Have you ever been new at a job and realized that everyone who is working there has been there with the company for years? Or, alternatively, you may be with a company where all of the employees are relatively new and resignation is common? The latter is an example of what staff turnover is.
When employees stay with a company for a long amount of time, and it's rare for workers to quit their job, is an example of a low turnover rate and high retention. Having a low employee turnover rate is an essential key to helping a business thrive in today's economy.
Throughout this article, we will take a deeper dive into what exactly staff turnover is and how it can positively impact your business.
Firstly, what is staff turnover?
Staff turnover is the measurement of how many staff join or leave a company, it also can be called a turnover rate. This initiative can be measured in a variety of different ways, and below are some examples of employee turnover that can occur.
Voluntary turnover is when an employee decides that they want to leave the company without being forced to do so. There can be many reasons why this may occur and can be linked to low levels of job satisfaction or having a bad work-life balance.
Involuntary turnover can best be described as when the employer decides to let an employee go, and is commonly known as when a staff member is "fired". This is often caused by poor efforts around the place of work but there are strict measures in which this can be implemented. If an employee is relieved from their job and the correct procedures aren't followed, the company can find itself in legal trouble.
Lastly, is a less common type of employee turnover and it is called internal turnover. This is when an employee transfers to a new location or different position within the same company. There are a variety of reasons for why this may happen, it could be a promotion or demotion. Internal turnover is normally associated with an employee's career development.
How to calculate employee turnover rate
Calculating your employee turnover rate is critical information for any business and can help to optimize their company and increase their revenue.
The employee turnover rate can be calculated by using a simple math equation. To do so, you'll need to consider the below variables to determine the figure.
Over the course of the year find out how many employees left.
Find out how many employees were working at the beginning of the year.
Determine the number of employees at the end of the year.
Employee turnover equation
Step 1. To calculate the level of employee turnover, add the number of employees that are with the company at the end of the year to the number of employees who were with the company at the beginning of the year.
Step 2. Take this number and divide it by 2. Once you've
With this figure, you then must divide this number by the number of employees who have left over the course of the year. Lastly, multiple this number by 100 and the number will be your annual turnover rate.
Example: Over the course of 2022 80 employees leave. They started the year with 1000 employees and ended the year with 995.
1000+995 = 1995
This is the number of employees at the beginning of the year and the end added together.
1995/2 = 997.5
The combined employee number is divided by 2.
80/997.5 = .08
The number of employees that are left over in the year is divided by the number from the previous step.
100 x .08 = 8
Times the final number by 100 to give us our turnover rate percentage
What causes a high employee turnover rate?
There is numerous reasons why a business could have a high employee turnover. These would be some of the more common ones seen in a business that are both causes of involuntary turnover and voluntary turnover.
Overworked employees tend to leave the company in a shorter amount of time.
Poor working conditions. This will make an employee start to look for an easier option to find their financial means elsewhere.
Low pay and lack of advancement opportunities. When not getting paid enough for the work an employee is doing with no hope of moving into a high paying role at the company the employee will have a hard time seeing a long term future with this team.
Personal reasons, whether it is family or just not the right career path for an individual. This is perfectly normal because not every job is for everyone long term.
Lack of recognition, This is normally caused by management not giving enough positive feedback and the employee will, in turn, look for different goodwill they will feel more respected.
Why does employee turnover matter?
Having a low employee turnover rate is imperative in order for your business to be a success. Every time your business adds new employees it adds stress to the staff by adding an inexperienced teammate in the group which can slow down the synergy of the team. It will also be added stress to the managers because they will have to worry about training on top of their most likely heavy workload. This will also cost the business money to teach a new employee the skills needed to work within the company and the productivity of the unit as a whole will be less during this time causing less output with more time needed.
Having a high turnover rate doesn't just affect the internal part of your business but it can also directly affects your competition. This doesn't happen in all cases of an employee leaving but this employee that your company has spent time and money to train to be a success at your establishment could leave your team and stay in the same field of work and take all of the valuable skills to the competition. This will then make your business have to rehire a new employee and spend money on training again while your competition gets a newly trained employee.
Combating high employee turnover
Now that the reasons have been addressed as to why your business could have high employee turnover rates. You now understand why this could happen and here are a few simple solutions on how to combat these turnovers to improve the future of your business. A good place to start would be upper management and work your way down. This is effective because good habits will be formed and passed down the chain of command which in turn will make the company as a whole run smoother and employees will want to be there.
Another approach to combating your turnover rate is to work on the company culture. This is a set of standards that will be a positive impact on the working environment making employees happier and keeping them around for a longer amount of time.
Giving feedback properly and encouragement can also give your employees the needed boost that is needed to feel heard and appreciated which will create better morale which is a direct correlation of a good employee turnover rate.
Conduct an analysis
Its imperative for any successful business to find out the reasons why their turnover rates are higher than desired. Performance reviews and exit interviews are a great way for a company to identify what issues are causing a low retention rate and can be a direct answer on how to rectify the situation. Exit interviews are a meeting or questionnaire that an employee can list what they did or didn't like about their role or job when leaving a business. Performance reviews are conducted monthly quarterly or annually and are similar to exit interviews in the sense that the employee will discuss their grievances about the role.
Investigate staff retention issues
Investigating your staff retention issues is the most direct way to reduce employee turnover. staff retention doing specific actions that will help your employees have a higher level of satisfaction in their work environment which in turn will directly affect their happiness, productivity and longevity while working. If you would like to go more in debt about staff retention please click here
The first step is to find out if you do have high turnover rates then from there try to start executing a plan to change this. If you are seeing high turnover rates please talk to your management and make a game plan off of the information given above.
Test and measure
In order to find your staff turnover rate please refer to How to calculate employee turnover rate above.
What is a healthy employee turnover rate in Australia?
Now that you know how to calculate your employee turnover rate and solutions as to make your turnover rate better you might be asking yourself what is a good percentage of turnover for my business in Australia. Studies have shown that a healthy turnover rate is anywhere between 1-10% per year. Please note that this number changes from industry to industry.
Hopefully, now that you are aware of staff turnovers and the benefits of having a good rate are you can use these tools to make your business take the extra step that might be needed to compete in today's marketplace.
Identifying and implementing a strategy to effectively reduce staff turnover is possible, but can be complex. If you aren't sure where to start, we have a team of skilled HR professionals who specialise in improving staff retention in all different fields of work.
Our team can help you devise a plan to lower your staff turnover, give specific tips to improve your employee’s satisfaction, and/or make suggestions for software programs that can help. If you're interested in finding out more, you can contact us here.