What is employee turnover?
Employee turnover is a percentage amount of employees that leave a company over a specific period. Turnover often results in employers seeking a replacement for the newly opened positions. There are many reasons that an employee might choose to leave the company, which can range from personal choices to potential issues in the workplace. Understanding why employee turnover occurs can help your organization identify issues and avoid future turnover.
Types of employee turnover
The types of employee turnover don’t include internal transfers or promotions. Two primary types of employee turnover include:
- Involuntary turnover : this turnover type occurs when your organization might remove an employee from a position. This can be due to business decisions outside of your control, such as downsizing or asking employees to leave their positions.
- Voluntary turnover : this type of turnover occurs when an employee willingly decides to leave a position. Some examples of voluntary turnover include a change in life events, retirement, or pursuing a different position.
How to calculate employee turnover rates
Your organization might calculate turnover rates on a monthly, quarterly, or annual basis. Quarterly and annual turnover calculations can help show you more meaningful turnover patterns and are the most common period calculations used. You might separate your turnover rates to help pinpoint and resolve turnover issues faster. For example, tenured employees might leave for a different reason than new hire employees. The following formula is how you can calculate employee turnover in your organization:
1. Find the average number of employees for a time period
The first step is to find the average number of employees you had for the time period you’re measuring. To accomplish this, add the number of employees at the beginning of a time period and the number of employees at the end of the time period. Then divide this sum by two to find the average number of employees of that specified period.
2. Find your rate of turnover
The next step uses the average discovered in step one and the number of employees that left your company. You might consider separating this based on why employees left to determine the factor causing the highest turnover. To determine the turnover rate, you can take the number of employees that left the company during the period you’re measuring and divide it with the average number of employees.
3. Find your turnover percentage
This final step utilizes the rate discovered in step two. This can help you understand the percentage of employees that have separated from your company. To accomplish this, you take the rate found in step two and multiply it by 100.
Average employee turnover rates
The average turnover rate can vary between industries and positions. It’s important to consider your industry, high-turnover positions, and even the seasons when analyzing employee turnover rates. Knowing this information can help you identify ideal turnover rates for your organization.
Why is it important to calculate turnover rates?
Understanding how often employees leave your company can help you understand and reduce employee turnover. This can also provide insight into your company’s leadership, culture, and procedures. Turnover rates can also help you determine how much money you spend on recruiting, hiring, and training new staff due to turnover. Some additional reasons why calculating employee turnover is important includes:
- Identify time spent sourcing new talent.
- It can help you understand overall employee satisfaction
- Help identify ways to improve employee engagement
- Awareness of separation costs that affect the company
- Appraise the effectiveness of your talent acquisition strategies
What is a healthy turnover rate for the company?
Healthy turnover rates can vary between departments and organizations, so you need to analyze how turnover has affected your company in the past. Turnover should accomplish two things in your organization which are to reduce top performer turnover and increase the flow of top performers being brought into your company. The turnover rate should ideally be low, whereas underperformed turnover rates should be higher.
Some turnover can benefit your company as it can bring in new talent and ideas to your organization. Additionally, some employees might not be well-suited to their positions or your organization. In these instances, turnover can benefit your company.
Why do employees leave the company?
There are many reasons that employees might leave your organization. It’s important to understand different reasons why employees might leave so you can identify problems and implement solutions. This can help prevent the future turnover of new and desired talent. Here are some common reasons why employees might leave your company:
- Employees are experiencing burnout in their current position
- Limited chances to grow or move within the company
- Compensation doesn’t match the duties and responsibilities performed
- Difficulty balancing their work/life schedules
- Issues with management or poor management
- Interest in a new position or career with a different organization
How employee turnover might impact the organization
If your turnover rate is above established ideal rates, it can impact the performance of your organization. Some ways that high turnover rates can affect your company include:
- Decrease in your organization’s productivity
- Increased costs to source, hire, and train new employees
- Increased workload and stress on current employees
- Potential decrease in employee trust
- Reduced company morale
- Loss of company culture and unity
Tips to reduce employee turnover rates
If you discover that your turnover rate is higher than your ideal rate, you might consider implementing new strategies to help reduce turnover and increase employee satisfaction. There are many ways you might implement strategies to help employees feel satisfied with their positions. Here are some tips you can consider to help reduce employee turnover:
1. Review your current hiring and onboarding strategies
Reviewing your current talent acquisition methods can help you ensure that you’re hiring the right candidates for the position. By incorporating competency screening, behaviour testing, and a thorough interview process, you can identify the best candidates who align with your available positions. This can also help you find candidates that fit and promote your company culture.
