Calculating employee turnover rate is a crucial metric for businesses to understand their workforce stability and effectiveness of their retention strategies. In New Zealand, like elsewhere, the calculation involves a straightforward formula, but requires accurate and comprehensive employee data. Here’s how to calculate turnover rate:
Step 1: Define the period
Decide on the time frame you want to calculate employee turnover rate. This could be monthly, quarterly, or annually, depending on your business needs and the insights you’re seeking.
Step 2: Gather your data
You will need two key pieces of information for the defined period:
The number of active employees at the start of the period.
The number of employees who left during the period. This includes all departures, regardless of the reason (resignation, dismissal, retirement, etc.).
Step 3: Calculate your average number of staff
To get a more accurate turnover rate, calculate the average number of employees over the period. You can do this by adding the number of employees at the start of the period to the number of employees at the end of the period, then dividing by 2.
Average Number of Employees = (Number of Employees at Start+Number of Employees at End)/2
If you don’t have the exact number of employees at the end of the period, you can use the number at the start of the following period.
Step 4: How to calculate employee turnover rate
Now, use the Number of Staff Members Who Left who left and the average number of employees to calculate the turnover rate with the following formula:
Turnover Rate= (Number of Staff Members Who Left/Average Number of Employees) × 100
Example of employee turnover rate formula
If a business started the year with 100 employees, ended with 110 employees, and had 15 employees leave during the year, the calculation would be:
Average Number of Employees = (100 + 110) / 2 = 105
Turnover Rate = (15 / 105) x 100 = 14.29%
This means the business had a 14.29% annual turnover rate.
Interpreting a company's turnover rate
Interpreting employee turnover rates within an organisation involves more than just calculating the percentage of employees leaving over a specific period. It requires a nuanced approach to understand the underlying reasons, the impact on your organisation and what measures can be taken to improve or maintain a healthy turnover rate.
Here's how businesses can interpret employee turnover rates effectively:
Understand the context
Industry benchmarks: Compare your turnover rate with industry averages. A rate that might be high in one sector could be typical in another, such as the difference between the tech industry and government employment.
Type of employment: Consider the nature of the roles within your organisation. Higher turnover might be expected in roles that are seasonal, temporary, or generally considered entry-level positions.
Analyse the data
Voluntary vs. involuntary turnover: Distinguish between employees leaving by choice (voluntary) and those let go by the organisation (involuntary). High voluntary turnover might indicate dissatisfaction among employees, while high involuntary turnover could suggest restructuring or performance issues.
Departments and teams: Break down employee turnover rates by department or team to identify specific areas with higher turnover. This can highlight management issues, cultural misfits, or job dissatisfaction within segments of the organisation.
Time of turnover: Analyse when employees are leaving. Early departure (within the first year) could suggest mismatches between job expectations and reality or possibly inadequate onboarding processes.
Dig deeper
Exit interviews: Utilise exit interview data to understand why staff is leaving. Look for patterns or common themes that could indicate broader organisational issues.
Employee engagement surveys: Compare turnover rates with employee engagement levels. Low engagement scores in areas with high turnover could confirm systemic problems affecting employee satisfaction and retention.
Implement strategies based on insights
Targeted retention strategies: Use insights from your analysis to implement targeted retention strategies. This might involve improving the onboarding process, addressing management or cultural issues, or enhancing employee engagement and development opportunities.
Monitor and adjust: Employee turnover rates and the effectiveness of retention strategies should be monitored continuously. Adjustments should be made based on evolving organisational needs and employee feedback.
Reflect on the positive aspects of turnover
Not all turnover is negative. A healthy company's turnover rate can bring fresh perspectives and skills into the organisation and remove underperforming employees. The key is finding the right balance that allows for innovation and growth without losing valuable knowledge and negatively impacting team morale.
New Zealand industry benchmarks
In New Zealand, industries typically experiencing the highest employee turnover rates often include those with high levels of part-time or casual employment, where entry barriers are low, and the work can be seasonal or less secure. These sectors generally encompass:
Hospitality and tourism: Restaurants, bars, and hotels frequently see high turnover due to the seasonal nature of tourism and the high proportion of casual or temporary staff.
Retail: High turnover is common due to the varying demand, part-time work opportunities and the appeal to younger workers who may view retail positions as temporary roles.
Healthcare (particularly aged care and support workers): The emotionally and physically demanding nature, of the work, coupled with relatively low pay for entry-level positions, can lead to higher turnover rates.
Conversely, industries with typically lower turnover rates in New Zealand are those offering more stable employment, often requiring specialised skills or higher levels of qualification, including:
Public sector and Government: These roles often offer job security, comprehensive benefits, and structured career progression, contributing to lower turnover.
Education: Primary, secondary, and tertiary education sectors tend to have lower turnover rates, attributed to the professional commitment of educators and the structured academic year.
Professional services and IT: Higher barriers to entry, competitive salaries and career development opportunities can lead to greater job satisfaction and lower turnover.
It's important to note that employee turnover rates can vary within sectors based on factors such as company culture, management practices and specific job roles. Additionally, economic conditions, technological advancements and changes in the labour market can influence turnover trends over time.
