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. 

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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.

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      About the author

      The author of this article

      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.