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Here’s how to calculate your employee turnover

by Danique Geskus | Jun 27, 2024

Employee turnover can be a huge cost to your business, especially if you don’t understand its extent. Every time an employee leaves, you face unexpected costs such as recruitment, selection and training of new employees. In addition, valuable knowledge is lost, and customer relationships can be damaged.

In this blog, we’ll show you what turnover can cost an organization on average, and how to calculate staff turnover yourself.

When you don’t understand your employee turnover, you risk running into recurring problems without addressing the root of the problem. Therefore, the first step is to understand and calculate your cost of attrition. Because only then can you take targeted measures to reduce turnover and avoid high costs down the road.

Replacing an employee costs on average 25-33% of a person’s annual salary (SHRM, 2022). But the percentage varies from organization to organization. Sometimes it can be as much as 200% of a gross annual salary!

That average is so high because of all the factors that come under the cost, and sometimes hidden, such as:

    • Recruitment and selection (recruiting);
    • Training costs;
    • Onboarding;
    • Induction by colleagues;
    • Off-boarding/exit interview;
    • Opportunity cost;
    • Internal transfer;
    • Training new employee;
    • Burnout danger.

Example of the cost of attrition

Suppose one of your employees with a monthly salary of €3,384 gross (based on a modal income of €44,000 gross per year (CBS, 2023), is leaving the organization. This is then the total cost:

1. Employer charges

These consist of an average of 25-33% on top of the monthly salary. Thus, the employer expenses come to a minimum of €3,384 x 1.25 = €4,230 gross per month or €54,990 per year

 

2. Cost of replacing employee

According to the SHRM at least 25% of annual salary. So in this example, those consist of 0.25 x (13 x €3,384) = €10,998 gross per year

 

Total cost

In total, based on a modal income, the cost of employee turnover in this example already comes to €65,988 per year.

In addition to these factors, there is often more loss to the organization that does not translate directly into numbers. As soon as an employee leaves, and especially if they are in a more experienced position, you can think about the loss of customers, supplier and partner relationships, knowledge and possible image damage.

Calculating the turnover of your staff

By calculating the turnover of your workforce per year, you will gain good insight into satisfaction and involvement within your organization. Because a satisfied colleague is a colleague who stays. Because by keeping turnover low, you can save a lot of unnecessary extra costs in the company.

👉 Would you also like to calculate this for your organization relative to employee turnover? Download our free employee turnover calculator

When should you take action?

The optimal rate lies exactly at the intersection of turnover and retention costs, which we call the “turnover point. The ideal outflow rate is different for each organization. Google, for example, has a very high attrition rate (30%) because their employees have only been employed for an average of 1.1 years.

The formula you can use to calculate the turnover point for your organization is:

Turnover point = (Cost of replace) / (Cost of retain + cost of replace) Is the result greater than 1? Then it means that the cost of replacement exceeds the cost of retention. It is then necessary for your organization to invest in staff retention.

Is the rate of turnover in your organization above 10%? Then there is high staff turnover. Look for the cause of attrition and address it so you can move your business forward in a structural way.

Once you understand the costs and calculate how high turnover is in your organization, the next step is, of course, to reduce staff turnover. One way to do that is to examine what causes attrition and apply strategies to address those causes. This way, you increase employee satisfaction and engagement at the same time.

Calculate your gradient with the calculator

Want to know exactly how high (or low) employee turnover is in your organization?
Then use our handy template with calculator
.

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