The employee turnover rate is an important indicator of an organization’s work culture, hiring procedures effectiveness, and overall employee management. Understanding turnover rates in comparison to industry standards and worldwide employee retention benchmarks can assist firms in driving growth and improving staff engagement. In this post, we will look at how to calculate the employee turnover rate and analyze what it means for your company. First, let’s see what employee turnover means.
What Is Employee Turnover?
Employee turnover is the percentage of employees who leave your company in a certain period of time. Turnover rates are often calculated annually or quarterly by organizations. They can also quantify turnover for new workers to evaluate the effectiveness of their recruitment strategy.
Employee turnover is an important indicator for assessing the effectiveness of human resources departments or human resource management systems.
Why Is Employee Turnover Important?
Replacing an employee is more expensive than retaining them. The entire recruitment process must be restarted, which takes time and resources. If your employee turnover rate is high, i.e., several individuals leave at the same time, it might lead to:
- Extra costs associated with finding a replacement
- Lower morale among those who remain
- A scarcity of trained and knowledgeable workers
- Loss of faith in the team’s ability
When staff turnover has such major repercussions, it makes business sense to keep track of it so that you can take appropriate action when it becomes excessive.
How To Calculate The Employee Turnover Rate
You can calculate the employee turnover rate in three easy steps. Before you start, you must first determine the time period for which you wish to compute. It could be done on a monthly, quarterly, or annual basis.
Here’s how to calculate the employee turnover rate:
#Step 1: Gather Required Data
To calculate employee turnover, you will need to gather three pieces of data. First, the number of employees your company had at the start of the time period (e.g., year). Second, the total number of employees in your company at the end of the time period. Third, the number of employees who departed your company throughout the specified time period.
Proceed to the following stage once you have gathered this information.
#Step 2: Determine the Average Employee Count
To calculate your employee turnover rate, first determine your typical number of employees. To achieve this, add the number of employees at the start of the time period (for example, the start of the year) to the number of employees at the conclusion of the time period (e.g., the end of the year).
Here’s how to figure out your average employee count:
Average employee count = [(number of employees at the start + number of employees at the end)/2]
For example, suppose your company had 42 employees at the start of the year and 62 at the end of the year. In addition, 13 employees left during the same time period. Simply add 42 and 62, then divide the amount by two to get your average number of employees.
Average employee count = 62+42/2 = 52
#Step 3: Determine the Turnover Rate Percentage.
Next, multiply your average staff headcount by your turnover rate. Divide the number of employees who left by the average number of employees to arrive at this figure. Then multiply the result by 100 to get the percentage of turnover.
Here’s how to figure out your turnover rate percentage:
Annual turnover Equals [(number of employees who left/average employee number)*100]
Using the same example, divide 13 (the number of employees who departed during the time period) by 52 (the average number of employees) and multiply by 100 to obtain a 25% staff turnover rate.
Annual turnover percentage = 13/52*100 = 25%
How To Calculate The Employee Turnover Rate on a Monthly Basis
You can calculate the monthly employee turnover rate as follows: (Employees who left in a month / average number of employees in a month) x 100 = monthly employee turnover rate
Here’s how to go about it:
Determine the number of employees who remain at the end of the month as well as the average number of employees in the same month.
Subtract the average number of employees from the total number of employees who left during the month.
Multiply this figure by 100.
For instance, a company had an average of 50 employees in March. Two employees quit the company in the same month. This results in the following equation:
(2 / 50) x 100 = 4%
How to Analyze Your Employee Turnover Rate
Your industry will determine how excellent or bad the turnover rate you estimated is. A 25% turnover rate is nothing if you work in manufacturing or retail. However, if you work in education, you should look into the causes behind the high employee turnover rate.
The employee turnover rate is more than just a number. To better understand the information hidden behind that number, you need to examine it from many perspectives. To begin, consider the following:
- Who are the departing employees? Is it the new hires or the senior ones who are leaving?
- Why are employees quitting? Is it the new hires who are departing because there is a disconnect between what they expected and what they are actually doing? Do you need to train them more or revise your job description to attract the best candidates? If senior staff are departing, perhaps you could create an upskilling or career management program to keep them.
- Is there a pattern to their exit? For example, if more employees leave either before or after the yearly appraisal, it is possible that they are dissatisfied with the process or your usual increment rates.
How to Make a Report on Employee Turnover Rate
Using your selected software or application, you may measure employee turnover with a simple report. Here are a few easy steps:
#1. Create a table and label it.
Create a table with six columns and one row for each of the year’s 12 months. You can even track different time periods, such as quarterly or annually if you like. Label the column with the information you’ve gathered, such as:
- Month
- Employees on the payroll
- Employees enlisted
- Number of employees resigned
- Employees being phased out.
- Turnover
The months should be labeled on the rows.
#2. Enter your data
You can enter the appropriate number for each category. You’ll need employee totals as well as figures for how many people joined and left the company.
#3. Determine the final number
The closing number can be calculated by adding the opening and joining numbers and subtracting the number who left. The turnover rate can then be calculated using the cell’s formula. In Google Sheets, for example, the formula is =(D2/((B2+E2)/2)). The formula can be copied into the final column of each month’s cell. It should take into account the values in the cells automatically.
