If experienced employees leave the company to pursue a better opportunity, the company considers this a loss. Instead of working with the old employees, recruiting new employees, giving them proper training, and judging their performance is sometimes quite challenging for the company. Hence, human resources management must implement effective retention strategies to keep the employees long. In today’s tech practices, HR management implements different employee management system, assisted by valuables tools, to eliminate the high turnover over fiscals.
In this blog, we will highlight what employee turnover is precisely, how to calculate the employee turnover rate, and, most importantly, how to minimise it within the workplace.
What is Employee Turnover?
Employee turnover is a count of workers who leave an organization during a fiscal or calendar year. It includes voluntarily departed employees and those fired, suspended, or laid off by the company.
If a company experiences high turnover over the year, it must immediately change its environment or work culture. Conversely, a company with a low employee turnover rate is its ultimate goal.
Top 5 Types of Employee Turnover in the Workplace
This section provides a detailed overview of employee turnover employees experience during their working tenure.
- Voluntary Turnover
- Involuntary Turnover
- Attrition
- Regrettable Turnover
- Internal Transfer
1. Voluntary Turnover
Voluntary turnover is considered the first type of turnover, where employees choose to permanently leave a company and take a new role somewhere else. Voluntary turnover can become more threatening for employers because it tends to be more expensive to repeat the hiring process and get a genuine candidate for the vacant position occupied by an experienced talent who just moved out.
One of the main purposes of HR leaders is to reduce voluntary turnover, but it has become inevitable. Most employees leave the company either voluntarily or non-voluntary.
2. Involuntary Turnover
Involuntary turnover is the second type, where the organization ends employment with the employees against their will, typically due to factors like layoffs, dismissals, or other organizational changes. This type of turnover happens due to circumstances, hazards, employee misbehaviour, fraudulent activities, etc.
The involuntary circumstances may impact workplace morale, enhance workload for remaining employees, and be active employers for new hiring.
3. Attrition
Many organizations use the word ‘attrition’ instead of ‘turnover’; however, there is a difference between the two. Turnover refers to the ratio of employees leaving an organization to employees joining as replacements. On the other hand, Attrition refers to the number of employees leaving the company voluntarily or involuntarily. Here, the company decides not to fill the position again.
Employee mass layoffs can be considered a type of attrition. A high attrition rate may be considered a red flag in some scenarios. But in general, a balanced attrition rate is nothing to worry about; it is a natural part of the employee life cycle.
4. Regrettable Turnover
One of the most problematic employee turnover issues employers face during their work tenure is this type of turnover. In this type of turnover, the company loses valuable and high-performing employees. Bad management, monotonous work culture, micromanagement, or dry promotion can be top reasons for regrettable turnover. To eliminate regrettable turnover rates, employers should update different employee engagement practices and invest in maintaining excellent management.
5. Internal Transfer
Internal turnover is less terrifying. Employers can initiate the practices as a reward to employees or as retribution against them. Now, what is it? Internal turnover is an in-office employee transfer from one domain to another or from one department to other departments. With the internal transfer option, the company offers a better path for employees to pursue their professional goals. It improves business outcomes, profitability, innovation, and employee satisfaction.
How to Calculate Employee Turnover Rate in Percentage?
The employee turnover rate calculates the number of employees who leave the company after working for a specific period. It is calculated as a percentage every fiscal year or twice yearly. The rate helps assess the company’s retention and overall management effectiveness. But before planning for the employee turnover rate calculation, you must select the best time.
Here’s how to calculate the employee turnover rate in three simple steps:
Step 1: Grab Essential Information
To calculate the employee turnover precisely, you need to select a date from where you start your count and an end date to calculate the turnover rate, such as calendar year or financial year. What you should grab is,
- Count of employees at the beginning of the period
- Count of employees at the end of the period
- Count of employees left at the end of the period.
After that, you can move on to the second step.
Step 2: Calculation of Average Number of Employees
To calculate the average turnover rate, you must calculate the average number of employees throughout the specific duration. Here is the formula for calculating the average rate.
