How to Calculate Employee Turnover Rate

Your company’s employee turnover rate can make or break your business. You should know whether your business is losing talented workers at a rapid pace — so you can do something about it. By learning how to calculate employee turnover rate, you can make data-driven hiring decisions. This is especially vital if you’re launching a European startup. For example, you may be able to enhance your startup performance with employee retention strategies.

This guide to employee retention and turnover rates will help you understand why it’s so important. We’ve even provided a simple formula to help you determine what your turnover rate is. We also have a few tips for how you can retain top talent for your business in Europe.

Three co workers having a sit-down meeting in the office at a company with low turnover rate

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What is employee turnover?

Employee turnover refers to the number of employees who leave your company over a given period of time. Turnover rate is expressed as a percentage — it’s the percentage of all your employees who decided to leave. Employee turnover often means workers who left your company voluntarily. Although it sometimes can refer to employees that you terminated, which would be involuntary turnover.

Employee turnover is natural for every company, of all sizes. You should expect to have some turnover. If employees are leaving your institution for negative reasons, or your turnover is higher than average, you may want to address it.

Common reasons for employee turnover are:

  • Lack of growth opportunities
  • Natural career progression
  • Promotion or transfer within the company
  • Burnout
  • Negative attitude toward management
  • Toxic work environment
  • Major family or life event
  • Offer from a competitor
  • Bad work-life balance
  • Involuntary

Keeping tabs on your employee turnover rate and what’s causing it can help you address fundamental problems in your company. If you’re unsure how to calculate turnover or why the rate of employees seems to be so high, you may consider working with external HR consultants to get to the bottom of it.

How to Calculate Employee Turnover Rate

One of the most common formulas for employee turnover rate is:

An illustration on how to calculate employee turnover rate

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If you want to know your employee turnover rate for a longer period of time, like one year, you can use the same formula. You simply count active employees at the beginning and end of the year, rather than the beginning and end of the month.

When you search for a formula for calculating employee turnover rate, you’ll see that not everyone agrees on one standard. Some organizations may define “active employee” differently than others, for example. Or they may exclude new hires from the count of active employees.

To get an accurate turnover rate, you should decide on firm definitions for each of the following groups:

  • Employees
  • New hires
  • Terminations

Once you’re able to categorize your workforce into each of these groups, you’ll have an easier time calculating turnover. Also, be sure to use the same definitions and formula for each period that you calculate employee turnover. If there’s no consistency, your data will be useless!

What is a good turnover rate for employees?

Most HR professionals agree that a turnover rate of 10% or lower is ideal for most organizations. In practice, however, most companies end up with a turnover rate of between 12% and 20%. Keep in mind that every company and industry is different. A healthy employee turnover rate for your business might be considered high in another industry.

Average Employee Turnover Rate in Europe

If you are looking to recruit European talent for your company, you should know what the average turnover rate is in your industry. This can help you make informed hiring decisions.

Cedefop, an EU agency focused on vocational development and training in Europe, collated the latest employee turnover data from Eurostat. The most recently available data is from 2020.

According to their numbers, the sector with the highest employee turnover rates is elementary workers, which includes:

  • Agricultural laborers: 18.8%
  • Cleaners and helpers: 10.4%
  • Food preparation workers: 13.8%
  • Technical laborers: 13.7%
  • Other elementary laborers: 12.2%

The sector with the lowest employee turnover rates was managers:

  • Business managers: 3.7%
  • CEO, officials, and legislators: 3.2%
  • Hospitality and retail managers: 3.1%
  • Technical managers: 3.5%

As you can see, the rates vary significantly based on sector, industry, and role. If you’re looking to expand to Europe or hire European workers, but are unsure of how to go about researching employee retention and turnover rates for your industry, you can work with a European HR consulting firm. They’ll be able to find the relevant data for you and help make evidence-based hiring decisions. 

A woman standing holding her notebook and papers at work

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How European Employers Can Retain Top Talent

According to a survey conducted by McKinsey, one in three European workers is considering quitting in the next 3-6 months. Those numbers don’t look good. So what can you do, as an employer, to retain top talent in your company?

Europeans’ top concerns when it comes to their jobs are compensation, caring leaders, and advancement. Companies that don’t provide these things are running a higher risk of losing their employees.

