As an employer, there will be times when employees look to move on to new opportunities. But every time someone does, it costs you both time and money.
To fully understand how many staff are finding new employment elsewhere, you should calculate your turnover rate. Finding the correct rate for your business will help you to improve future employee retention.
In this guide, we'll discuss what staff turnover is, how to calculate staff turnover rate, and how to decrease yours.
What is staff turnover?
Also known as employee turnover, staff turnover is the number of employees who have left their roles and need replacing. This can be throughout the whole company or broken down into individual departments.
As an employer, it's important you successfully manage the issue within your company. But to do this, you need to understand the different types of staff turnover.
Different types of employee turnover
There are a few different types of employee turnover that you need to be aware of. Let's discuss each of them in more detail:
Voluntary turnover
Voluntary turnover is when employees leave of their own will. Common examples of these include:
- Better job opportunities in a different company.
- Retirement.
- Resigning.
Involuntary turnover
Involuntary turnover is when an employee leaves a company without having a choice. This could be due to many reasons, such as:
- Poor performance.
- Toxic behaviour.
- Part of a lay off or redundancy.
- Gross misconduct.
Overall staff turnover
Overall staff turnover is the turnover throughout the whole company. This includes both voluntary and involuntary.
For larger businesses, turnover is measured throughout different departments. But depending on the size of your business, you may choose to find the number of employees leaving the company as a whole.
New employee turnover
New employee turnover is the rate at which new starters have chosen to leave a company. Finding how many new employees are leaving is a good way to find out if your onboarding process is effective, if you have problems with your workplace culture, or if the job description isn't correct.
Reasons for high employee turnover
There are many things that can cause high employee turnover within a company. So as an employer, it's important you familiarise yourself with them. Doing so can go a long way to correctly managing the issue in your company.
Below are common examples of reasons behind high levels of employee turnover
- Lack of growth or career development opportunities.
- Poor employee work-life balance.
- Bad management.
- Lack of employee recognition.
- Poor or toxic work environments and cultures.
- Poor working relationships with colleagues or managers.
- Employees feel overwhelmed with workloads or demands.
- Poor overall employee experience.
- Outdated HR policies or procedures, such as a lack of flexible working options.
If you feel like any of the above are taking place in your company, then you need to address the issue as soon as possible.
Reasons for low employee turnover
Having low staff turnover in your company is crucial. Having fewer employees leaving your business means that in theory, they are happy to be working for you.
However, you may be wondering what it is you've done that's led to this. Common examples include:
- Employees feel well-paid and compensated.
- You've created a healthy workplace culture.
- Employees feel engaged and happy.
- There's open communication between both employer and employee.
- Incentives, such as cycle-to-work schemes and early finish on Fridays.
- Smaller benefits, such as free fruit in the office.
Who is responsible for employee turnover within a company?
As the business owner, ultimately staff turnover lies with you. But, it's also the responsibility of your senior staff.
Your senior employees are in place to not just manage your employees, but to also get the best out of them. This includes improving their skills and performance.
Poor performance is a common reason for staff turnover. So it's important you make your senior staff aware of how important they are in lowering the number of people leaving.
What is employee turnover rate?
Staff turnover rate is a way to measure the number of employees leaving company during a specific time period. For example, you can measure annual turnover or monthly turnover rates.
Once you've calculated the rate at which employees are leaving your business, you can begin to solve the problem (if there is one).
Why are employee turnover rates important?
You should never underestimate the importance of finding the staff turnover rate in your company. It can be a great way of discovering how effective your human resources management is.
However, there are many reasons why it's important to find your staff turnover rates. Such as:
- They help to gain insight into the leadership in the business and workplace culture.
- They help to show a lack of employee satisfaction and engagement.
- They help to assess how effective your onboarding and training programme for new starters is.
What is a healthy staff turnover rate?
There's no correct answer to what a healthy or unhealthy turnover rate is. However in Ireland, a report found the average turnover rate is 18.2%.
However, you should remember that the above figure will vary throughout different industries. Some industries will have higher turnover rates than others, so it's important you compare yours to a company within the same type of work.
How to calculate employee turnover rate
To get the full picture of how many employees are moving on from your business, it's important you calculate the turnover rate successfully.
Firstly, you need to decide the certain time period you're looking to find the rate for. Mostly this is on an annual basis, however you can calculate yours quarterly or monthly. However if you feel your company is suffering from frequent departures, you can always choose to find your monthly rate.
To calculate staff turnover, you should follow the below steps (this is a calculation for annual turnover):
Step one - collect information
The first step you should take to find your staff turnover rate is to collect all the essential information required. This information will form the foundation of your rate.
You'll need to find the following three pieces of information:
- The number of employees at the beginning of the specific period.
- The number of employees at the end of the specific period.
- The total number of employees that left during the specific period.
Step two - calculate the average number of employees
The next step in calculating your staff turnover rate is to work out your average number of employees.
