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What Is a Turnover Percentage?

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  • Written By: Ray Hawk
  • Edited By: E. E. Hubbard
  • Last Modified Date: 29 August 2016
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A turnover percentage is a calculation for a rate or quantity of change, and is usually applied to changing staff levels in an organization, but types of turnover can also include how often the portfolio in a mutual fund changes or the rate of change in a chemical reaction. The numbers arrived at in calculating turnover percentage are somewhat subjective. In its simplest form, it is a representation of how much of a new element reflects upon the volume of the whole.

Human resources departments in businesses will calculate an employee turnover percentage by dividing the number of lost employees by the ideal number of employees that the company expects to have during a fixed period of time. An example of this would be a firm employing 100 people that, in the course of a year, lost 12 individuals to various factors. In this case, 12 employees divided by 100 equals a 12% turnover. This percentage is used to quantify the rate of change in the labor force, but it only provides a basic understanding of the process of staff turnover.

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The calculations for employee turnover become more complex when the total number of employees is not consistently maintained over time. Other factors mitigate the raw value of the numbers as well, such as subcategories of employees who are either full or part-time, management or labor, or contract versus permanent employment. Protracted degrees of absenteeism due to sick leave, paid time off, or leaves of absence due to personal issues of staff can also make it difficult to gain a true perspective on what the underlying cause is for a relatively high employee turnover rate.

Some high turnover industries include fast food production and retail sales, where the environment is fast-paced, pays relatively low wages, and commonly employs young people who may not be dependent on the job for their survival. Low turnover industries include manufacturing and utilities workers, who often represent demographics of families, where the workers have good pay and benefits, and relatively stable positions in the company. A 2007 survey of United States employment found that the average turnover in business was 12.3%, with the highest rate in hospitality at 21.3%, and the lowest in utilities at 6.5%.

Comparable calculations in other business arenas are also frequently done for turnover percentages. Mutual or bond fund stock investments are rated by calculating turnover percentage in terms of how holdings in the fund have changed in the last year. The turnover rate is calculated by first determining the lesser of two factors: assets sold or assets bought within a year. The lower value is divided by the value of the entire fund portfolio on a monthly basis to get a turnover percentage. As in employee turnover, however, the percentages can be misleading, and an investment fund that shows a turnover rate in excess of 100% does not necessarily reflect the fact that the fund manager is intricately involved in the management of its assets on a day-to-day basis.

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