How to Calculate Average Turnover
The turnover rate of a business describes the number of employees that are replaced in a given time period. This figure includes employees that are fired or quit, but hard numbers do not adequately describe the scenario without a reference point. Therefore, turnover rates are typically described as a percentage of the average number of employees on the payroll.
Any lost employee should be included in your average turnover. As an example, if five employees quit during a specific time period and three others were fired, you lost eight employees. You should note the circumstances of each loss. If many employees quit, that may indicate a problem with the work environment. If more employees are fired, that could indicate a weakness in the hiring or training process.
Turnover rates are typically expressed over an extended time period, such as several months or a year. To express the turnover percentage, you need to know the total number of employees for the period being calculated, but this may fluctuate in a growing company. Therefore, count the number of employees on the payroll at the end of each month and average this figure across the time period in question. As an example, if you are going to calculate annual turnover, add each month's ending employee count and divide by 12 to get the average total number of employees for the year.
To calculate the turnover rate for the selected period of time, divide the total number of employee losses during the time period by the average number of employees on the payroll for the same time period. As an example, if you lost five employees over the course of a year and typically employed 10 workers, divide 5 by 10 to calculate a turnover rate of 0.5. To express this number as a percentage, multiply by 100. Therefore, your turnover rate is 50 percent.
Although it's tempting to directly average turnover rates or percentages, doing so may skew the results when the number of employees is inconsistent. Therefore, you should average the number of employee losses for each time period and divide that by the average number of employees. As an example, if in three consecutive years, you lost five, seven and six employees, the total loss is 18 employees. Dividing by 3 calculates the average loss of 6 employees per year. If the average number of paid employees was 10, divide 6 by 10 to calculate an average turnover of 0.6, or 60 percent.