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How to calculate turnover costs
To calculate turnover costs, you must determine a time frame of measurement and the turnover rate, calculate the average cost of each turnover, and then calculate the turnover cost. Here is a closer look at each step and some helpful formulas for calculating turnover costs:
Determine a time frame of measurement and determine the turnover rate. When calculating a turnover rate, you do so according to a specific period or across multiple periods. Common periods of measurement include the following:
Month
Quarter
Year
While these are the most common, you can choose any period for this calculation. After this, you must figure out the number of employees that left the company within the measurement period you selected and the average number of employees the company had during this period.
Here is a formula for illustration:
Turnover rate = (number of employees who left / average number of employees)
When you determine the number of employees that have left your company in the measurement period and the average number of employees during that same period, you can add that first figure with the end number and divide that sum by two.
Calculate the average cost of each turnover. To calculate the average cost of each turnover, you first must add the expenses of each turnover for the measurement period.
With this sum, you then divide total expenses by the number of turnovers to get the average cost of each turnover. These expenses can include all tangible expenses and any intangible measurable expenses.
Calculate the turnover cost. Here is the formula to calculate the turnover cost:
Turnover cost = Total number of staffers x Turnover rate x Average cost of departure
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