  • Compensation: Of course, compensation will always be a big factor when it comes to retaining employees. People have to feel like they’re rewarded adequately for their work if they are to stay in their jobs. You should also ensure that employees understand the key differences between gross and net pay.
  • Caring and inspiring leaders: Having team leads, managers, or an executive board that inspires employees to work hard and contribute to the company is a big motivator for European workers. They want to know that their leaders care about the work they do.
  • Advancement: Many employees look for opportunities to advance — if they see their current job as a dead end, it’s more likely they’ll end up leaving to look for advancement elsewhere.

You can lower your turnover rate amongst European workers by addressing these three issues. Offer compensation and benefits packages that provide flexibility and demonstrate how valuable your workers are. Promote and hire leaders who care not only about the company but also about the people who make it up. Work with your HR consultant to create a career advancement pipeline so employees can see what opportunities might lie ahead for them.

Make Evidence-Based HR Decisions with Europe HR Solutions

Knowing your employee retention and turnover rates is an important step toward hiring and retaining top talent in Europe. But it’s not the only step. Once you have that information, you need to act on it. You need to implement solutions that keep the best employees at your company.

The team of HR professionals at Europe HR Solutions has years of experience helping businesses of all sizes with hiring and people management. Not only can we calculate your employee turnover rate for you but we can also devise solutions to help you lower it if it’s too high.

Our multilingual team can assist you with all aspects of HR management for your company, including recruitment, onboarding, training, professional development, HRIS implementation, payroll, and more.

Contact us for a free consultation so we can discuss your employee retention.

Business owner surrounded by paperwork, indicating the need for HR outsourcing

How outsourcing HR can save money

If you own a small or mid-sized business, you understand how frustrating it can be to spend time and money on tasks that don’t generate revenue. The costs of building an HR department from the ground up can prove astronomical. 

When you’re launching your small business in a foreign country, especially, you’ll need HR solutions before you open your doors for daily operation. Europe HR Solutions can help.

 

The right outsourced HR team can reduce your ongoing costs in the following ways:

  • Payroll administration:

By outsourcing your HR, you can bring in vetted professionals to set up and administer your payroll system. This team can train you to ensure a seamless transition after their service contract is completed. 

You won’t have to stress over hiring long-term employees to take care of payroll, or training payroll administrators.

  • Benefits implementation:

Your outsourced HR team can help you to select the right benefits software package and enroll the employees of your small business.

  • Human resources management:

Outsourcing your HR can prove to be a game changer for your overall human resources management, too. HR consultants contribute through a wealth of experience in compliance, employee relations, and recruitment.

This saves valuable time for small business owners, mitigates the risk of legal issues and delays in operations, and provides access to the latest industry best practices and trends.

When it makes sense to outsource HR for small businesses  

International companies with fewer than 50 employees are considered small businesses, and rarely expand to Europe with an inhouse HR team already in place.

For US and UK-based small businesses that launch European operations, there’s usually a CFO who oversees broad HR tasks. 

However, the CFO or other executives managing HR for a small business launch in Europe often lacks the country-specific legal and HR expertise necessary to ensure innovative solutions that reflect the country’s best HR practices and legal compliance.

It’s important to consider the following when determining whether or not you should outsource your HR:

  • What specific HR services and support does your business require?
  • Do you have anyone on your team who’s well-versed in country-specific employee regulations and labor laws?
  • Will you need management compliance training and support?
  • Will your current employment handbook, policies, and procedures translate to adhere to the needs of employees in different countries?
  • Do you have a small HR department in place that may need help implementing payroll, benefits, training, and development?
Time is money. Outsourcing HR saves time, letting you focus on what matters.

What to expect with Europe HR Solutions

By outsourcing your HR, you may find it’s easier to take care of your daily operations and to strategize and prepare for the launch of your small business in Europe. Europe HR Solutions has supported countless small, mid, and large-sized businesses in their international HR needs.  

Whether you need our team to manage your HR and implement solutions, or you need us to help guide the HR professionals you have on staff, we can sweat the small stuff to ensure your big picture remains intact. 

You can expect Europe HR Solutions to do the following:

Act as your representatives:

We’ll act as an extension of your small business. This means we will collaborate with you and ensure we’re promoting your vision and standards in any HR matters we handle for you.

Ad hoc requests:

We understand that you may have ad hoc requests. We’re used to fast-paced, high pressure situations, and will ensure your needs are met in a timely manner.

