Turnover
Turnover, also called the separations rate, is the share of employees who leave your payroll in a period: separations divided by employment, times 100.
- LAW
- 26 U.S.C. §3303(a), experience rating
- BOUNDARY
- Employment for the pay period including the 12th
- FORMULA
- Separations ÷ employment × 100
- WATCH FOR
- Comparing yearly turnover with the BLS annual average rate
Turnover counts every employee who leaves your payroll, whether they quit, are laid off or fired, or retire. The federal measure comes from the Bureau of Labor Statistics (BLS) Job Openings and Labor Turnover Survey (JOLTS): divide separations by employment and multiply by 100. A month with 6 separations and 120 employees has a 5% turnover rate. Your payroll records hold both counts, so the rate is only as accurate as your termination dates and active statuses.
How do you calculate the turnover rate?
Count the separations in the period, divide by employment for the same period, and multiply by 100. BLS counts employment as everyone on the payroll who worked or received pay for the pay periodPay period. A pay period is the recurring block of time, such as a week or a month, for which you calculate and pay wages.Click to open the term that includes the 12th of the month. For a yearly rate, add the 12 monthly separation counts and divide by the average of the 12 monthly employment counts. The BLS annual average rate divides by the sum of the 12 counts instead, so it is an average month.
| RATE | SEPARATIONS | DIVIDED BY |
|---|---|---|
| Monthly (BLS) | Separations in the month | Employment for the pay period including the 12th |
| Annual average (BLS) | Sum of the 12 monthly separation counts | Sum of the 12 monthly employment counts |
| Yearly turnover | Sum of the 12 monthly separation counts | Average of the 12 monthly employment counts |
Work it out: one year
Enter each month’s employment for the pay period that includes the 12th, and the month’s separations. The card computes each month’s rate, the yearly turnover rate, and the BLS annual average rate.
One year: 120 employees and 18 separations
Employment: everyone on the payroll for the pay period that includes the 12th. Separations: everyone who left the payroll in the month.
Turnover rates from twelve months of your own payroll counts, measured the way the Bureau of Labor Statistics does: employment for the pay period including the 12th of each month, and all separations in the month. It leaves out rates by type (quits, layoffs and discharges, other separations), how to count a layoff of 7 days or less, and how separations reach your state unemployment tax rate. Other cases and state law can change the result.
Which separations count as turnover?
Total separations cover every employee separated from the payroll during the period, in three types. Quits measure voluntary turnover, and layoffs and discharges measure involuntary turnover. A layoff lasting or expected to last more than 7 days counts as a separation; if you later recall the employee, BLS counts the recall as a hire.
| TYPE | WHAT IT COVERS |
|---|---|
| Quits | Employees who left voluntarily, except retirements and transfers to other locations |
| Layoffs and discharges | Involuntary separations you initiate, including layoffs, eliminated positions, firings for cause, and seasonal terminations |
| Other separations | Retirements, transfers to other locations, deaths, and separations due to disability |
How can turnover raise your unemployment tax rate?
Every state bases your unemployment tax rate on your experience. Federal law, 26 U.S.C. §3303(a), bases reduced state rates on at least 3 years of experience with unemployment or other factors bearing a direct relation to unemployment risk, or at least 1 year for a newer employer; until then, a new employer may get a reduced rate of at least 1.0%. Three of the four formula types measure benefits paid to former employees or the separations behind them; the fourth, payroll declines. States decide which claims they charge you.
Frequently asked
- U.S. Bureau of Labor Statistics, JOLTS Data Definitions
- U.S. Bureau of Labor Statistics, Job Openings and Labor Turnover Technical Note
- 26 U.S. Code § 3303 - Conditions of additional credit allowance
- U.S. Department of Labor, Comparison of State Unemployment Laws 2023, Chapter 2: Financing
General information, not legal or tax advice. Apply current federal and state rules with qualified guidance.