## Let us walk you through the calculations to determine turnover costs and the projected savings with increased engagement.

To get you started, we broke this walk through down into 3 different parts:

### Average Turnover Cost by Employee

**Step 1: ****Determine Turnover Cost by Position Level (if more than one salary)**

Since we have more than one average salary, we need to determine the average turnover cost by position level. If we just had one average salary, you could multiply it by 150% to get an estimated turnover cost. However, we can provide more insight into lost costs with multiple average salaries. Gallup’s research breaks down three different salary levels: average entry level, average mid-level, and average executive/technical salaries.

In this example, we have two different salary levels: entry level and technical. We're going to break down the turnover costs by position type and then determine the average between the two salaries.

Here's the formula for **Average Turnover Cost by Employee:**

- [(Average Salary x 50%) + (Average Salary x 250%)]/2
- [($31,200 x 50%) + ($135,500 x 250%)]/2
- [($15,600) + ($338,750)]/2
- $354,350/2 = $177,175

The average turnover cost using two salaries provided is **$177,175. **

Now that we have an average employee turnover cost of $177,175, we need to determine how many employees on average are leaving.

### Average Employee Turnover

**Step 2: Determine Turnover Rate (if not provided)**

If you don't have a benchmark turnover rate on hand, you can save time and use our **Sparck Engagement Calculator**. It has a built in function that helps you calculate the turnover rate for last year using just four numbers:

- The number of employees at the beginning of the year.
- The number of employees who left during the year.
- The number of employees who were hired during the year.
- The number of employees at the end of the year.

You input that information in this area on the calculator.

If you don’t have the turnover rate for your organization or don’t have the information needed to use the **Sparck Engagement Calculator**, the calculator also provides standard industry turnover rates.

However, here's the calculation that the calculator uses.

Here's the formula for **Annual Turnover Rate: **

- (# of Employees that Left During the Year) / [(# of Employees at the Beginning of the Year + # of Employees at the End of the Year)/2]
- 21 employees/[(275 employees+281 employees)2]
**= 7.55%**

**Step 3: Determine Average Employee Turnover**

To uncover how many people are leaving every year on average, we multiply the 7.55% turnover rate by the total number of employees (290). With this simple calculation we find that 22 employees leave on average.

Here's the formula for **Average Employee Turnover:**

- Turnover Rate x Number of Employees
- 7.55% x 290
**= 22 Employees**

The average employee turnover is** 22 employees. **

### Total Turnover Costs + Projections

**Step 4: Determine Average Turnover Cost**

Now we need the average annual turnover cost. We multiply the average turnover cost by employee (part 1 - $177,175) by the average employee turnover (part 2 - 22 employees).

Here's the formula for **Total Turnover Costs:**

- Average Turnover Cost by Employee x Average Employee Turnover
- $177,175 x 22
**= $3,879,247**

The estimated total turnover costs are $3,879.247.

**Step 5: Determine Projected Turnover Savings**

Now that we have the estimated turnover costs, we can focus on the 65% of people who are leaving voluntarily every year. There is a huge financial upside of $2.5 million dollars in savings.

Here's the formula for **Projected Turnover Savings: **

- Total Turnover Costs x 65%
- $3,879,247 x 65%
**= $2,521,510**

The projected turnover savings is $2,521,510 in this Cost Analysis, which captures the total opportunity cost if you were able to retain 100% of the employees who are willingly leaving.

### Next Steps:

- Go back to the
**Cost Analysis Resource Page**to learn more about the different sections of the**Cost Analysis**. This is our Ultimate HR Guide to get Leadership Buy-In! - Check out
**Calculating Turnover Costs and Projected Savings**for an explanation how to explain these calculations.