line is that the market doesn’t have to determine the pricing you set.
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