Employee Turnover: Everything You Need to Know
Employee turnover denotes the percentage or number of employees who leave an organization for any reason and are replaced by newer employees. 8 min read
3. Desirable and Undesirable Turnover
4. Turnover Calculations
5. Rethinking Turnover
What Is Employee Turnover?
Employee turnover denotes the percentage or number of employees who leave an organization for any reason and are replaced by newer employees. Their positions are filled, and the business takes on new staff. Measuring this turnover can be extremely helpful to employers who wish to examine the reasons for their turnover rates, or to better estimate the cost of hiring, for budgetary purposes. General references to employee turnover rates can be very confusing, especially initially, so there are specific definitions, processes, and calculations for employee turnover that may be valuable to HR practitioners.
There are various kinds of employee turnover. The basic definition states that turnover happens whenever an employment relationship ends. Turnover and attrition are not the same things, though the two terms are often conflated and used interchangeably. They both refer to the exit of employees in one way or another. Attrition more specifically denotes the end of an employment relationship that ended amicably, such as:
- Unemployment which comes seasonally
- Job elimination or layoffs
- Employee death
This is unique and different from turnover, because attrition, when it occurs, the position is not usually filled with a new employee. That’s something that an internal employee would likely take on.
Employee termination for reasons owing to:
- Violation of policies
- Poor work performance
is referred to as involuntary turnover. It’s also known as termination, discharge, or firing. This termination of employees is considered involuntary, even though some layoff procedures are handled very differently from terminations. Some layoffs and unemployment conditions have state and federal provisions that are not extended to employees who get fired due to policy violations or poor performance.
When an employee voluntarily leaves a business of their own accord, it’s qualified as a voluntary termination. Employees will give a variety of motives for vacating their positions with an organization, though this consideration is static. Employees leave and may be doing so to relocate to a new area, to accept employment with another company or perhaps are tending to personal matters that make it practically impossible to work properly. When these situations arise, and an employee voluntarily decides to terminate the employment relationship they have with their employer, the employee is generally required (though “encouraged” may be more appropriate, as many employees opt to leave employers “high and dry” when terminating the work relationship) to give some sort of written or verbal notice of their intent to resign from their positions. This is known as “two weeks’ notice” to many, and it’s designed to afford businesses the opportunity to fill positions without suffering a loss to productivity.
Desirable and Undesirable Turnover
Turnover comes with a taboo and a negative implication and is viewed negatively by many in the business world. However, turnover is not always a bad, or negative event. Desirable turnover refers to any employees whose performance fails to meet or is below the company’s expectation and terms as defined by the employment contract leaving their positions and being replaced by newer, more effective employees. In other words, a company may view this sort of turnover favorably because they’re “getting rid of dead wood.” Desirable turnover due to absenteeism, late shifts, poor performance, and other factors is costly. Replacing poor-performing employees with employees who are more effective at their positions can improve profitability, though there may be financial losses suffered during any transitions. Also, desirable turnover can occur when newer, replacement employees bring with them and infuse new skills, talents, information, methods of completing work and doing the job, etc. This gives a company “fresh blood,” and is thought of by many in the business community as a means of keeping a company’s platform of ideas current and generationally modern.
On the other hand, undesirable turnover refers to any period where a company is losing employees who are considered valuable resources by the company thanks to their skills, qualifications, work ethic, or any other number of factors. The No.1 influencer of employee satisfaction is, without a doubt, the relationship between employees and supervisors. It’s imperative that upper management are all well-trained and able to handle the job at hand.
Simple turnover calculations are very straightforward. If a company employs 100 employees, and 15 of those employees are fired or quit in a given period, the turnover rate for that company would be 15 percent. Many businesses, companies, and organizations use more comprehensive breakdowns and calculations to better determine what factors underlie and impact turnover with employees. For example, if five employees leave a company in the month of January, one in May, and four in November, there would be different turnover rates for the monthly and yearly calculations. In this instance, the yearly turnover rate would be about 10 percent, and the monthly turnover rate would be just north of 8.3 percent.
These calculations may also consider the different types of employee turnover, particularly voluntary and involuntary reasons why an employee might leave a company, or more granular factors like poor performance, tardiness, accepting a job elsewhere, etc. These calculations aid in determining training costs and requirements, hiring costs, and estimating the amount of time staff in a company many have to devote to recruitment and training efforts.