2. Offer competitive salaries, benefits, and work-life balance
Employees often try to find positions with optimal salaries and benefits that align with their lifestyle needs. Offering a competitive salary and implementing regular raises can show that your organization values its employees. Some benefits that employees might also look for in companies include health insurance, retirement plans, paid time off, and medical coverage. Some ways to improve your company culture can also include additional paid holidays, work-from-home opportunities, and voluntary employee engagement events.
3. Offer career growth and internal movement opportunities
Most employees look for growth and improvement opportunities within an organization. Providing additional training, cross-training opportunities, and career progression programs can help employees grow in the company and take on more responsibilities. This can help increase their overall satisfaction and help them feel valued within the organization.
4. Ensure to recognize top performers and wins for teams or the company
Employees who feel recognized and valued are more likely to stay with the company than leave voluntarily. Providing recognition for increased productivity or sales can help an employee feel valued and important to the company. Developing a recognition program that fits your company and its culture can help decrease employee turnover rates.
5. Train and develop your management team
Your management team engages with your employees daily and can greatly impact employee satisfaction and performance. Providing mentorship and training to your management team regularly can help them manage teams more effectively and ultimately reduce turnover rates. This can also increase communication flows and can help employees feel more comfortable with the company.
6. Conduct regular company surveys
Recurring company surveys can help employees address how they feel about your company and its culture. Sending out regular anonymous surveys can also help identify improvement opportunities within your organization and help you develop programs or initiatives to improve employee satisfaction. This can allow your company to fix issues before they cause employees to leave the company searching for other opportunities.
7. Review and revamp your company culture
Your organization can have a direct effect on employee experiences. Employees who feel valued, recognized, and have a positive work-life balance are more likely to stay in their current position instead of seeking other employment. Fostering a positive and inclusive company culture can help individual employee growth and greatly impact long-term turnover. Feedback, team-building activities, and celebrating small and big company wins can make a large difference in employee satisfaction.
8. Value employee work/life balance
Employees who feel like their work affects their personal lives are more likely to seek employment where they have more work/life balance. Placing value on employees’ personal time and implementing strategies to reduce their work-life affecting their personal life can increase employee satisfaction. This can also help them be more productive and positive during their work hours.
Examples of how to calculate turnover rates
When learning how to calculate turnover rates, reviewing real-world examples can help you better understand how to apply the formula and interpret the results. Here are few examples of how to calculate employee turnover rates, using different time frames:
Example 1: Monthly turnover rate calculation
On April 1, your company had 143 employees. On April 31, your company had 145 employees. During that period, ten employees left the company.
- Calculate your employee average:
- 143 + 145 = 288
- 288 / 2 = 144
- Divide the number of employees who left by the average number of employees:
- 10 / 144 = 0.0694
- Multiply the number from step two by 100
- 0.0694 x 100 = 6.94%
Based on your company’s ideal rate of turnover, you might consider looking into employee turnover rates. If it continues approaching close to 10%, you might consider implementing some programs or initiatives to increase employee satisfaction.
Example 2: Quarterly turnover rate calculation
On January 1, your company had 1357 employees. On March 31, your company had 1314 employees. During that period, 47 employees left the company.
- Calculate your employee average:
- 1357 + 1314 = 2671
- 2671 / 2 = 1335.5 (round up to the nearest whole number) = 1336
- Divide the number of employees who left by the average number of employees:
- 47 / 1336 = 0.0352
- Multiply the number from step two by 100
- 0.0352 x 100 = 3.52%
This number is closer to 0% than 10%, so this turnover rate might mean your company is experiencing normal turnover rates due to factors outside of the company’s control.
Example 3: Annual turnover rate calculation
On January 1, your company had 581 employees. On December 31, your company had 478 employees. During that period, 125 employees left the company.
- Calculate your employee average:
- 581 + 478 = 1059
- 1059 / 2 = 529.5 (round up to the nearest whole number) = 530
- Divide the number of employees who left by the average number of employees:
- 125 / 530 = 0.2358
- Multiply the number from step two by 100
- 0.2358 x 100 = 23.58%
This number is over what’s considered healthy employee turnover. So, you might consider analyzing the reasons behind employee turnover and consider ways to improve employee satisfaction to reduce turnover rates.
