What Your Employee Turnover Rate Really Says About Your Company (+ 2 Simple Formulas to Track It)

6 min

Finding great new hires is an awesome skill—but it’s keeping them that’s the real challenge. 

With a third of employees leaving employment within 90 days of a new role, it’s no surprise ‘retention’ is the buzzword on every HR pro’s mind.  

There are a ton of tangible steps you can take to boost employee retention—from creating a killer onboarding process to offering personalized perks—but the ‘spaghetti method’ of throwing solutions at the situation to see what sticks is old news. 👎

Today, strategy is everything. 👍

If you want to hold onto your star players, it’s time to streamline your approach—and that means taking the time to learn what your employee turnover rate is and what it says about your company.

In this ultimate guide to employee retention, we explain how to calculate employee turnover rates and analyze them for the ultimate strategic approach—plus some unmissable top employee retention tips. 

Check it out!

What is the employee turnover rate?

An employee turnover rate tracks the percentage of employees who leave an organization in a certain time period. 

Overall, that includes resignations, dismissals and retirements—but you can also break it down to pinpoint other important info. For example: 

  • Competitive retention: Figure out how good (or not) your employee engagement is by tracking how many employees choose to leave. 
  • Onboarding strengths: New-hire turnover rates compared with overall rates can show how well your onboarding processes work.

So, why do employee turnover rates matter? 

It’s simple: they show how good you are at onboarding and retaining employees (and where you can do better 😉).

The number crunch: How to calculate your employee turnover rate

Ready for the hard and fast metrics? 

To figure out your overall employee turnover rate, you only need these three magic numbers: 

  • B = Number of active employees at the beginning of the month
  • E = Number of active employees at the end of the month
  • L = Number of employees who left during the month 

Average no. of employees (Avg) = (B+E) / 2

To figure out your final monthly turnover percentage, divide by the number of employees who left during the month and multiply by 100:

Monthly Turnover % = (L/Avg) x 100 

Let’s try it out: 

If you have 25 employees at the beginning of the month (B = 25), 15 employees at the end (E = 15), and 2 employees left during the month (L = 2). Here’s what your formula looks like: 

25 + 15 = 40 / 2 = 20 (Avg) 

2 / 20 x 100 = 10% Monthly Turnover Rate

Note: You can use exactly the same formula to find out your annual employee turnover, just replace B, E and L with annual figures, instead of monthly.

The formula for your new hire turnover rate is similar, but this time we divide the number of new hires who left within a time period (NH), with the overall no. of employees who left during that same time (Em), and then multiply by 100.  

New Hire Turnover % = NH / Em x 100

For example, if you had 5 employees leave within a year and 3 of them were new hires, your formula would look like this: 

3 / 5 = 0.6 x 100 = 60% New Hire Turnover Rate

How to analyze your employee turnover rate (with minimum fuss)

Employee turnover rates show what’s happening on the surface—but they’re really just one piece of the puzzle. 

Once you’ve got those figures in-hand, it’s time to dive deeper to find out what’s really going on.

Here are a couple of ways to get the most out of your metrics: 

  • Industry comparisons: To understand what your employee turnover rate says about your company, check out your industry average turnover rates. As of 2020, leisure and hospitality (5.5%) and accommodation and food services (5.6%) had the highest turnover rates, while state and local education (1.3%) were among the lowest. 
  • Internal trends: Get even deeper insights by keeping tabs on your data over time and across different departments and management levels to spy internal turnover trends. 🕵️

5 top tips to hold onto rockstar employees

Now comes the fun part. Once you’ve analyzed your key turnover metrics, you can pinpoint the areas where employees drop off—and then optimize those areas to boost your overall retention rates. 📈👍

For example, if most of your employee turnover comes from new hires, you probably want to rethink your onboarding process—but if it’s just one department that’s suffering, maybe take a closer look at the job descriptions and the benefits offered in that area. 

Here are five pointers to get you started with superstar employee retention: 

  1. Go remote: Remote working has boomed in 2020, and employees love it. In fact, companies that offer permanent remote work options have 25% lower employee turnover than those that don’t. If your overall turnover is high, try including more remote options in the long-term job description.

🛠️ Toolkit add #1: Find the top remote talent with our latest guide, How to Hire Remote Employees that Are the Perfect Culture Add

  1. Build a memorable employer brand: A strong employer brand reduces turnover by 28%, and it all starts at day one of the hiring process. The top-quality features of a smart applicant tracking system (ATS) can help you show candidates you mean business and remind your teams why they love your company. 

🛠️ Toolkit add #2: Build a killer employer brand with Breezy’s unmissable guide on How to Attract Awesome Candidates on a Budget

  1. Streamline your onboarding process: Employees need to know you care about them from day one. With the right onboarding process, you can improve employee retention by a whopping 82%. “The goal of every onboarding process should be getting the newest hire to the greatest level of success as quickly as possible,” explains Stacey Gordon, CEO of Rework Work.

🛠️ Toolkit add #3: Streamlining your onboarding process has never been easier than with our how-to on HRIS + ATS Magic: How to Boost Your Hiring Efficiency With One Simple Integration.

  1. Boost diversity, equity and inclusion (DEI): Diversity is known to boost business productivity and company culture—both of which have a direct impact on retention. “The most important thing a company can do to recruit and retain employees is build and promote an inclusive workplace culture,” says Brynn Huneke, Director of Diversity and Inclusion at AGC.

🛠️ Toolkit add #4: Looking for the most effective diversity checklist to boost your DEI credentials? Look no further than Breezy’s latest on Real Deal Diversity, Equity and Inclusion: A Quick Checklist to Help You Check In

  1. Offer awesome perks and benefits: It can be the smallest perk that encourages a quality new hire to stick around. Use candidate surveys to understand what potential employees really want—and then give it to them. 

🛠️ Toolkit add #5: Check out Breezy’s unmissable checklist, These Are The Only Perks You’ll Ever Need to Attract Star Talent—need we say more? 

A holistic approach to employee retention

We’ve all heard the saying, ‘Out with the old, in with the new’—and (to an extent) that’s exactly what drives good business.

A certain amount of turnover is healthy—new hires bring in fresh ideas, promote productivity and drive innovation—but if you’re losing every good hire that comes your way, it’s time to try a new approach. 

Although employee turnover rates will give an overview of your org, the true key to boosting those stats is to take a holistic approach and give every department some much-deserved TLC. 

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