When employees leave a company and have to be replaced, that's called turnover. A certain amount of turnover is unavoidable, but too many employees leaving in any given period of time can ruin a company. Turnover is expensive too, with some sources saying it costs about twice an employee's salary to locate and hire a replacement.
Some employees will always retire, move away, go back to school, or leave the workforce. This level of turnover is not only unavoidable; it can be beneficial because It brings new people into the organization with new ideas and a fresh perspective.
Types of Turnover
The two general types of turnover are voluntary and involuntary. Voluntary turnover happens when the employee chooses to leave on his own for any reason. Involuntary turnover takes place when a company implements layoffs or other, similar actions where the decision for an employee to leave is made by the company and not the employee.
As a general rule, voluntary turnover is the measure used to discuss and compare employers. Front-line supervisors have the most direct effect on voluntary turnover. Involuntary turnover, caused by layoffs, can be a long-term result of a struggling business due to high levels of voluntary turnover.
Measuring Employee Loss
Turnover rate is a calculation of the number of employees who have left the company in a given time period, and it is expressed as a percentage of the total number of employees. Although the turnover rate is usually calculated and reported as a percentage per year, it can be for different periods.
How to Calculate Turnover Rate
You calculate the turnover rate by dividing the number of employees who left by the total number of employees at the beginning of the period. This number is expressed as a percentage. You can calculate voluntary turnover, involuntary turnover, and total turnover.
For example, a company has 100 employees at the start of the year. During the year six employees quit, and nine get let go in a layoff late in the year. The voluntary turnover rate for the year would be 6/100 or 6 percent. The involuntary turnover rate was 9/100 or 9 percent. The total turnover rate would be calculated as 15/100 or 15 percent because the six employees who left voluntarily and the nine who were laid off are added together.
What Employers Can Do
For involuntary turnover, the best thing you can do is manage the company well so that you can keep employees happy and create a workplace in which they want to stay.
- Identify and train hiring staff on what a great candidate looks like so that the company vets interviewees properly and hires the right people in the first place. It includes making sure that candidates fit not just the job requirements, but also mesh with the company culture, working team, and management.
- Put together competitive compensation packages, and review them annually. Have HR provide you with current pay package trends for your industry. Offer employees flexibility when possible, such as telecommuting part-time, on-site daycare or compressed work weeks. Get creative if necessary to provide bonuses and other benefits.
- Ask teams for weekly or monthly updates on their achievements, use these to create programs to offer recognition and praise for a job well done, and encourage a positive, supportive work environment. It is one of the most cost-effective ways to increase employee satisfaction.
- Outline clear career paths that offer challenges to employees discuss them at annual and mid-year reviews and encourage workers to bring questions and requests to their managers throughout the year.
- The greatest single influence on employee satisfaction is their direct supervisor. If you are in upper management, make sure your supervisors are well-trained not just in job skills, but in interpersonal skills as well.
If you are a supervisor, whether you supervise front-line employees or managers, it is in your best interest to keep turnover low. It makes your job easier because you don't have the time and training costs of new hires to replace the employees who quit.
It saves the company money because there are direct costs to having to find and hire new employees. Your supervisor will also likely evaluate you as a better manager if your voluntary turnover is low.