Experts estimate that the cost to find and train a replacement for an employee can cost anywhere as much as twice an employee’s salary. It’s extremely costly to do, from the perspective of employers. To lower turnover in a business establishment, business-minded experts recommend being proactive, and making the best possible hiring decisions from the start. Hiring people who are a good fit for the company is a surefire way to improve the odds of their sticking around longer, which would have a positive impact on turnover rates. Experts recommend companies vet, interview, and screen their candidates for employment very carefully, which not only ensures that they have the proper skillset and abilities to perform the job, but also to ensure that they tolerate, or fit in well with company standards and culture. These processes can be a good way of gauging whether or not managers and co-workers will interact positively with the applicant.
It’s also important for employers to set the proper expectations regarding benefits and compensation, so there is no confusion or room for disagreement with employees over cursory practices. Businesses are encouraged to thoroughly review and understand their compensation packages, along with their benefits offerings on an annual basis. They are also encouraged to pay attention to certain trends in the business marketplace and have human resources professionals within their organization stay on top of implementing best hiring practices and standards.
Employers are also encouraged to pay close attention to the personal needs of their employees, and to try to offer as much flexibility as they can in all manners concerning allowing their employees to handle any issues that may arise, within reason. Offering:
- Choose-your-own-hours schedules
- On-site day care
Anything may help employees feel more comfortable at work, and employers are encouraged to think outside the box in meeting the needs of their employees.
This sort of interaction bolsters employee engagement, as employees require social interaction and a rewarding work environment that doesn’t threaten them in any way. Some of the best ways to foster an employee/workplace relationship that is positive is to dole out respect and recognition from upper management where possible, along with providing a challenging, yet rewarding environment with room for employees to learn, get better, and matriculate into other positions.
Managers are often guilty of overlooking just how important it is to foster a positive work environment for their staff, and they often underestimate just how far meaningful recognition and/or praise from upper management can go in providing that environment, as well as how impactful the praise may be in bolstering synergy. This means of maintaining a happy, productive workforce is thought of by many experts as being one of the most cost-effective means of maintaining favorable employee turnover and satisfaction ratings.
This doesn’t have to be over-the-top behavior, either. Simply sending employees emails, praising their part in completing projects, or highlighting their achievements over a given work period, particularly in view of the team or division in which they work, which is often referred to as peer recognition (some companies also allow their employees to officially recognize each other), are all very effective means of injecting synergy, positivity, and effectiveness into a workplace.
In order to make it easier for companies to identify the important accomplishments of their employees, employers are encouraged to ask their teams for weekly or monthly updates as to the achievements of employees. Specific numbers and figures, references, examples of emails, or official praise from co-workers or customers are all good units of measure of an employee’s performance.
Challenging, yet clear career paths are preferred by most. Employees typically want to know where they may be headed, and how they’re going to get there. Employees usually want to improve, matriculate into better positions as time progresses, be rewarded commensurately, and be challenged during their tenure in a given position. To foster this feeling, employers consider yearly reviews and midyear bonus checks to be excellent means of incentivizing employees to remain within the company.
Relationships between employees and management are critical. Employees often cite the relationship they have with their boss as a huge deciding factor in how comfortable they feel on the job and in the workplace, and will not hesitate, as experience has shown, to leave a job if they feel they are not on good terms with their bosses.
Although change is inevitable, and every business should expect turnover, it’s usually costly, and can eat up a lot of budget if not kept under control. Studies show that no matter how much an employee likes their job and all the perks that come with it, they are likely to leave that job for a better opportunity should it present itself. This is normal, but it means businesses should expect, among many other reasons, ranging from simple termination to employee death, to deal with a lot of turnover, attrition, and recidivism.
There are innumerous ways to boost synergy and engagement among employees. The approach should be based on the company, and what upper management and company culture dictate. Businesses would do well to keep employees informed, engaged, and if possible, excited about the company culture. Team-building activities are thought of as effective by many, although some professions and employees benefit greatly from working in isolation. It depends on the business and culture. Employers would be doing themselves a favor to let employees contribute to the operation of the business. This helps them feel valuable and integral, which makes them much less likely to leave.
Companies that accept turnover and realize that it can actually be a good thing, are positioning themselves to succeed -- more so than companies that deal with turnover poorly. Turnover can refresh the skillset of the workforce, bring in new talent and new ideas, and can actually increase efficiency and operating costs, if leveraged with extreme care.
If it leads to the right individuals leaving and staying within the company, turnover and attrition can be very good things. Without it, companies would remain with the same employees over extended periods of time, potentially leaving them without a modern feel, or with employees who were unfit to perform the duties of the job. In an example, consider a business that deals in mobile cellphone technology. It may be beneficial for a company to have X amount of turnover, because it ensures younger, tech-savvy individuals are always in the hiring pool.
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