Assist with HR strategies:

We’re committed to providing HR services that help your business grow and succeed. We’ll make certain that the innovative solutions we offer adhere to your overall business and HR strategies.

Create and implement policies and procedures:

We’ll strategize with you to create and implement your company’s policies and procedures and ensure details are in place that will help your employees thrive and create a positive work environment.

Handle employee contract needs:

We’ll help to create and manage your employee hiring processes (including talent acquisition, interviews, and onboarding checklists), employee complaint procedures, performance reviews, and off-boarding processes.

Legal compliance:

Europe HR Solutions will use our thorough knowledge of the various nuances in employment regulations and labor laws to keep your operations, policies, and procedures within legal compliance. This will help reduce your liability risk should issues with employees arise.

Manage employee and management training and development: 

We can cover government-mandated and specific position training programs to support your employees to work with excellence and grow in their positions. This includes compliance training for managers.

Recruitment: 

We can utilize the latest in talent acquisition trends and industry best practices to make sure you attract the talent you deserve to fill your staffing needs. We want to help you to build the best team possible to create a positive work culture and  a productive team.

The cost of outsourced HR services for small businesses

When to outsource your small business’s HR could be determined by your available budget. The cost of outsourcing your HR may be an upfront expense, but in the long run, it can save you significant money and protect your revenue.

The services offered by Europe HR Solutions can vary in cost, and are dependent on the extent of service you require. We can determine the cost based on the scope of the project.

For example, you may need us to manage a specific, well-defined project that allows us to estimate the cost involved. However, you may require our services on a daily basis, for an extended period of time, or find you need support in an immediate HR emergency. This may mean we will need a retainer payment or charge for an hourly rate.

How to determine your HR outsourcing needs

Before you decide to outsource your HR, it’s vital to determine what type of services you require. It can be overwhelming to discern your needs, but reflecting on and strategizing about specifics can be beneficial.

Answering the following questions may help you to understand what services you require:

  • Do you need an outsourced HR professional who takes the time to know and understand your business, staff, and culture?
  • Do you need HR professionals who are available on a daily basis?
  • Are you in dire need of help with critical talent acquisition?
  • Do you require flexibility and a large scope of HR tasks?
  • Are your needs limited to legal compliance and knowledge?
  • Do you need help developing your workplace culture?
  • Do you need to overcome language barriers?
  • What are your long-term HR needs?

Other benefits of outsourcing your HR

Once you’ve determined when to outsource HR for your small business, you may find that it allows you to streamline your operations and focus on your overall business strategy.

This strategic move reduces your administrative burdens of managing payroll, benefits, and other HR tasks in-house. The cost-effectiveness of outsourcing becomes evident as it eliminates the need for investing in HR infrastructure and ongoing training. 

This newfound flexibility can enable your small business to adapt quickly to market changes and allocate resources more efficiently. Ultimately, an outsourced HR team becomes a strategic partner, and empowers you to prioritize your employees, enhance organizational efficiency, and thrive in the competitive European business landscape.

Contact Europe HR Solutions

Europe HR Solutions understands how crucial HR is to the foundation of any successful business. We can consult with you to determine when it’s best to outsource HR for your small business, and customize innovative solutions with you. 

Your HR needs remain our greatest priority, and we want to support you in ways that promote legal compliance and allow you to see your small business dreams come to fruition. 

Connect with Europe HR Solutions today for a free consultation and be sure to check out our blog for the latest HR insights, tips, and trends. The road to success for your small business is just an HR step away.

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    Author

    Inez Vermeulen

    Inez Vermeulen

    Inez Vermeulen is the Founder and CEO of Europe HR Solutions, with over 25 years of successful corporate and entrepreneurial experience in various global industries. She has helped grow and expand the European divisions of global companies such as Coca-Cola Company, Regus, DHL, American Medical Systems, etc. Inez has received several company awards for her entrepreneurial spirit and success.

    She owns a Bachelor’s degree in French, History and Latin, several HR global expert certifications, a Master’s degree in Metaphysical Sciences, ICF Coach Certification and has completed her Doctorate on Transformational Leadership. Inez is fluent in Dutch, English, French, Italian and German. She works in partnership with an extensive international network of independent & professional companies and resides in Belgium near Brussels with her husband Jan.