Intro to employee turnover

Employees come and employees go: how to manage employee turnover successfully.

Employee turnover is a fact of life, or – to be specific – business. Every year, employees choose to leave their positions for opportunities elsewhere, and companies make positions redundant or fire employees who aren’t prospering in their roles.

 

Monthly turnover rates have steadily increased over the past ten years, and employee turnover calculation shows that this is mainly because of employees choosing to leave their jobs. According to one study, 51% of employees are looking for a new job at any given time.

Not all turnover is negative. Some is essential for healthy businesses. However, a consistently high employee turnover rate can be extremely damaging. It’s important to look at the employee turnover rate by industry when considering its impact on your business.

 

In this guide, read an employee turnover definition, and get employee turnover statistics that put the issue into perspective. Find out why high employee turnover can create operational costs for businesses, rather than just HR ones.

After using our employee turnover calculation to work out rates, learn about the main causes of employee turnover, and find out how a high rate can be reduced through carefully targeted policies.

Employee turnover definition

The term employee turnover refers to the number of employees who leave a company during a given period. It is often expressed as a percentage of the total workforce.It’s a broad term that encompasses many different situations – employees may retire, or leave for another role – so it’s helpful to break it down into different types:

1. Voluntary employee turnover

This describes all situations where a staff member chooses to leave a company. Whether they leave to take up a similar role elsewhere, focus on family life, or travel the world – this is voluntary turnover.

2. Involuntary employee turnover

This turnover is where the decision is made by the employer. For example, a company may decide to fire an employee for poor performance.

 

A tip: Employee attrition also falls under turnover. This is when an employee leaves the company and they are not replaced. This could occur for various reasons, such as the position becoming redundant.

Cost of employee turnover

The impact of employee turnover on finances shouldn’t be underestimated. Various costs arise from replacing employees, and high employee turnover creates larger problems.

Employee costs as a percentage of turnover are difficult to pin down, as few employers possess the data to calculate them. However, one estimate puts the cost of employee turnover at 20% of an employee’s salary. Consider these three main issues:

Recruitment costs

Recruitment costs

Creating job adverts, recruitment agency costs, time for interviews – all of this all adds up and can put pressure on company finances.

Staffing and training costs

Staffing and training costs

This is where turnover hits companies hardest, yet it’s often overlooked. New recruits will need induction training. It is likely to take several months until their productivity matches that of the former employee. In the meantime, current staff find their workloads impacted.

Cyclical impact on employee turnover

Cyclical impact on employee turnover

High employee turnover can make other employees unsatisfied and more likely to leave. Workload increases and training responsibilities can be a factor in this.

Employee turnover rate by industry

Employee turnover rates vary significantly by industry.

Areas where it is easy to recruit staff and training newcomers is quick, efficient and expected to have higher turnover rates, but these won’t necessarily pose a problem. For example, many businesses in the service industry do not expect employees to stay for long, but refined onboarding processes ensure they are still productive.

 

In more highly skilled positions or specialised industries, however, finding suitable employees can take time and turnover causes difficulties. For example, engineering, standards and compliance, and technology have low turnover rates and strive to keep them this way.Regardless of area, turnover can have knock-on effects. For example, even with full training, the relationships between staff and external clients cannot easily be replicated.

 

It’s crucial that employers measure their employee turnover rates in order to understand the progress of their business, and the extent to which employees are satisfied with their position within the company. Through examining turnover rates by industry, it’s possible to gain insight into issues that need addressed in order to achieve not only a loyal workforce, but future success.

Employee turnover calculation

Work out a business’s overall employee turnover rate using this formula.

Turnover rate =  Number of employees who left during specified period x 100

    Average total number of employees employed during specified period

This can be adapted to show a yearly or monthly rate. It’s also helpful to measure and track it per quarter, or per six months.

 

A tip: As well as looking at the employee turnover rate in the context of industry norms, break it down further for a fuller understanding.

 

Employee turnover can be desirable or undesirable:

  1. Desirable turnover benefits the company, as it involves employees whose performances do not meet the company’s needs leaving. They are likely to be replaced by more effective employees.
  2. Undesirable turnover means that the company is losing talented, valuable employees who may be hard to replace. A high rate of undesirable turnover is a warning sign. If top performers leave frequently, this should be addressed immediately.

There are additional points to consider. Is it mostly new employees who are leaving? If so, this points to issues with recruitment or onboarding.

Does one department have a high turnover rate compared to the rest? This is the area to target employee retention policies.

Causes of employee turnover – and how to manage them

There are multiple factors that impact employee turnover. Some are external, but there are also many that businesses can control and, through doing so, greatly improve their employee turnover rate. In this section, we’ll outline these issues that lead to high employee turnover, and suggest useful strategies.Businesses curious about staff retention more broadly should also read our Ultimate guide to employee retention.

Start at the beginning with recruitment

Recruiting the right candidate for a role is never a certainty. But refining hiring processes and tracking retention rates of new employees is crucial when it comes to tackling high employee turnover.  That’s because studies show that 80% of turnover can be traced back to hiring decisions.

Employees who don’t fit their roles will be unengaged, unproductive and on the lookout for other opportunities – so selecting people who fit their roles is essential. Let’s look at how to do that.

