HR Calculations: Voluntary Turnover
While it’s important to monitor the company’s turnover rates, more detailed analysis is usually required to get the real picture. And there’s a big difference between voluntary turnover—when an employee chooses to leave your organization unexpectedly—or involuntary turnover, such as an employee you have fired, or one who was forced to leave because of a medical reason.
A large amount of involuntary turnover is not generally a reason for concern, but if all the company’s turnover consists of voluntary—and unforeseen—departures, you may have a more serious issue.
1.Determine the number of employees leaving over a certain period of time.
You may decide to calculate turnover on a month-to-month basis, or you might review the annual turnover rate. (For example, assume 10 employees left during the previous year).
2. Determine the reasons each employee left to identify only those who voluntarily resigned.
Exclude from the data those who left involuntarily for medical or disciplinary reasons, and those who moved away, so you are left with only those who chose to voluntarily leave the company. (For example, assume 2 employees were fired, 1 moved out of state and 2 resigned for medical reasons. This means 5 employees voluntarily left of their own accord).
3. Determine the total average headcount during the period in question.
Find out the number of employees on the books. If you’re monitoring annual turnover, find out the average number of employees on the books during that period. (For example, assume there were 50 employees on the books for January – July, 49 employees in August, 52 in September, 49 in October and November and 51 in December. 50+50+50+50+50+50+50+49+52+49+49+51 / 12 (months) = 50. So the total average headcount is 50.
3. Divide the number of employees leaving by the total average headcount.
This will provide the voluntary turnover rate. (For example, 5 employees / 50 average headcount = 0.1)
4. Multiply the figure by 100 to get the turnover percentage.
(For example, 0.1 x 100 = 10%)
Whether this figure is considered “high” or not will vary from company to company and depends on your own typical turnover rates, as well as those of the industry in general.
Consider excluding those employees who retired from employment from the turnover rate. While the retirement was voluntary, it was likely an expected action that could be planned for. It’s also unlikely that the retirement was due to a systemic problem within the company. Therefore, including this information in the analysis is unlikely to be useful to your evaluation.