What Does A High Employee Turnover Rate Imply?
How can you know whether your turnover rate is high? In most cases, high turnover means that 28% of your new employees leave within the first 90 days of employment. (Again, this comes at a high cost to businesses because they must constantly go through the process of recruiting, hiring, and training new employees.) Negative employment experiences are frequently the cause of high turnover. An event or negative experience drove away 34% of the 28% of new hires who resigned.
Is 25% A High Turnover Rate?
25% is usually considered a high employee turnover rate. This, however, varies by industry.
What Factors Contribute to High Employee Turnover?
Employees who are dissatisfied with their jobs are more inclined to depart and seek employment elsewhere. This implies that there is a substantial correlation between excessive turnover and a lack of employee engagement. Why?
- Employees that are bored, disengaged from the organization, and uninterested in their work may be driven to leave.
- Employees may also choose to quit if they are offered a higher salary or benefits package.
- Employees may be enticed to leave organizations by job advantages such as the opportunity to work from home or unrestricted paid time off.
Look at companies in the healthcare and retail sectors to get a sense of what high turnover looks like in the industry. Employees in these fields typically have a higher turnover rate because they become tired of monotonous, repetitive duties and seek employment elsewhere. As the gig economy expands, distributed or remote workers may feel less linked to their employers and their goals.
Because these workers are all fighting for low-wage employment, any firm that provides tempting bonuses may be rewarded with more loyal staff. Whether it’s a discount on company clothing or a free meal every shift, various employees will look for positions based on the benefits that appeal to them.
As organizations compete for a limited supply of highly skilled personnel, the tech industry has one of the highest turnover rates. However, due to the increasing demand for technically skilled professionals, these individuals frequently move from one fantastic position to another.
Employee Turnover And Frontline Personnel
Why is there such a high turnover rate among frontline workers in particular? Put it down to a lack of communication.
Any company’s communication is intended to involve two groups: customers and staff (which can include partners, part-time workers, and freelancers). Employees may be more likely to seek out firms that are better at expressing rules, priorities, and processes to employees if internal communications are struggling.
Employees may also look for organizations that have mastered digital communication best practices. These could include:
- Sending messages to employees via their preferred communication channel or device
- Communicating with employees at times when they are most likely to receive communications
- Encouraging and welcoming two-way contact between executives and front-line staff.
- Genuine, open communication from executives and CEOs
- Reaching out to and interacting with deskless and remote employees
How to Reduce The Employee Turnover Rate
Making people want to stay by providing a great employee experience will help reduce turnover. Workers are more likely to stay with a company if they are presented with an engaging, helpful, and communicative organization.
Ultimately, creating a great work experience is the key to lowering turnover. In any firm, there are two approaches to creating a great employee experience.
#1. Maintain regular communication with staff.
Internal communications that are effective can help keep employees motivated and reduce attrition. Workers are more likely to stay with a company if they feel connected to its culture and supported by its employees. Here are some key strategies for improving internal communications.
- Examine your existing communication lines. What works and what doesn’t? Internal communications technologies that stand alone do not perform as well as integrated workforce communications platforms. As a result, your email and intranet will not reach your employees as effectively as a solution that connects all of your channels over time.
- Improve employee engagement by doing research on your staff. Discover who they are and what methods of contact they prefer. You will be able to attain and meet your employees’ expectations if you take the initial step in understanding your audience.
- Create a multi-channel strategy for reaching out to your staff. This gives you the freedom to reach out to employees through their preferred channel, and you’ll engage deskless and frontline staff (who may not have simple access to email or the intranet) who prefer a mobile app for your organization.
- Measure the effectiveness of internal communications content. Start small if required. Consider what KPIs and measurements are crucial in order to grasp what success entails. Track this information over time and share it with your team and leaders.
#2: Provide more opportunities for managers to recognize and appreciate employees
Management frequently impacts employees’ experiences at a firm, and a lack of support from managers may make employees feel irrelevant to the organization. Furthermore, if employees are remote or spread, supervisors may find it difficult to reach them. Employees may seek businesses with more supportive work cultures if bosses do not support their employees.
Managers have enormous power to improve the employee experience. Employees who receive consistent acknowledgment for their exceptional work from their managers are five times more likely to stay, while those who receive continuous assistance in managing their workload from their superiors are eight times more likely to stay. However, only around half of the managers are effective at either.
Employees love hearing from their superiors as well. Employee turnover is 14.9% lower in companies that adopt regular employee feedback than in those that do not. It should come as no surprise that managers may influence how engaged their people are. Engagement is built on trust: Employees who have confidence in their team leader are 12 times more likely to be totally engaged in their task.
Is It Better To Have A High or Low Employee Turnover?
While a high employee turnover rate is often undesirable, an unusually low turnover rate is a solid indicator that your firm may have underlying issues that need to be addressed.
In Conclusion,
The employee turnover rate is a great indicator of what is wrong or well with your human resource practices and the organization as a whole. You must examine and find the hidden indicators hiding beneath those data in order to double down on what is working and improve on what is not.
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