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Employee turnover is an important statistic

General Information, Hiring Tips and Advise, Staffing Industry Facts, Uncategorized

Employee turnover is an important statistic for staffing firms—it tells you how often you will need to hire new employees. A high turnover rate means that your employees average a shorter tenure with your firm; when the turnover rate decreases, average employee tenure goes up. What does this mean for your firm? The lower the turnover rate, the less money your firm spends on recruiting, new-hire administrative costs, training, and any other costs associated with replacing employees. Lower turnover could mean increased profit margins for your firm.

The turnover rate for your company tells you, on average, how many times a single position within your company was occupied by a different employee throughout the year. Suppose you had one position and one person filling that position throughout the entire year, your turnover rate would be zero—there was no change in the person employed in the position throughout the year.

Calculating Turnover

If you had one position and two people had filled that position throughout the year, your turnover rate would be 100%. This is calculated by taking the number of people employed (two in this example) and dividing it by the number of positions or jobs (one in this example), then multiplying the result by 100. Next you must subtract 100—this 100 accounts for the person who is initially employed in the job: 2/1=2*100=200-100=100

You can calculate the turnover rate for both your internal, permanent staff, and also for your temporary and contract employees. Be sure to calculate these two turnover rates separately, as they are typically very different. In order to calculate your company’s turnover rate you first need to determine your company’s average daily employment (for internal employees or for temporary and contract employees) and the number of W-2s your company issued throughout the year to employees for the employee type for which you are interested.

In most temporary or contract staffing firms, the number of temporary and contract positions available fluctuates each day. Calculating your company’s average daily employment will help you to determine how many positions your company filled on an average day over the course of the year. You can calculate your company’s average daily employment by determining how many employees your company had on the week that included the 12th of the month for each month in the year, summing these employment levels, and then dividing the sum by 12.

Once you have determined your average daily employment, you need to determine how many temporary and contract employees you had throughout the year. The quickest and best measure of this is the number of W-2 forms that your firm issued to temporary and contract employees for the year, since each employee will be connected to exactly one W-2 regardless of the number of positions they held.

Once you have these two numbers, you can calculate your company’s turnover rate for temporary and contract employees using the following formula: (total number of W-2s issued/average daily employment*100)-100 = turnover rate.

You can use this same calculation to determine the turnover rate for your internal employees, as well.