Average number of employees = [(begining employee count + end employee count)/2]
Explanation: if you have 1000 employees at the beginning and 780 at the end of the calculation, the average should be (1000+780)/ 2 = 895.
Step 3: Calculation of Turnover Rate Percentage
You can easily calculate the turnover percentage for that year by subtracting the average number from the primary employee count, then dividing the subtracted number by the primary count and multiplying that answer by 100 for the turnover rate percentage.
Explanation: Employee Turnover Formula
- Subtraction between the primary and average counts (1000-895) = 105.
- To make it in percentage form (105*100) /1000 = 10.5 %
- So, the turnover percentage is 10.5 %.
The employee turnover ratio can easily be measured with a performance management system and added tools.
What is a Healthy Turnover Rate?
Healthy turnover rates may vary industry-wise. Generally, a healthy turnover rate is around 10 to 15 % annually, depending on the sector. In the retail or hospitality sectors, based on the trade market, turnover rates may hike to 30% or more without prior notification. However, they stay balanced in the IT and other industries.
A healthy turnover count may increase the tendency for more recruitment practices and enhanced training costs, and employers may face different fraudulent activities performed by people, like job ghosting, followed by team cohesion, etc. Organizations should understand employee issues regarding career development opportunities and workplace culture to understand turnover better. Analyzing and strategising the problems may improve retention rates and promote a positive work environment.
The Reason Behind Employee Turnover
Why do companies face mass employee turnover? There may be many reasons behind the considerable turnover. From the employers’ side, it may be very tragic if they face more than a 50 % turnover ratio over a fiscal. Analyzing the reasons and delivering effectual output may stop the high turnover rates and maintain retention for extended periods. Here are some common causes of high turnover:
➔ Limited Career Development Opportunities
One key reason for huge employee turnover is the perception of limited career advancement. When organizations do not provide training programs, mentorship, or clear pathways for advancement, employees feel monotonous or bored doing the same tasks for a long time and may seek opportunities elsewhere. Proper domain-wide training and mentorship programs about ever-evolving technology, regular feedback, opportunities for skill development, and a clear career trajectory can enhance retention.
➔ Poor Management Practices
Quality management enhances employee satisfaction and shields against poor leadership, which can otherwise create a toxic work environment and lead to high turnover. By investing in management training and promoting a culture of open communication, organizations can harness the full potential of quality management, creating a more positive and productive work environment.
➔ Inadequate Compensation and Benefits
Competitive pay for every employee is essential to retaining talent in a workplace. Inadequate compensation and limited benefits make employees feel dissatisfied, so they focus on better-paying opportunities. Understanding and recognising the employees’ hard work, initiating rewarding and delivering benefits, conducting regular salary reviews, offering feedback, and ensuring successful compensation packages can help employers maintain a healthy employee turnover every fiscal year. Besides, conducting regular salary reviews, delivering feedback, and ensuring successful compensation packages also help retain talent.
➔ Poor Work-Life Balance
In today’s speedy work environment, employees are often compelled to provide 24*7 work super hectic work assistance that may be stressful from the employee’s side; employees get burnout while maintaining a smooth work-life balance. To balance the employee turnover ratio in every fiscal year, organizations can commence flexible work arrangements, like remote opportunities with flexible hour assistance, which are often more successful in retaining employees.
Understanding employees’ requirements, studying them, delivering proper feedback, and following the correct output enhances talent’s commitment to the organization.
➔ Unclear Job Expectations
Amidst the pressure of bulk hiring, recruiters prioritize quality over quantity without conducting background checks and verifying expertise, as it takes more time. During onboarding, employers should be responsible for delivering proper knowledge transfer on roles and responsibilities and setting specific performance goals to ensure employees know what is expected. This directly impacts employees’ performance, as they become confused and feel valueless, leading to massive turnover.
➔ Job Insecurity
The job market today is pretty unstable. Proper job security significantly impacts employee morale and loyalty. In some scenarios, employers often fail to secure employees for their positions. Micromanagement, a toxic work culture, or a lack of transparency regarding employees’ plans results in consistent layoffs and anxiety, prompting employees to seek more stable opportunities. Providing clear communication about company goals and changes can help alleviate these concerns.
