Lightspeed POS : How to Calculate Your Restaurant Turnover Rate

Staff turnover is growing a problem that plagues the restaurant industry. In 2020, due to restaurant closures and restrictions, the turnover rate in the hospitality industry skyrocketed to an all-time high of 130.7 percent compared to 78.9 percent in 2019. Not only that, but the industry was faced with an unemployment rate of 39.3 percent at its highest in April 2020.

While this level of turnover was caused by exceptional circumstances, the aftermath has created new challenges in terms of hiring and retention in restaurants and other hospitality businesses across the globe. When staff are constantly coming and going, restaurants are left with the expensive problem of replacing employees. With a transient workforce, team culture, employee engagement and performance all suffer.

But not everything is doom and gloom-knowledge is power when it comes to curbing a high restaurant turnover rate.

It’s time to tackle turnover head on. When you know your employee turnover rate, you can control it better. This guide to restaurant turnover will give you the scoop on:

  1. What is restaurant turnover?
  2. Why is restaurant turnover a problem?
  3. Why should you know your employee turnover rate?
  4. How to calculate your restaurant turnover rate
  5. 5 actionable ways to lower employee turnover

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What is restaurant turnover and why is it a problem for the restaurant industry?

Turnover is a measurement of how many of your staff members leave your business-whether by quitting or by being fired-over a certain period of time. Stay tuned for our simple formula for calculating your restaurant’s turnover rate.

Turnover is problematic for the restaurant industry for several reasons:

Restaurant turnover is expensive

Replacing just one hospitality industry employee costs $5,864 on average. How is that possible?

There’s a cost associated with every step of the hiring process: productivity loss, publishing a job posting, sifting through applications, interviewing candidates, onboarding and training.

Restaurants invest precious resources into new employees who likely won’t be around for the long haul. After all, the average tenure of a restaurant employeeis just 56 days! If your restaurant loses 10 employees in one year, it’s spending $58,640 on replacing them. That’s money that could be invested in initiatives that could grow the business, instead of just keeping it afloat.

Restaurant turnover causes workplace culture to suffer

When staff are transient, they won’t feel the need to get to know their colleagues. However, research shows that creating a family-like sense of community in the workplace leads to better outcomes.

Restaurant turnover diminishes workplace performance

The industry-wide restaurant turnover rate is problematic for businesses because it costs them money and causes culture and performance to suffer. When employees can’t establish a community because of transiency, they don’t feel a sense of belonging.

When employees are highly engaged at work, they go above and beyond what is expected of them, and actually generate more revenue.

Why should you know your restaurant’s turnover rate?

You understand now how turnover affects the industry, but do you know how it affects your restaurant? The escalating restaurant turnover rate is alarming, but how does your restaurant compare? When you know your restaurant’s turnover rate, you can better combat it.

How? Well, knowing your current rate gives you a benchmark from which to compare your turnover over time.

Let’s say that you calculate your turnover rate and find that it’s 50%. This figure seems great compared to the industry average, so you don’t do anything to actively fight turnover. However, because of this complacency, you then find that a year later your turnover rate is 80%.

By keeping an eye on turnover over time, you can discover what’s causing employees to leave and then do something to prevent it from happening further.

How to calculate your restaurant turnover rate (with examples)

Without further ado, here’s the restaurant turnover rate formula:

The first thing you need to do is to choose a period of time over which to measure turnover. You can choose one year if you’d like to compare it to the industry average, and then look at turnover on a monthly or quarterly level to see how it’s changed throughout the year.

Let’s say that you want to calculate your annual turnover rate. To calculate it, you would count how many employees left your restaurant during that year.

Let’s say that 15 staff members left your restaurantin 2019.

Next, you need to find your restaurant’s average number of employees for 2019.

Let’s say you started off 2019 with 6 employees.By the end of 2019, you had 10.

With those numbers, you would calculate your restaurant’s average number of employees like this:

Average number of employees:

= 6 + 10 / 2

= 16 / 2

= 8

So in 2019, 15 staff members left your restaurant, and you had an average of 8 employees working at your restaurant throughout the year.

Now, we can calculate your restaurant turnover rate for 2019:

Restaurant turnover rate:

= 15 / 8

= 1.875

= 187%

Yikes! This restaurant turnover rate is much higher than the national average. Why is this?

Let’s analyze your monthly restaurant turnover rate and see if there was a particularly rough month.

How to calculate your monthly restaurant turnover rate

Off the top of your head, you remember that 3 employees left in April and, for the month, you had an average of 7 restaurant employees.

Restaurant turnover rate for April:

= 3 / 7

= 0.42

= 42%

For April, your restaurant turnover rate was 43%, which is quite low when compared to your annual restaurant turnover rate of 187%.

Next, you examine December, a month where all of your staff quit because you didn’t give them flexible shifts for the holidays.

Restaurant turnover rate for December:

= 8 / 4

= 2.00

= 200%

In December 8 employees quit and you had an average of 4 employees that month. December’s turnover rate was 200%, which could be what inflated your annual turnover rate.

Use labor management software to track restaurant turnover

While calculating restaurant turnover is relatively straightforward, it still involves keeping track of how many people left your business and how many you hired.

Ideally, you should automate this process with labor management software that synchronizes with your restaurant platform. The biggest benefit? Tracking, paying and scheduling your employees with precision.

Rather than relying on an Excel spreadsheet to track your employee count, labor management software helps…

Read More:Lightspeed POS : How to Calculate Your Restaurant Turnover Rate