How is the fluctuation calculated?
How to calculate the turnover rate in your company
Employees come and go. The fluctuation rate is used to ensure that HR managers keep track of how long employees stay in the company on average. It is one of the most important key figures in personnel controlling and indicates the dynamics of personnel movements.
In the following we will deal with exactly what the fluctuation rate says, the reasons why employees leave the company and when there is a need for action on the part of the employer. At the end of the article you will find Formulas for calculating the turnover rate and how they differ.
Turnover rate: definition
The fluctuation rate is mainly dealt with in personnel controlling. The measured value provides information about employee movements within a company. The focus can be on the personnel movement of the entire company as well as on individual departments. Furthermore, the turnover rate not only covers employees who leave the company, but also those who have been transferred within the company.
A higher turnover rate indicates a faster movement of personnel. Employees stay in the company for a shorter time and are less tied to the company the higher the value. A lower fluctuation rate, on the other hand, indicates greater employee loyalty. If you calculate the turnover rate of a single department instead, you can draw conclusions about the behavior and management of this department.
Types of turnover
In personnel controlling a distinction is made between:
- natural employee turnover (e.g. retirement, end of a fixed-term contract or death of an employee)
- Internal employee turnover (e.g. transfer of an employee)
- External employee fluctuation (e.g. leaving an employee due to a termination)
- Early turnover: If there is an early or first-year fluctuation in the external fluctuation, this means that employees leave the company within the first 12 months of employment. This indicates problems in recruiting or on-the-job training.
Particular attention should be paid to fluctuation outside the company, as this harbors the greatest risks. The dangers for a company when an employee leaves a company are above all high financial burdens: bridging costs, costs for recruiting and the training of new employees. In addition, work processes can be delayed and productivity declined. That in turn has a negative effect on profits.
Reasons for fluctuation
The reasons for a termination on the part of the employee can be very different. Usually there is not just one, but several reasons why an employee decides to leave the company. A distinction is made between positive (the cause of the termination is outside the company) and negative (the cause of the termination is within the company) reasons for termination.
Why do employees leave a company?
Positive reasons for termination
- Family reasons (children, parents in need of care, househusband / housewife)
- Midlife crisis and the question of the meaning of the job
- Poaching through a better offer
- Business start-up
- Change to the job of your choice
- Financial independence through inheritance
- Change to another industry
Negative reasons for termination
- False promises
- Standstill and a lack of prospects
- Lack of appreciation
- Pronounced hierarchies
- Strong control of work (micromanagement)
- Low chances of a raise
- Bad work atmosphere and bullying
It is important for employers to know the reasons for the termination in order to recognize possible developments and, if necessary, to develop solution strategies.
The fluctuation rate in an industry comparison
The fluctuation rate varies depending on the industry. In some industries, fluctuation fluctuates seasonally, for example in agriculture. In general, fluctuation rates in different industries differ due to several influencing factors. The fluctuation in telecommunications, for example, is usually higher than in the automotive industry, as the Labor market, the requirement profiles and company structures distinguish. For this reason, it only makes sense to compare companies in an industry with one another and draw conclusions about fluctuation.
Further reasons for different high fluctuation rates in different industries are:
- (Seasonal) fluctuating order situation and personnel requirements
- Lack of advancement opportunities
- Temporary workers vs. skilled workers and specialists (e.g. call center agents in the telecommunications industry are easier and faster to replace and also find a job more quickly)
- General situation on the labor market
The Federal Employment Agency names the following industries with the highest fluctuation rates for 2018:
- Temporary employment: 140.6%
- Agriculture, forestry, fishing: 76.9%
- Hospitality: 68.5%
- Information and communication: 64%
The lowest fluctuation rates can be observed in the following economic sectors:
- Public administration, defense: 13.9%
- Financial and insurance services: 15.6%
- Mining, energy and water supply, waste management: 17.7%
- Manufacturing (metal and electrical industry, steel industry, manufacture of intermediate goods and goods for domestic use): 19.5%
Different fluctuation rates also occur in different areas within a company. According to a fluctuation study by Deloitte in Austria from 2019, sales and IT in particular are affected by a somewhat higher fluctuation:
This is how the fluctuation rate can be calculated
The employee turnover in the company can be seen on the basis of the calculated fluctuation rate. The measured value is one of the most important key figures in personnel controlling and can be calculated using various formulas. We use the same example for all formulas:
Number of employees at the beginning of the period: 90
Average number of employees: 89
The average number of employees is calculated as follows:
(90 (number of employees at the beginning) + 88 (number of employees at the end of the period)) / 2 = 89
Departures: 12 employees
New additions: 10 employees
Fluctuation rate formulas
The simplest formula is the basic formula. However, it is also the most imprecise way of calculating the fluctuation rate. It compares the number of employees leaving the workforce at the beginning of the calendar or fiscal year. In doing so, she disregards how many of the newcomers leave the company after a short time.
|Departures / headcount x 100 = turnover rate|
12/90 x 100 = 13,33 %
We see that the 2 new additions do not even appear in this calculation. In the absence of this crucial detail, the turnover rate is inaccurate.
This formula comes from Central Association of the Electrotechnical Industry. Here you take the number of replaced departures and divide it by the average number of employees.
|Replaced departures / average number of employees x 100 = turnover rate|
10/89 x 100 = 11,24
BDA and Schlueter formula
The most widely used formulas for calculating the turnover rate are BDA and the Schlueter formula.
The BDA formula was developed by the Federation of German Employers' Associations, for which the abbreviation BDA stands. It compares the departures with the average workforce. It is a little more precise than the simple basic formula, but it ignores half of the new entries and half of the exits.
The Schlueter formula is a little more complex than the previous two. It takes account of the departures and divides them by the workforce at the beginning of a calendar or fiscal year plus new additions. This formula is particularly suitable for fast-growing companies such as start-ups, as all newcomers are included here.
|BDA formula: Departures / average number of employees x 100 = turnover rate|
|Schlueter formula: Departures / (number of employees at the beginning of the period + additions) x 100 = fluctuation rate|
BDA formula: 12/89 x 100 = 13,48%
Schlueter formula: 12 / (90 +10) x 100 = 12%
What does the fluctuation rate say?
The fluctuation rate provides important information about employee fluctuation within a company over a certain period of time. If you compare two or more companies in an industry, it provides information about whether the personnel movement is within the normal range.
Is the High turnover rate (compared to other companies in the same industry), this means that a relatively large number of employees leave the company. Various causes, such as employee dissatisfaction, a bad working atmosphere or low salaries, can be the reason for the increased number of people leaving. Depending on the industry and the situation on the labor market, it is worthwhile to research the causes and, if necessary, to take measures to retain employees.
With a comparatively low turnover rate, employee loyalty is largely stable. Employees stay with the company longer. This can have various internal or external causes. That is why companies should remain vigilant and keep an eye on developments even when the fluctuation rate is low.
Written by Lisa Mandelartz
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