This is done by adding the number of employees at the beginning of the time period, with the number of employees at the end. Then dividing that number by two. For example:
40 employees at the start + 30 employees at the end = 70 employees. Divided by 2, gives you 35 employees (40+30= 70, 70÷2=35).
Step three - calculate the staff turnover rate percentage
The final step in calculating the staff turnover rate in your company is to find the turnover rate percentage.
This is done by dividing the number of employees who left, by your average number of employees. Then multiplying that number by 100. For example:
4 employees left ÷ 35 average number of employees = 0.11. Multiplied by 100, gives you 11.42% (4÷35=0.11, 0.11x100=11.42).
How to analyse your staff turnover rate
It's important to use your staff turnover data wisely. This is especially important if you have a high turnover rate and need to identify issues causing it.
When you've calculated your rate of staff turnover, compare it to the same period in a different year. This'll help you to see if the problem has got better or worse.
However, there are some questions that you should look to answer once you've calculated your employee turnover rate. Let's discuss them in more detail:
Which employees are leaving your company?
It's important for you to understand which employees are moving on from your company. If you're finding a higher amount of senior staff are moving on then this should raise alarms.
For example, if senior managers are regularly moving on there will be a higher financial cost to replace them.
Why are employees leaving your company?
It's important you understand why a departing employee is choosing to leave your company. Doing so will help you take action and reduce turnover in your business.
One of the best ways to do this is to conduct exit interviews. Exit interviews are an important avenue to gain honest and valuable employee feedback on why they're moving on.
Are there any patterns emerging?
It's important to find out if there are any patterns that are emerging with departing employees.
You should look deeper into the issue to find any patterns. For example, it should be highly concerning to you if new employees are choosing to leave as there may be an underlying problem with their workload.
New employees tend to leave jobs for the following reasons:
- Difference between what they're expected to do and what they end up actually doing.
- The job description wasn't accurate.
- There was insufficient training provided.
However if experienced employees are moving to new employment, this may be down to the compensation package you're providing or them simply wanting a fresh start. It's important to remember that there's nothing wrong with people choosing to leave your business for a new job.
Effects of high employee turnover
The effects of high turnover should never be ignored. There are many different consequences to allowing your company to have a high employee turnover rate.
Ignoring them will mean you continue to allow employees to leave your company at a higher rate. The following are common effects:
- Higher administrative costs having to hire new employees.
- Having to train staff can take time out of other employees' days.
- Working relationships have to be created.
- A decrease in employee morale, productivity and quality of work.
- Hard to attract the best talent.
Effects of high employee turnover
The effects of high turnover should never be ignored. There are many different consequences to allowing your company to have a high employee turnover rate.
Ignoring them will mean you continue to allow employees to leave your company at a higher rate. The following are common effects:
- Higher administrative costs having to hire new employees.
- Having to train staff can take time out of other employees' days.
- Working relationships have to be created.
- A decrease in employee morale, productivity and quality of work.
- Hard to attract the best talent.
Ways to increase employee retention
It's important you increase the retention of your staff. It can play a big part in employee engagement, morale and the overall performance of your business.
Once you increase employee retention within your company, you'll reduce staff turnover and keep your best employees. So let's discuss ways of retaining staff in more detail:
Improve your recruitment process
Improving your recruitment process will help bring turnover costs down for your company.
It's important to create a job description that is accurate to the job’s daily tasks. As well as this, ensure you're hiring the right staff. Don't just hire someone for the sake of it There's nothing wrong with waiting and taking longer to make sure they fit your company.
Conduct employee surveys
It's important you provide your current employees with regular employee surveys. They are an important way of improving the overall employee experience within your company.
The surveys may make you aware of issues that you previously had no idea about, issues that can easily be resolved. Making changes following the surveys is a great way to improve retention and bring down your turnover rate.
Provide development opportunities and career progression
A good way to increase staff retention is to ensure you provide your employees with sufficient development opportunities. It's important your employees feel like you want to help to develop their skills and knowledge.
Doing so just doesn't just bring benefits to them, but will also benefit the quality of their output.
Analyse your benefits and compensation packages
One of the most common reasons why employees look to move on from their role is because they don't feel they're paid enough.
To help avoid this, you should conduct industry research. Doing so will ensure you're paying your staff correctly for the work they're doing. This'll go a long way in keeping your best staff in your company.
Help your employees' work-life balance
It's important you help your employees achieve a better work-life balance. This can be simple things like offering flexible working options, or early finishes on Fridays.
You should speak with all your staff and ask them for some ideas about how their work-life balance can be improved. Listening to your employees and making changes where possible is a great way of keeping your top talent and lowering your turnover rate.
Get expert advice on staff turnover from Peninsula
As an employer, there will be times when employees find new employment. But every time someone leaves, it costs you time and money. So it's important to understand how many are leaving.
To find how many staff are finding new employment elsewhere, you should calculate your turnover rate. Finding this will help you to improve future employee retention.
Peninsula offers 24/7 HR advice which is available 365 days a year. Want to find out more? Contact us on 0818 923923 and book a free consultation with one of our HR consultants.
