Perhaps you’ve heard of job hopping, a growing phenomenon in the modern workforce, which challenges employers of all industries to rethink their employee retention strategies. It’s more and more common for the younger generation of workers to change their jobs after one or two years in a company, and there can be many reasons for that. Today’s workers are prone to experiment with diverse roles in a short amount of time as a way to accelerate their professional growth, expand their skill set, and ultimately find a job that’s truly fulfilling.
Of course, there could be plenty of other causes for employee turnover. With this in mind, companies may find it worthwhile to investigate them so they can retain talent and maintain a stable workforce.
What is employee turnover?
Employee turnover, also known as workforce attrition, refers to the number of people who leave an organization during a specific period. We differentiate between voluntary and involuntary turnover: the former refers to employees resigning of their own will, while the latter involves firing, retirement, or other situations in which employees leave their jobs because they were asked to do so.
Typically, it’s recommended to treat these two separately to get a clearer idea about how effective an organization’s retention strategies are. For instance, an unusually large number of resignations may be a cause for concern and would prompt companies to revisit their hiring and overall management policies, since people may be leaving due to low job satisfaction, lack of recognition, or poor leadership. However, none of these would directly affect layoffs or people simply reaching retirement age, which shows why it’s best to analyze voluntary and involuntary turnover separately.
It’s important to note that some level of staff turnover is natural and expected, and determining whether your company experiences low or high turnover will depend on a lot of variables. For starters, economic recessions or global epidemics will undoubtedly influence the number of layoffs. Benchmarks for the ideal turnover will also vary from industry to industry, but according to LinkedIn, the average attrition rate across all sectors is 10.6%, so anything above this likely signals a high turnover.
Calculating employee turnover rate
Measuring the rate at which people resign from their jobs offers valuable insight into the success of an organization’s onboarding processes, management practices, and worker morale. The attrition rate is usually expressed as a percentage and is calculated monthly, quarterly, or yearly. As a rule of thumb, quarterly or annual calculations are more reliable, as it may take a while for the data to be large enough to reveal meaningful patterns.
There is no one way to calculate it, but the most common employee turnover rate formula is the following:
employee turnover rate = (number of employees who left / average number of employees) x 100.
For this formula, you’ll need:
- The time frame for which you’ll want to calculate the turnover rate;
- The number of people who left during this period;
- The number of employees at the start of this period;
- The number of employees at the end of this period.
The last two pieces of data are necessary to calculate the average number of employees:
average nr. of employees = (nr. of employees at the beginning + nr. of employees at the end)/2.
To illustrate this in practice, imagine that your organization had 112 employees at the beginning of the year and 146 at the end of it. The number of employees who left during this period is 21. In this scenario:
The average nr. of employees = (112+146)/2 = 129.
The annual turnover rate = (21/129) x 100 = 16%.
Interpret your findings
The above results may point to a high turnover – provided that the data is not from retail, hospitality, entertainment, or other industries with generally higher percentages. Once you notice that a significant portion of your workers are leaving, you’ll want to dig deeper and find out what causes their departure. This way, not only will you increase employee engagement and retention, but you will also reduce the cost of turnover. This will be especially helpful, given that recruiting a replacement and training them requires a bigger investment than addressing the needs of your current workforce.
Truly understanding your turnover rate meaning implies answering the following:
- Who are the people that leave?
Taking a closer look at the individuals who resign could already prove insightful. For example, if most of them are new hires, then you might ask yourself whether they really got what they were promised in the hiring phase or if the training programs need improvement. Perhaps there are elements in the job description that were misleading.
If your senior employees or top performers choose to resign, this could point to some shortcomings in the opportunities they have for growth or even a lack of adequate compensation or recognition. This also takes us back to job hoppers, who will need even more conditions met in order to stay in your company.
- When do they tend to resign?
Another thing to keep an eye out for is timing. You may find that workers are unhappy with their compensation if they resign after the annual raises. Or, you may see them intending to leave the organization when you introduce new policies, bring in a different management team, or make other similar changes.
- What is the reason for their departure?
One of the best ways to find out why your employees resign is to conduct exit interviews with them. Here, you should aim to create a positive atmosphere where individuals feel comfortable responding to your questions as honestly as possible. You also need to make sure that you ask the right questions to gain more insights into your employee’s experience and help identify areas for improvement. If they repeatedly express that their efforts were not appreciated or that they found it difficult to collaborate with a certain team member or manager, then these will surely be worth looking into.
Final thoughts
Calculating employee turnover is only the first step in learning about the complex reasons driving staff attrition. You’ll need to do some extra digging to get to the bottom of why people choose to leave their jobs, but if the end goal is to retain talent, then it’s an effort that will be worth your while. In the process, you may discover underlying issues within your organization that will help you review your hiring agenda and improve the compensation and benefits plan so your workforce will feel more engaged and valued.
