# Calculating Turnover Rate

*note*: If you need to determine the cost of employee replacement (how much does it actually cost you to hire new employee for already existing position), please go to “Turnover Calculator” page.

## Step 1

**Calculate the average number of employees. **The number of employees is calculated by adding the number at the start of the period, to the number at the end of the period, then dividing by 2 to arrive at the average number of employees.

For example: At the start of the year the firm employed 30 people. At the end of the year the firm employed 50. To arrive at the average we add together 30 + 50 = 80. Then divide by 2 to get our answer 80/2 = 40. This figure is the average number of people employed during the period.

## Step 2

**Calculate the number of departures during the period.** The key here is to make sure that we only include those departures that are actually relevant. That means those that come within the definition we are using. So for the definitions we are using in this example the relevant figures are: Total number of exits = 6 Voluntary = 4 Early = 2

## Step 3

**Divide departures by number of employees. **To arrive at our final figures, we divide the number of relevant departures by the average number of employees. Then multiply by 100 to get the percentage rate. For total turnover we have: 6 / 40 (x 100) = 15% For voluntary turnover we have: 4 / 40 (x 100) = 10% For early turnover we have: 2 / 40 (x 100) = 5% Calculating Employee Turnover.

**However, please keep in mind that there are a number of variables to be considered:**

Let’s say there were 100 employees at the beginning of the year, and 100 employees at the end of the year, and at the end of the year, 84 of those employees were the same ones as were there the previous year. You might say that the turnover rate was 16%.

But suppose one of those 16 who left was actually replaced three times. The employee quit in January, the replacement quit in April, and another person was hired who lasted only until November. Then you might want to count every time an employee left the company and another one was hired – in this case you’d get 18%.

**Another variable to consider**: suppose the work force is 100 at the beginning and 90 at the end of the year. Perhaps 16 people have left, but only 6 have been hired during the year, while 2 more were hired and retired within the same year. You might define turnover as 18/100 or as 18/90, or as 18/95, since 95 is the average of 90 and 100. Instead of 95, you might want to do a fancier average, where you actually add up the number of employees on each day of the year, and divide the total by 365.

**One more variable**: who decided it was a calendar year that we should use for sampling the turnover rate? Perhaps there was no turnover at all for 3 years prior, and then a shift in management caused a lot of people to leave this year. Then a more representative measure would average over 2 or 3 or 4 years. Maybe you’d want to average the turnover in each month of the last 48, but weight recent months more heavily than earlier months.