Step-by-Step Calculations for Turnover Costs and Projected Savings

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
• Average Employee Turnover
• Total Turnover Costs + Projections

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. 

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:

1. The number of employees at the beginning of the year.
2. The number of employees who left during the year.
3. The number of employees who were hired during the year.
4. 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.

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.  

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). 

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. 

Next Steps:

• Go back to the ROI Analysis Toolkit to download the ROI Analysis Bundle and learn more about the different sections of the ROI Analysis.
• Check out Calculating Turnover Costs and Projected Savings for an explanation how to explain these calculations.