What Is Employee Turnover and How to Calculate It?
Whether we like it or not, employees leave the company for various reasons. To retain your employees and rectify the cause of their turnover, you first need to quantify the number of employees leaving your company. This is where the employee turnover rate comes into play.
The company spends a lot to source suitable candidates, send them on their recruitment journey, screen them to check their compatibility with the organisation, engage them with pre-employment screening, and finally onboard them into the workforce. Employers should always look into retaining their employees.
To better understand why employees leave the company and come up with ways to prevent this. We must understand employee turnover.
Employee Turnover Definition
Employee turnover is the number, or percentage, of employees who leave your company during a specific time.
A high employee turnover rate indicates a severe problem with your hiring strategies, and you should look into it to reduce your employee turnover.
New hire turnover or the first-year turnover rate is a recruitment metric that calculates the number of employees who leave the organisation within their first year at the company.
Usually, companies calculate the employee turnover for all the employees. In some instances, it is also useful to calculate employee turnover for a specific department or select company teams.
How to Calculate Employee Turnover
Calculating employee turnover is fairly straightforward. The following are the steps to follow:
- First, take the time you wish to observe.
- Divide the total number of employees who left your organisation at that time by the average number of employees in your company.
- Multiply them by 100 to get the employee turnover rate. For example, if the total number of employees who left your company is 25 and the average number of employees in your company is 150
- Employee Turnover rate = (25/150) x 100
- Then, your company has a turnover rate of 16% during the observed time.
- To get the most accurate result, do not consider temporary hires or employees on an extended leave. This will not produce the proper result.
Types of Employee Turnover
There are two types of employee turnover. Understanding them can help you gain more insight into why an employee leaves your organisation.
Voluntary Turnover is when the employee chooses to leave the organisation. This might be because of better job opportunities or a bad work culture. This is where you need to conduct a formal exit interview to analyse the reason for the employee turnover to help reduce them in the future.
Involuntary Turnover is when an employee is fired from the company. This might be due to poor performance or bad behaviour from the employee’s side. This might indicate that the employee was a bad hire or that they might have failed to meet the standard requirements of their job.
Reasons for Employee Turnover
There are many reasons for employees to leave a company. It is necessary to understand them all so employers can find a solution in case of a high employee turnover rate.
The following are some reasons for high employee turnover:
- Every employee expects some level of growth when it comes to their career. After working for some time in the company and experiencing no growth or development in their career, the employee might start to look for job opportunities elsewhere.
- Sometimes, the employee might not even have a negative reason for departure. The employee might have received a better job offer at some other company and might switch over because of that.
- Employees may sometimes face the problem of handling too much work. This might be something they would be willing to do with less frequency. But, continuous overwork may lead them to burnout.
- The work environment, the management, the peers, and everyone else around the employee might exhibit some toxic traits. This may have made the employee leave the company.
- The employee could have some family event that may require them to leave the job.
- When employees work for a company and go out of their way to do a good job, they expect recognition for their work. When an employer does not appreciate them for their efforts, they may leave the job searching for a place where they feel appreciated.
- Every employee requires a work-life balance. A job that does not offer them time to spend on other aspects of their life can negatively impact their mental health. This can also make the employee leave their work.
- It is also possible that the employee did not meet the company’s standards, either as a cultural fit or regarding their duties. This reason falls under involuntary turnover.
How to Reduce Employee Turnover
Reducing employee turnover and retaining employees is necessary to run a company. After looking into the reasons for the employee turnover, you need to ensure that they are addressed, and initiatives are taken to reduce the employee turnover at your company.
The following are ways you can reduce your employee turnover rate:
- It all starts with your hiring process. Most of the time, employees quit because they feel they are not the right person for the job. Or it might be because they might not meet the company’s requirements. To overcome this, you need to refine your hiring process to ensure that bad hires are reduced.
- Every organisation should offer a path for employees to grow in their careers. Since every employee would most likely like to learn new skills and excel in their career, professional development is mandatory.
- Having an employee reward and recognition program is always good practice. This can make your employees feel appreciated and happy, thus helping to retain them.
- To ensure that the employees work at their maximum productivity. You need to offer them a proper work-life balance. To keep them engaged, check if their goals are manageable and offer help whenever required.
- Building a good work culture can go a long way in retaining employees. More than the salary and the perks, employees focus on their well-being and work for companies with a good work culture.
Understanding employee turnover can help you plan your hiring strategy, building your work culture, creating a development plan for your employees, and help the company become a more desirable place for employees to work. This can help you to improve your employer branding.
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