Employee Turnover

Companies often want to have low employee turnover rates because it reduces hiring and training costs, improves the quality of work, increases productivity, and boosts the company's reputation. 

What Is Employee Turnover?

Employee turnover measures the number of employees leaving the organisation in a specified period, regardless of the reason (voluntary or involuntary). While it usually pertains to the total number of staff leaving the company, you may also compute the turnover within departments or demographics. 

Employee turnover is expressed in percentage, denoting the rate by which employees leave and are replaced by a new hire. 

Steps In Calculating Employee Turnover Rate

To compute the company’s staff turnover rate, do the following steps:

Step 1 - Gather the necessary information

Decide on the period for which you want to determine your rate. In many organisations, it’s annually, but you can also go with quarterly. 

After this, determine the following information:

• Number of employees at the beginning of the period
• Number of employees at the end of the period
• Total number of employees who left during that period 

Step 2 - Determine the average number of employees

The next step is to determine the average number of employees. To compute, you simply need to add the number of employees at the beginning of the period and the number of employees at the end of the period and divide the sum by 2. 

For example, you have 48 employees at the beginning of the year and 38 by the end. Add them and you’ll have 86. Divide 86 by 2 and the average number of your employees is 44.  

Step 3 - Compute the turnover rate

The last step is to compute the employee turnover rate. Do this by dividing the number of employees who left by the average number of employees, then multiply the answer by 100. 

In our example, 10 employees left, so that would be 10 ÷ 44, which is equal to 0.2273. When multiplied by 100 the annual turnover rate is 22.73%. This means almost 23% of your employees left within a year. 

Why High Staff Turnover Rate Is A Concern

In Human Resources, employee turnover is a crucial metric, often seen as a reflection of the company’s management. When your company has a high employee turnover rate, you may incur:

• Extra expense in recruitment and training the replacement
• Shortage in personnel who are skilled and knowledgeable - this may significantly affect productivity
• Lower morale for those who remained 
• Bad reputation or image 

Reports say the cost of turnover can be anywhere between half to twice the employee’s annual salary. After all, not only would you repeat the process of recruitment, hiring, onboarding, and training, but you would also lose some level of productivity along the way. 

But when is the turnover rate high? To determine if your company’s staff turnover is high, you need to compare it to the expected rate within the industry, role, or region. 

In our example, 23% is quite acceptable if we’re talking about staff turnover in adult social care in England since the rate in 2022/2023 was at 28.3%. 

On the other hand, 23% may be high if we’re considering teaching roles in Australia, where data shows that “the number of teachers leaving in the first five years is close to 5-6%.”

Causes of Employee Turnover

When an employee leaves the company voluntarily, it could probably be due to finding another job that offers higher pay, more flexibility, better benefits, or more progressive career growth. There’s also the possibility that the new company culture fits them more or they have better relationships with their managers and team members there. Of course, retirement may also be the reason for voluntary turnover. 

On the other hand, if the employee leaves the company involuntarily, it could be because of poor performance, lay-offs, or misconduct. 

What Can You Do About High Employee Turnover Rate

Below are some steps you can take to improve your high turnover rate:

Consider significant factors

Consider factors, such as who is leaving the company (new hires or seniors), and if there’s a pattern to when they are leaving (do they resign after appraisal?). 

Another thing to consider is the reason why they are leaving. In many organisations, this can be determined through exit interviews. 

Make a stronger hiring decision 

Some studies pointed out that 80% of employee turnover often happens due to bad hiring decisions. 

One way to make a stronger hiring decision is to be thorough in the recruitment and hiring process. Things like writing accurate job descriptions, conducting interviews and reference checks, and running other background checks all contribute to finding the top candidates who would thrive and stay in the company. 

Focus on effective onboarding

A report revealed that a good onboarding experience can improve employee retention by up to 83%. It is for this reason that many organisations now streamline their onboarding process through software implementation and the use of checklists.