Table of Contents
What Is Employee Turnover Rate?
Your employee turnover rate is the percentage of your team that leaves the company within a certain period, which includes those who quit and those who are fired or laid off.
You can break it down into voluntary and involuntary turnover to see what’s behind these departures. Remember, this rate counts part-time and full-time employees but doesn’t usually include contractors or vendors.
Why Employee Turnover Rate Matters
Employee churn is a natural part of business. Team members might move away or chase new career opportunities. However, keeping churn to a minimum helps you hold onto top performers and cuts down on the costs of hiring and training new staff.
A low turnover rate usually signals high employee satisfaction. But if you’re seeing high turnover, it’s wise to examine internal and external factors affecting your retention rates. This insight can guide improvements to keep your team stable and satisfied, reducing recruiting costs.
How to Calculate Turnover Rate
Depending on what you’re looking to measure, several methods exist for calculating your employee turnover rate.
General Turnover Rate
To find the general turnover rate, divide the number of employees who left during a specific time frame by the average number of employees employed in that time frame, then multiply by 100.
Employee turnover rate = (Number of employees who left / Average number of employees) x 100
Annual Turnover Rate
For annual turnover, divide the total number of employees who left in a year by the number of employees at the start of that year, then multiply by 100.
Annual employee turnover rate = (Number of departed employees in a year / Total number of staff employed at the start of the year) x 100
Voluntary and Involuntary Turnover Rates
To assess voluntary turnover (employees who leave by choice), divide the number of voluntary departures by the average number of employees during the period, then multiply by 100. Similarly, use the same calculation method for involuntary turnover (employees who are fired or laid off).
Voluntary employee turnover rate = (Number of employees who chose to separate/ Average number of employees) x 100
Involuntary employee turnover rate = (Number of employees fired or laid off/ Average number of employees) x 100
What Is a Healthy Employee Turnover Rate?
According to Marisa Ramirez, Wizehire’s Director of People Operations, a good turnover rate varies from industry to industry. That said, a 10% employee turnover rate is generally considered healthy. Put simply, the lower the number, the better.
Ramirez highlighted the significant distinction between “good” and “bad” turnover.
“Good” turnover can occur when employees leave for growth opportunities that better match their career goals, potentially refreshing the team dynamic.
“Bad” turnover involves losing highly valued team members whose departure can significantly disrupt company operations and morale. Understanding this difference is crucial for managing workforce changes effectively.
What Is a High Employee Turnover Rate?
Although acceptable employee turnover rates can differ across industries, many organizations aim to keep their rates below 10%.
Rates exceeding 10% are generally seen as high, particularly in industries where employees tend to remain with the same organizations for years. Good examples include government sector jobs that typically offer long-term stability.
How to Decrease Turnover Rate
Companies looking to keep their top team members engaged should proactively consider what factors may impact potential churn rates. Afterward, identify adjustments during the entire employee lifecycle that can decrease your turnover rate, even as early as the hiring process.
Get Clarification During Exit Interviews
When conducting an employee’s exit interview, try to understand why they’re leaving and how they felt about their time at your company. You may identify areas for improvement that could reduce additional churn.
Some employees, for example, may report a lack of allyship or a hostile work environment. Your HR team and the employee’s supervising manager can assess the situation.
There may also be challenges with quiet hiring when an employee takes on new responsibilities in addition to their current workload. While this can open up opportunities, it can lead to burnout or resenteeism.
Watch for Signs of Disengagement
Employees might not openly express dissatisfaction with their roles, often due to fears that such admissions could jeopardize their job security during layoffs. Instead, they might exhibit signs of disengagement, which can include:
- increased absences, late start times, or behaviors like coffee badging
- lowered productivity, enthusiasm, or responsiveness
- decreased participation in social or team-building activities
When behaviors like these are detected, address them during employee one-on-ones so a path forward can be created and mutually agreed upon. In worst-case scenarios, consider a performance improvement plan.
Appreciate Your Employees
Employees who feel undervalued are more likely to look for new work opportunities. Implementing employee appreciation and recognition programs, which can include formal programs and public shoutouts for team member accomplishments, can promote employee satisfaction and retention rates.
Track Market Trends
Employers can benefit from monitoring market benchmarks for pay and benefits to ensure that they have competitive offerings. Reviewing their compensation philosophy annually can help ensure that their company remains competitive.
How to Analyze Employee Turnover Rates
When analyzing employee turnover rates, it’s important to account for trends or seasonality. Some positions may have cyclical employment periods.
School systems, for example, may expect to experience a seasonally high turnover rate in May or June, but it would be more concerning if turnover spiked mid-year.
It’s also important to account for your business’s growth, which, depending on your calculation method, may skew the turnover rate.
If, for example, you calculate turnover based on the number of employees your year starts with but then double your workforce several months in, your turnover rate may seem much higher than it was.
Finally, account for large events that contributed to turnover rates. Team-wide layoffs can inflate turnover rates for an entire year.
Tracking voluntary and involuntary turnover rates can provide detailed insights into why employees may leave. You can also view turnover rates from quarter to quarter and year to year.
Wize Words
Tracking your turnover rate can help you identify potential employee departure trends early. By closely monitoring turnover, you can find opportunities to engage current team members, promote a positive workspace, and ensure that you’re offering competitive compensation.
Frequently Asked Questions
The top reason people often leave their jobs is job dissatisfaction. This can come from a few places: maybe they’re not getting along with their manager, there aren’t enough chances to move up or learn new things, the pay may not be great, or they don’t feel recognized for their hard work. Also, a negative workplace or a poor balance between work and personal life can make employees head for the door.
While market trends may cause shifts in industry retention rates, some industries consistently experience higher-than-average employee turnover rates. These include the construction, retail, accommodation and food services, professional business services, transportation, warehousing, leisure, and hospitality industries. Companies in these industries should proactively prepare for high turnover to prevent concerns around skilled or trained staff shortages.
Author
Share
See How It Works