Need help with how to measure employee turnover rate? Worry no more; in today’s blog post, here at Kind Mind, we will be taking you through everything you need to know, from how to calculate turnover to what a good benchmark should be.
What is employee turnover?
Employee turnover refers to the number or percentage of employees who leave a company or organisation and are replaced by new employees over a certain period.
Turnover can be voluntary, where employees leave independently, or involuntary, where the company terminates employees.
High levels of employee turnover can be costly for your company. Therefore understanding the reasons for employee turnover and taking steps to reduce it can help businesses reduce costs, whilst improving retention and overall performance.
Why measure employee turnover?
Measuring your employee turnover is essential for several reasons:
- Managing talent acquisition costs – Hiring and training new employees can be costly and lead to a loss of productivity while new employees get up to speed.
- Recruitment efforts – Measuring employee turnover can also help you assess your recruitment efforts. If turnover is high, it may indicate that you need to attract suitable candidates or that there are problems with the recruitment process.
- Employee satisfaction – Turnover rates can also provide insights into employee satisfaction levels. If employees leave your organisation in large numbers, it may indicate that they are unsatisfied with their jobs, the company culture, or other aspects of the organisation.
- Organisational health – High employee turnover can point to broader problems, such as poor management practices or negative company culture. Measuring turnover can help you identify areas to improve to retain employees.
Overall, measuring employee turnover can help you identify areas for improvement and take steps to retain your employees, leading to better organisational performance and a more positive work environment.
How to measure employee turnover rate
There are several ways to measure employee turnover.
Calculate the overall turnover rate
The formula for calculating employee turnover is as follows:
Employee turnover rate = (Number of employees who left during the period / Total number of employees during the period) x 100
To calculate the average number of employees during a period, add the employee count at the beginning to the number of employees at the end, and divide by 2.
For example, if a company had 100 employees at the beginning of the year, 120 employees at the end of the year, and 15 employees left during the year, the calculation would be as follows:
Employee turnover rate = (15 / ((100 + 120) / 2)) x 100
Employee turnover rate = (15 / 110) x 100
Employee turnover rate = 13.64%
This indicates that the company had a turnover rate of 13.64% for the year.
Calculate the voluntary turnover rate
This is the percentage of employees who leave the organisation voluntarily (i.e. not due to termination) over a given period. To calculate the voluntary turnover rate, divide the number of employees who left voluntarily during the period by the total number of employees at the beginning and multiply by 100.
Calculate the involuntary turnover rate
This is the percentage of employees terminated or laid off by the organisation over a period. To calculate the involuntary turnover rate, divide the number of employees terminated or laid off by the total number of employees at the beginning of the period and multiply by 100.
Calculate the turnover rate by department
This can help identify departments or teams with high turnover, and targeted retention efforts may be needed.
Calculate the cost of turnover
This involves estimating the direct and indirect costs of employee turnover, including the cost of recruiting, hiring, and training new employees, as well as lost productivity and decreased morale.
How often should you measure employee turnover?
The frequency at which you should measure employee turnover depends on your organisation’s size, industry, and culture. However, it is generally recommended to calculate employee turnover at least once a year.
Measuring turnover more frequently, such as quarterly or monthly, can provide more up-to-date information and help organisations identify trends and issues as they arise and take a proactive approach in changing them. However, frequent measurement can also be more resource-intensive.
In addition to regularly measuring turnover, it is crucial to analyse and use the data to inform retention strategies and improvements. Measuring turnover alone is not enough; organisations should also understand the reasons behind turnover and take steps to address any underlying issues.
A good employee turnover benchmark
There is no one-size-fits-all answer to what is a good employee turnover benchmark, as turnover rates can vary widely by industry, company size, and geography.
Some industries, such as hospitality and retail, may have higher turnover rates due to the nature of the work and the prevalence of part-time or seasonal jobs. In general, however, a turnover rate of less than 10% is often considered good, while a rate above 20% may cause concern.
It is important to note that turnover rates can vary widely within an organisation, too, with some departments or teams experiencing a higher volume of staff turnover than others. For this reason, comparing turnover rates within the same company or department may be more helpful than external benchmarks.
Ultimately, the goal should not necessarily be to achieve a specific benchmark but to understand the reasons behind turnover and take steps to improve retention and create a positive work environment.
Related employee turnover KPIs
In addition to measuring employee turnover, you can use several related Key Performance Indicators (KPIs) to understand employee retention and engagement. Here are a few examples:
- Employee Retention Rate – This KPI measures the percentage of employees who remain with the organisation over a period. It is the opposite of the turnover rate. It can be calculated as follows: (Number of employees at the end of the period – Number of employees who left during the period) / Number of employees at the beginning of period x 100.
- Absenteeism Rate – This KPI measures the percentage of scheduled work time employees miss due to absences. High levels of absenteeism can be an indication of employee disengagement or dissatisfaction.
- Employee Engagement – This KPI measures employees’ commitment, motivation, and satisfaction with their work and the organisation. It can be measured through surveys or other assessments.
- Time-to-Fill – This KPI measures how long it takes to fill open positions. A longer time to fill can indicate a need for more qualified candidates or challenges in the recruitment process.
- Cost-per-Hire – This KPI measures the cost of recruiting and hiring new employees, including advertising, interviewing, and training costs. High costs per hire can indicate inefficiencies in the recruitment process or challenges in attracting and retaining top talent.
By measuring these related KPIs in addition to employee turnover, you can gain a more comprehensive understanding of employee retention and engagement and take steps to improve in these areas.
How to start improving your employee turnover rate
Here are some steps you can take to start improving your employee turnover rate:
- Conduct exit interviews – Conduct interviews with departing employees to gather feedback on why they are leaving and what the company could do to retain them. Use this feedback to identify areas for improvement.
- Improve the hiring process – Ensure that the hiring process is thorough and that the job requirements and expectations are clear. Hire candidates who fit the role and the company culture well.
- Offer competitive compensation and benefits – Offer competitive salaries and benefits packages aligned with industry standards and employee needs. This will help attract and retain talented employees.
- Create a positive work environment – Create a positive work environment that values employee well-being, job satisfaction, and work-life balance. Offer opportunities for career development and growth.
- Provide regular feedback – Provide employees with regular feedback on their performance and provide opportunities for training and development. This will help employees feel valued and invested in their work.
- Improve management practices – Train managers to be influential leaders who communicate effectively, resolve conflicts, and support their teams. Ensure that managers are accessible, approachable, and supportive of their employees.
- Foster a culture of respect and inclusion – Foster a culture of respect and inclusion where employees feel valued, respected, and supported. Offer diversity and inclusion training to employees and hold managers accountable for promoting a culture of respect and inclusion.
Remember that reducing employee turnover is a long-term process that requires a commitment to continually improving culture, attitudes and job satisfaction. Improvements can benefit your bottom line, so it’s worth the time and investment.
Are you looking for more guides on HR benchmarks? Read our latest articles here.