Employee turnover is the rate at which employees leave an organization during a specific period of time. This is typically measured throughout a period of a year. EM However, some organizations also apply turnover to subcategories such as departments and teams. This acknowledging internal mobility as well as quantifying the number of employees leaving an organization altogether.
However, it must be noted that it can be separated into two types of turnover;
• Voluntary turnover • Involuntary turnover
Voluntary resignation is any situation in which an employee actively chooses to leave an organization due to reasons such as a superior job offer, or a conflict in the workplace. On the other hand, involuntary turnover occurs when the employment is terminated by the emloyer. The reasons behind this can vary, from poor performance, to an acquisition.
Calculating turnover is a great way to keep track of your turnover rate, and to analyze it in relation to any retention/employee engagement initiatives you have put in place. It is calculated by dividing the number of employees that have left the organization by the total number of staff:
Employee Turnover = Number of terminated employees / Average number of employees
This is generically expressed as a percentage on an annual basis.
For example, if you lost 5 employees in the past year, out of a company of 68, your annual turnover rate would be: 5 separations 68 employees = 0.0735 = 7.35% annual turnover.
It is hard to distinguish a reasonable level of the turnover due to its situational nature. In other words, your ideal turnover will be dependent on the industry you work in and the type of business your organization undertakes. For instance, hospitality companies usually have a high rate of staff turnover. This is not necessarily reflective of poor company policies, but rather the general societal norm of using hospitality jobs such as waitering as a means of staying afloat in between education and jobs. Therefore, the first place you should look at when attempting to distinguish if you should be worried or proud about your employee turnover rate, is your industry average rate.
A low employee turnover rate is when the number of employees that have left your organization over a determined length of time is low. Again, compare your figures to the industry average and go from there. Usually a low rate is a sign that you are doing something right as it shows your employees value their work and the cpmpany they work for enough to stay. However, at the same time it is important to assess who is leaving the company. A more valuable employee leaving, will have a greater impact than an unproductive employee. Nonetheless, employee turnover, whatever the rate, allows for new hires, which means new ideas.
A high rate is a situation in which a vast number of employees are exiting your business. Again, you should balance your figures against the industry average to distinguish this. If you find that your employee turnover rate is higher than the average, you may well have a problem. You should be conducting employee exit interviews to monitor the reasoning behind your workforce leaving and develop a process to minimize those issues.
Although employees will inevitably leave an organization. Whether it will. be to retire or to change their career path, you must pay attention to those who are leaving for reasons manageable by your business. These include employee engagement, and or getting offers from competitors and assess how you can retain such staff/take into consideration the costs of hiring and training someone to replace them.