Tips to Minimise Employee Turnover Rate in the Workplace
Huge employee turnover can be stressful, costly, and disruptive for employers. To create a more stable workforce, consider implementing the following strategies:
1. Enhance Onboarding Processes
A comprehensive onboarding program helps new employees feel welcomed and integrated into the company culture. Provide clear expectations and essential training, and assign mentors to guide newcomers. A positive onboarding experience can significantly reduce early turnover.
2. Foster a Positive Work Environment
A positive workplace culture emphasising respect, inclusivity, and teamwork can significantly impact employee retention. Employees feel valued and satisfied throughout their tenure when management encourages open communication, celebrates and rewards achievements, and promotes a healthy work-life balance. This leads to a stable and productive workforce, making it a key strategy to focus on.
3. Offer Competitive Compensation and Benefits
Employees stay in a company for a long time when they receive the proper compensation and benefits as expected. So, the high employee turnover rate can easily be minimized by regularly assessing and adjusting employee salary structures to remain competitive within your industry. Add-on comprehensive benefits, like health insurance, retirement plans, and paid time off, can enhance employee job satisfaction and loyalty. Hence, it reflects on massive employee retention and company productivity.
4. Promote Work-Life Balance
You can significantly reduce employee turnover by promoting remote or hybrid work options, flexible hours, and support for balancing personal and professional responsibilities. Balanced work-life practices ensure better effort during employees’ work tenure. Also, Employees become satisfied, which leads to retention and ultimate productivity.
5. Employee Growth Development
A company can create a work culture where employees have ample opportunities for professional growth through training programs, workshops, and continuing education. Encourage employees to pursue certifications or higher education and offer financial support when possible. Investing in their development shows you care about their future, making them more likely to stay.
6. Conduct Regular Performance Reviews
Implement a structured performance review process that includes regular feedback and goal-setting discussions. This ensures employees understand their progress and areas for improvement, helping them feel valued and motivated.
7. Encourage Employee Feedback
What does an employee experience throughout their tenure within the organization? And the reason behind their resignation is essential to address the problems and build a positive work culture. Employers can create channels for employees to share their thoughts and suggestions anonymously. Regularly conducting surveys and listening to employee concerns can help you identify areas for improvement and demonstrate that you value their input.
8. Recognize and Reward Contributions
Acknowledge employee achievements through recognition programs, bonuses, or awards. Celebrating milestones and individual contributions boosts morale and reinforces a sense of belonging and appreciation.
9. Build Strong Relationships
Encourage managers to develop strong relationships with their team members. Regular one-on-one meetings can help managers understand employee needs, aspirations, and challenges, fostering a sense of connection and support.
10. Promote from Within
When possible, prioritize internal promotions over external hiring. This boosts employee morale and demonstrates that the organization values its workforce and is committed to its career growth.
11. Address Issues Promptly
Create a system for addressing workplace issues involving conflicts, workload concerns, or personal challenges. Promptly resolving issues shows employees that their well-being is a priority, reducing the likelihood of turnover.
12. Create a Clear Career Path
Provide employees with clear career development paths, outlining potential advancement opportunities. Transparency regarding promotions and career progression can motivate employees to stay and work towards their goals.
13. Implement Team-Building Activities
Regular team-building events and activities can strengthen colleague relationships, foster collaboration, and enhance the workplace atmosphere. A strong team dynamic can lead to higher retention rates.
14. Evaluate Workloads
Ensure that employees have manageable workloads to prevent burnout. Regularly assess team capacities and redistribute tasks when necessary. Maintaining a healthy work pace is crucial for long-term job satisfaction.
15. Exit Interviews
Organizations should conduct proper exit interviews to gain insights into why employees leave. HRs can use the feedback mechanism techniques to identify the reason behind employee turnover and address underlying issues within the organization. Continuous improvement based on exit data can help retain current employees.
Bottom Line
The turnover ratio is an excellent indicator of analysing employee turnover according to human resource policies. Before researching the turnover ratio, it is essential to understand how and to what extent high employee turnover affects company productivity and how much rate suits the company’s health so that the company can double down on what’s working for the organization and what’s not.
