Turnover

Scope

Turnover costs typically consist of the following items:

Regulatory citations

• None

Key definitions

• Employment: The number of persons on the payroll who worked or received pay for the pay period that includes the 12th day of the reference month. This includes full-time, part-time, permanent, short-term, seasonal, salaried, and hourly employees.
• Job opening: Requires that a position exists and work is available for that position, work could start within 30 days, and the employer is actively recruiting from outside the company.
• Hires: The total number of additions to the payroll occurring at any time during the reference month.
• Separations: The total number of terminations (quits, layoffs, discharges, and other separations) occurring at any time during the reference month.

Summary of requirements

BLS statistics. The Bureau of Labor Statistics (BLS) collects and compiles monthly data for the Job Openings and Labor Turnover Survey (JOLTS). This data is collected in a survey of business establishments for total employment, job openings, hires, quits, layoffs and discharges, and other separations. This program covers all private nonfarm establishments such as factories, offices, stores, federal, state, and local government, and is a common resource used by U.S. employers.

Calculation. Total terminations (separations) during the year divided by the average number of employees equals the annual turnover rate. If calculated for a particular month, it can be multiplied by 12 to result in an annual rate. If done monthly, the annual rate can be achieved by adding the monthly estimates.

(Number of separations during the month ÷ average number of employees during the month) x 100

• Example #1: 35 separations out of 400 employees = turnover rate of 8.7 percent
• Example #2: 5 separations out of 100 employees = turnover rate of 5 percent

Purpose. Turnover rates can be helpful in determining the cause for losing employees. It can be broken down into the first 90 days after hire; 3-6 months; 6-9 months, etc. In addition, a turnover rate can be narrowed down to a specific location, department, or position. By narrowing down the parameters, companies can determine the true source of the problem. If most turnover is occurring during the first 90 days, for example, then the focus of the company can be towards hiring the right people, onboarding, orientation, and so forth.

Industry trends. Recruiting and retaining good employees is the best way to keep both turnover rates and costs down. However, there are several industries which consistently have high turnover rates. These include:

• Construction;
• Retail trade;
• Professional and business services;
• Arts, entertainment, and recreation; and
• Accommodation and food services.

When a turnover rate looks out of the ordinary, it is time to focus on the cause of the problem, and then on such things as hiring and recruiting, employee training, formal job descriptions, exit interviews, and increased benefits, to reduce the turnover rate. It can be a helpful tool to a company in focusing its efforts where they are needed most.