Human capital is of great concern for most organizations. Whether in good or bad times, employee turnover can directly affect the profit potential of an organization. The costs associated with high turnover can be substantial with the cost of recruiting, training, and decreased productivity. Given the implications, attrition should be tracked on an ongoing basis.
Review the turnover formula. Turnover = (number of employees exiting the job) / (average number of employees during the period)) x ((12 / (number of months in the period)
Determine the number of employees exiting the firm each month (attrits). Add up the number of attrits for each month over the period of months you have data for. For our example, let's use 5 attrits for the first 3 months of the year. This is a total of 15 for three months.
Determine the average number of employees each month. A common way to do this is to take the ending number of staff on hand at the end of each month. You can also take an average of trained staff at the beginning and end of each month. Let's say the average number of employees each month is 100.
Divide the number of employees exiting the job (Step 2) by the average number of employees each month (Step 3). The equation is 15/100 = .15.
Divide 12 by the number of periods you have attrition data for. In this case, we have three months of data. The equation is 12 / 3 = 4.
Calculate annualized attrition. Multiply the result in Step 4 (.15) by the result in Step 5 (4). The equation is .15 * 4 = .60 or 60 percent.