Actionable strategies for improvement
Improving your company's turnover rate necessitates a strategic approach aimed at addressing the root causes of employee departures. By enacting the following strategies, organisations can elevate employee satisfaction, cultivate a positive workplace culture, and reduce turnover rates.
Identifying patterns and trends: Analysing turnover data can reveal patterns or trends related to specific departments, roles, or times of the year. Recognising these patterns allows you to address underlying issues proactively, whether they stem from workload imbalances, management styles or external factors.
Enhancing recruitment strategies: Turnover insights provide valuable feedback on the effectiveness of your recruitment processes. By understanding why employees leave, you can refine job descriptions, selection criteria and interview questions to better align with the role's demands and your organisational culture, attracting candidates who are a better fit.
Refine onboarding and training: Ensure newcomers grasp their roles and the company ethos from the outset. A solid onboarding process paired with continuous training opportunities can markedly enhance job satisfaction and retention.
Provide competitive remuneration and benefits: Regularly assess and adjust your remuneration packages to remain competitive in your industry. Offer benefits that resonate with your staff, such as flexible working options and health insurance.
Cultivate a positive work environment: Create an inclusive and supportive workplace atmosphere. Promote open dialogue, acknowledge and celebrate accomplishments, and ensure employees feel valued and respected.
Career development opportunities: Offer clear avenues for career progression within the organisation. Engage in discussions about career goals with employees and provide mentoring, training, and development opportunities to aid them in achieving their objectives.
Undertake regular employee surveys: Solicit feedback from employees regarding their job satisfaction and engagement levels. Utilise this feedback to pinpoint areas for improvement and action necessary changes.
Tackle management issues: Ascertain that managers and leaders are proficient in people management. Inadequate management is a prevalent cause of employee turnover. Therefore, it's imperative to promptly address any concerns and support managers in their development.
Introduce flexible work policies: Where feasible, offer flexible working arrangements such as remote working, flexitime, and part-time positions. This can aid in improving work-life balance and retaining employees with diverse needs or circumstances.
Acknowledge and reward performance: Establish a mechanism for recognising and rewarding employees for their contributions. This could include performance bonuses, employee of the month awards or verbal recognition in team meetings.
Monitor and analyse turnover data: Maintain records of your turnover rates and scrutinise the data to identify trends or patterns. This will aid in understanding the reasons behind turnover and shape your strategies for improvement.
Support employee wellbeing: Invest in initiatives that promote the mental and physical health of your employees. This could encompass wellness programmes, mental health days, and access to counselling services.
Take the next step for a healthy turnover rate
Employee turnover isn't just about numbers; it's about understanding the pulse of your workforce. In the unique context of New Zealand labour laws and market dynamics, differentiating between types of turnover – voluntary and involuntary – becomes crucial for any meaningful analysis.
Implementing best practices in calculating employee turnover rates is fundamental. Organisations should ensure accuracy and consistency in this process by defining clear criteria for what constitutes turnover, collecting data meticulously and performing calculations on a regular basis – monthly, quarterly, or annually, depending on the business's needs. This systematic approach enables businesses to track trends over time, identify patterns and make informed decisions to address and pre-empt turnover issues.
As you navigate these complexities, remember that expert guidance can make all the difference. Employsure assists over 6,500 businesses across New Zealand, offering support and advice on employment relations and work health and safety. We’re able to offer insights to help you manage your workforce effectively.
Whether refining your onboarding process, developing employee retention strategies, or seeking advice on calculating and interpreting turnover rates, Employsure is here to help. Reach out today for a consultation or free initial advice and take a strategic step towards enhancing your workforce management.
Frequently Asked Questions
How do you calculate employee turnover rate?
The employee turnover rate quantifies the proportion of employees who exit an organisation within a specified time frame, typically annually. This rate is determined by dividing the total departures by the mean employee count for the period and then multiplying the result by 100.
How do you calculate monthly employee turnover rate?
To compute the monthly employee turnover rate, tally the number of employees who departed within the month and divide this by the average number of employees for the same month. Multiply the outcome by 100 to express it as a percentage.
Turnover Rate Formula: Monthly Turnover Rate (%)=(Number of Employees Who Left in the Month/Average Number of Employees in the Month)×100
How do you calculate annual employee turnover rate?
To determine the annual employee turnover rate, sum up the total number of employees who left over the year and divide this figure by the average number of employees during that year. Multiply the result by 100 to convert it into a percent.
Turnover Rate Formula: Annual Turnover Rate (%)=(Total Number of Employees Who Left During the Year/Average Number of Employees During the Year)×100
What is the average turnover rate in New Zealand?
The average staff turnover rate in New Zealand varies by industry, typically ranging from 10% to 20% annually. Sectors like hospitality and retail might see higher rates, while professional services and education usually experience lower turnover.
What is a good employee turnover rate?
Turnover rates differ greatly across different sectors. Nonetheless, a turnover rate below 10% is generally regarded as healthy across various industries, reflecting a stable and engaged workforce.
