What is employee turnover?

Employee turnover is an HR metric that measures the rate at which people leave their jobs, voluntarily or involuntarily, during a specific period of time. 

Turnover reflects the quality of the employee experience. Generally, a high turnover rate reveals undesirable work conditions, while a low turnover rate indicates a thriving organization and effective implementation of HR practices.

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How can we calculate the employee turnover rate?

Employee turnover is an easy HR metric to calculate. Simply divide the total number of employees by the number of departures at your organization during the period.

How to calculate employee turnover rate?

Voluntary vs. Involuntary turnover 

Turnover happens either because people leave voluntarily or because the employer dismisses them and they have to depart involuntarily.

What causes employee turnover?

Voluntary turnover occurs for various reasons, primarily because people may be seeking

  • Higher pay
  • More flexibility
  • More time off
  • Better benefits
  • Career growth
  • A positive work culture
  • A healthy relationship with bosses and managers

Involuntary turnover happens when a company terminates employment for reasons that include 

  • Failing to meet expectations
  • Poor work performance
  • Organization-wide layoffs
  • Business or behavioral misconduct

Why should HR leaders care about turnover?

An excessively high turnover rate means that people are leaving in droves. It’s usually a sign that people aren’t happy with something (or many things) at work. Moreover, the departure of so many skilled professionals can weaken morale and burden the company with significant recruitment and training costs. 

Alternatively, by keeping turnover at a reasonable rate, companies can spend less money on sourcing, hiring, and training people, and instead, focus their resources on investing in their current workforce, preserving productivity, and accomplishing business goals.

What is a healthy employee turnover rate?

An organization can’t—and shouldn’t— keep everyone. 

While an overly high turnover rate can reflect poorly on a company, some level of turnover is normal. Letting go of unsatisfactory team members enables the company to maintain equilibrium. Involuntary turnover of underperforming or problematic professionals makes room for new hires who better fit roles and can contribute more to the business. 

There isn’t a one-size-fits-all healthy turnover rate. It depends on the industry, the size of the company, and economic and social factors. Following COVID-19’s disruption of the economy, for example, the nursing-home worker turnover rate rose to a detrimental 94 percent while the tech industry benefited from a lower rate of 18.3 percent. By monitoring turnover data, however, you can track positions that have high turnover to determine a healthy rate for your company.

Improve tracking and employee turnover reduction with an HRIS

Using an HRIS, you can keep records of who’s leaving and analyze the data to determine why. An HRIS centralizes professionals’ relevant personal information, their length of employment, performance evaluations, and survey responses. With access to this data, you can evaluate whether the turnover is voluntary or involuntary and gain insights into how to reduce turnover within departments or specific positions.

What is the cost of turnover?

According to Gallup, turnover per employee can cost from one-half to twice a person’s annual salary. 

The cost of turnover involves the time, effort, and money a company invests in recruiting, onboarding, hiring, and training people. Not to mention, job vacancies also lead to lost productivity. 

There are also other costs of turnover, such as decreased morale, motivation, and engagement that can infect and weaken the company culture.

Who is responsible for employee turnover?

Building and fostering a healthy work environment is a team effort and requires everyone, from C-level decision-makers to managers and HR, to work together. Healthy cultures come from the top down, but it’s important to track turnover levels across teams. 

HR is responsible for helping the organization better understand what their people want and how to deliver it. It’s also important to provide managers with training so they can become more effective leaders who spark higher levels of engagement and foster enthusiasm among their teams about working for the company.

What can HR do to reduce turnover?

According to the Work Institute’s 2019 Retention Report, turnover in the US has increased by a troublesome 88 percent since 2010. While the increase is staggering, it is avoidable, and HR leaders can step up to reverse the course of this trend. Here are five practices to implement for lower turnover rates:

  • Gather feedback from people on their way out. Departing staff can offer a wellspring of valuable information. By conducting an exit interview, HR can learn what factors fueled the decision to leave. Was it a poor onboarding experience, a heavy workload, or a lack of opportunity for career development? Or, perhaps a toxic culture and lousy management? Discovering what factors catalyzed the departure can provide clues on how to improve the employee experience for the rest of the team members.
  • Educate managers to engage. Managers play a crucial role in turnover. According to the Gallup business journal, poor management can be the root cause of 75 percent of voluntary turnover. By equipping managers with the skills to build positive relationships, communicate expectations, and inspire motivation, you’ll be on your way to significantly reducing turnover.
  • Leverage turnover to elevate your workforce. Sometimes turnover can transform a company for the better. Weeding out unsuitable talent creates opportunities to hire high-performing, motivated people to fill open positions. 
  • Engage top talent. Sometimes the loss of skilled co-workers can negatively impact morale and replacing these professionals is costly. Offering career development options, competitive compensation plans, or better benefits can promote engagement and lower turnover among in-demand professionals.
  • Build a work community. Forging connections with co-workers, through virtual platforms or in-person team-building activities, strengthens the work community. Companies can further emphasize inclusivity by welcoming and celebrating peoples’ accomplishments. Creating a positive, vibrant culture nurtures camaraderie, fuels motivation, and wards off voluntary turnover.

Why should lowering turnover be part of the modern HR strategy? 

Turnover rates indicate a company’s internal state of health and its ability to retain talent. By approaching turnover with intentional, strategic planning, HR professionals can build an engaged workforce, improve the bottom line, and boost the company brand.