How to Calculate Employee Turnover

What is Employee turnover?

Employee turnover refers to the percentage of employees who leave your business during a specific timeframe. It’s an important KPI for HR professionals and employers to measure as it directly impacts businesses.

How to Calculate Employee Turnover 

When considering how to calculate employee turnover, you must first determine the period you wish to review - the previous full calendar year is a great place to start. 

There are three pieces of data to gather:

1. Number of employees at your start date.
2. Number of employees at your end date.
3. Number of employees who left during the set time frame.

The next step is to calculate your average number of employees, which you do by adding the number of employees at the start and end together and dividing the total by two. The amount of employees who left during this time is irrelevant in working out your average.

If you have 200 at the start and 220 at the end, your average number of employees for that period is 210. We then calculate the employee turnover rate by using the average and the number of employees who left.

Say fifteen employees left during that period; you’d divide the number who left by the average and multiply it by one hundred – 15/210*100 = 7.14%.

Your Employee Turnover Rate

What’s considered a low or high employee turnover rate differs depending on the industry. Retail and manufacturing sectors often have high turnover, but some sectors, like education and healthcare, typically keep employees for longer periods.

Our example of 7.14% would be considered a low employee turnover rate, and the accepted average for what is classed as low or 'good' is between 12 and 20%. In 2023, the overall employee turnover rate in the UK was 13% (Cendex).

Your employee turnover rate can tell you a lot about employee perception, engagement and loyalty. Monitoring your rate annually is essential to see if it improves or declines. It’s also a worthwhile calculation to run during times of change, be it rebranding, a merger, or introducing new leadership.

Calculating employee turnover during times of change helps you understand its impact on your people and whether there are potential risks.

Why does employee turnover matter?

Businesses with a high employee turnover rate face many risks, including lower productivity, lack of continuity, negative customer experience, increased workplace stress and more.

Acquiring new business

Clients and partners are seeking organisations that align with their values, and when a business has high employee turnover rates, it suggests that something isn’t quite working. Employees are more likely to stay with a company with a positive workplace culture, that prioritises wellbeing, invests in skills development, and has positive employee engagement. 

Loyal employees show your potential partners that you’re doing something right, giving them the confidence that you’re the smart partner they want in their corner. A high employee turnover rate suggests areas that must be improved, and this is less likely to inspire trust and confidence.

When you do right by your people, you’re creating opportunities for your business to thrive!

Lack of continuity

Lack of business continuity is another impact of high employee turnover that will negatively impact your bottom line. The impact will differ across sectors as with the accepted industry turnover trend. No matter the organisation, a fully trained and knowledgeable employee is more productive than a new recruit. New employees go through an induction and training period; during this time, they’re unlikely to be delivering to the same level as the employee they’re replacing.

Lack of continuity due to high employee turnover can create knowledge gaps, negatively affecting client and partner relationships. Client and account management involves relationship-building, and your partners will tire of continuously introducing themselves to new people.

Increase in workplace stress

It’s not just clients and partners who you risk frustrating due to high employee turnover. You must consider the impact on your remaining workforce. When an employee leaves, there’s likely to be a period where a team is left short-staffed. Those engaged and motivated to help your business grow may well take on the extra work. The risk is that the additional workload becomes too much for too long, which is when you put your people at risk of excess stress.

High employee turnover can also negatively impact the workplace culture, having a longer-term impact on overall engagement and employee wellbeing. 

The high cost of recruitment

All the risks mentioned to this point impact your bottom line, but none more so than the high cost of recruitment.

64% of employers consider the cost of recruiting fresh skills to be a considerable financial risk over the next two years.

When you use a recruitment agency to find new talent, you can expect to pay between £10,000 and £12,000 in fees each time. Add in the hidden expenses associated with people's time to support onboarding, equipment and training, and that cost could climb to £20-£30,000 every time you bring someone new into your business. Tom Nash, HR Business Partner, Pluxee UK

SMEs (0 – 49 employees) make up 99.2% of the UK business population (Money).

Let’s see how an annual employee turnover rate of 13% would impact them.

• 13% of 49 employees = 6 employees
• Replacing 6 x employees at £30,000 = £180,000.

The cost of doing business remains high, and the C-suite is exploring how to maximise their budgets and streamline their business. £180,000 is a substantial amount to pay to replace employees, especially if much of it is avoidable.

Larger businesses aren’t immune, so let’s apply this equation to them.

• 13% of 249 employees (max employees for medium business) = 32 employees
• Replacing 32 x employees at £30,000 = £960,000.

This presents a potential overhead of nearly one million pounds for replacing employees in one year. Is it any wonder that 64% of employers consider employee turnover a considerable risk?

• 13% is the higher end of the scale, and many businesses have employee retention strategies that will help retain talent. Still, the data that fuels our Retention Risk Assessment shows that almost half of UK employees will seek a new role in 2024.
• 24% of UK businesses dedicate up to 10 hours per week exclusively to scheduling interviews (HR Review). 
• In 2023, 77% of employers reported struggling to fill open positions (Omnipresent Group). 

Employee retention is essential, and the steps you take to enhance employee engagement and retention in your business will yield a return.

How to reduce employee turnover 

Understanding where you are is the first step to tackling employee turnover issues. Next, you must get to the root of the cause and analyse the data for potential patterns.

Was business change the cause? Perhaps a new manager? Poor managers are cited as one of the main reasons people resign.

Once you understand the cause, you can determine what steps you can take to reduce employee turnover and increase your employee retention rates. Read our blog - Employee retention strategies… the trick to keeping your talent, for a detailed review of proven talent retention strategies.

Reduce employee turnover with Pluxee UK

Using our exclusive research, we’ve created an Employee Retention Risk Assessment. In just three questions, we can assess whether you’re at risk of high employee turnover. Unlike the calculations explored here, our Retention Risk Assessment reviews the dominant age range of your employees, your employee benefits package and your company priorities – all of which paint a picture of how likely your employees are to look for new opportunities.

At Pluxee, we’re all about making more of life and adding that extra bit of joy that brightens our days. We shape the world of employee benefits and engagement by bringing to life a personalised and sustainable employee experience at work and beyond.

Our Employee Benefits enhance your EVP, helping reduce employee turnover. Boost financial wellbeing with Employee Discounts Platform, get employees faster access to medical support with Online GP, create mentally resilient employees with our Employee Assistance Programme, and more, including inclusive ways to reward your employees.

Get in touch today. It’s the first step in providing more of what matters to your people.

Sources:

Cendex

Money

HR Review

Omnipresent Group