Some tips:

  • Define each job role clearly. Ensure that prospective employees are given a full, realistic overview of their tasks and daily routine, and that they have appropriate expectations.
  • If it suits the role, use practical tasks and competency-based questions as part of the assessment – don’t rely only on interviews.
  • Give interviewees an insight into company culture. This should help both you and them gauge whether the company, as well as the position, suits.

Onboarding that works

Once a great candidate has been chosen, it’s time to onboard them. This is also an area where insufficient processes can heavily impact turnover; early impressions influence later career decisions. According to one poll, only 12% of employees strongly agree that their company effectively onboards new employees. Here are some tips for onboarding employees who’ll want to stay.

 

Some tips:

  • Onboarding involves employees learning about the company – but it should also prioritise explaining how they relate to it. How do their roles and tasks contribute to larger aims?
  • The process should be a dialogue. Managers need to define the company’s mission to the new employees, but the new employees should also be given time to ask questions, explain their own backgrounds, and voice for themselves what they hope to bring.
  • If employees are capable, don’t delay giving them useful work. Showing trust in a new team member makes them feel part of a valued team, and they’ll be keen to shine.
  • A balance of face-to-face conversations and information to refer to is key. Consider also which information is best communicated in each way. Keep orientation meetings broad and engaging, and communicate details through materials that employees can read and process.
  • Assign new employees a coach to help guide them in their role. CoachHub’s online coaching is tailored to each individual’s needs and career path.

Managing workload and avoiding burnout

As an employee settles into their role, managing their workload may be one of the largest challenges they encounter. In a recent survey of full-time employees, over 40% of staff said they sometimes felt burned out at work.

This isn’t sustainable for businesses when you consider the employee turnover calculation: overworked staff are also 2.6 times more likely to look for another job. High-performing employees are likely to be impacted – and high employee turnover here is detrimental for any business.

Helping employees handle their workloads and avoid burnout is essential for managing employee turnover.

Some tips:

  • Organise regular check-ins with employees where concerns about workload can be discussed and addressed.
  • Clearly communicate priorities to employees. Not knowing which task to start with can make people feel overwhelmed and exacerbate workload issues.
  • Don’t let employee attrition eat away at teams. Failing to replace a valuable staff member may make you lose the next one.
  • Coaching can help your employees deal with stress and learn coping strategies. Digital coaching is a flexible solution that you can use to support employees.

Effective management involves recognition

Poor relationships between managers and employees are a central reason for employee turnover. 93% of employees report that they would be less likely to leave a company if their bosses were more empathetic. Lack of recognition from managers can also be one of the causes of employee turnover. 79% of employees who chose to leave their role say that this was a major reason for their decision. This may seem worrying, but the good news is it’s easy to combat.

Implement training for managers that specifically looks at the impact of management on turnover and retention rates. Helping staff understand the importance of positive management is essential for long-term results.

 

Some tips:

  • Leadership coaching can be a useful tool in this. New managers appreciate support, while people who’ve held their role for a while may be glad for fresh new strategies.
  • Emphasise the importance of recognition and praise in retaining employees, and schedule regular feedback sessions for all levels of the company.
  • As well as thanking employees for their contributions, encourage them to raise concerns or questions that they have. This will provide an opportunity to acknowledge achievements and identify problems before they grow too large to tackle.
  • Monthly updates outlining recent achievements are a cost-effective way to make employees feel appreciated. Highlighting the talents of everyone in a team creates a positive work environment that people want to stay in.

Training for the future

Examining employee turnover rate by industry enables us to see certain patterns. Jobs which have a high employee turnover often tend to be in areas where there is limited chance of progressing, or little choice of career paths. Areas which have a low employee turnover rate, like engineering, are often those which offer employees a clear path to advancement.

 

This illustrates one of the key causes of employee turnover: lack of career development. People want to work in companies they can imagine themselves growing with. Learning and development are essential for workplace happiness.

Engaged, ambitious employees won’t want to keep the same responsibilities their whole lives – and that’s especially true of millennials, who are a mobile workforce. One survey showed that 36% of employees, and 48% of millennials, named a lack of learning and development opportunities as a reason for quitting.  Luckily, assisting employees to develop their skills and explore career paths won’t just help reduce employee turnover. It will also increase employee engagement, create knowledgeable teams with diverse skills and expertise, and reduce future hiring costs. Here are some steps to take.

 

Some tips:

  • Assist employees in envisaging their potential career paths. Be transparent about the track into senior roles, and the skills and experience required to get there. Work consistently with staff to identify their strengths, as well as areas they would need to develop.
  • Setting up a mentorship scheme within the company can be a useful way to encourage ambition. If there are employees who are already great examples of in-house progression, make sure to reach out to them and ask if they’d be interested in participating, and highlight their career paths to new employees.
  • Provide concrete professional development opportunities. Where possible, encourage collaboration between different teams so that people can gain new skills. Talent management coaching is an excellent choice here – flexible, tailored and online, it makes it easy for employees to combine their personal advancement with their work duties. It’s also encouraging for staff to see that the business has chosen to invest in them.

Author:

Rosie Evans
Behavioural Scientist at CoachHub.io

Rosie is a behavioural scientist at CoachHub, where she applies insights from positive psychology, neuroscience and behavioural science directly into digital coaching programmes and an approach that drives individual and organisational transformation. She works as part of the in-house research and development team, the Coaching Lab, and contributes to the advancement of the science of coaching and behaviour change; in addition to working both internally with in-house researchers and with world-class external academic teams to design and execute groundbreaking studies.

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