Contents
Staff turnover is something that businesses can’t avoid, as employees retire or move on to other positions. However, high rates of turnover can be extremely damaging for SMBs. As well as affecting productivity and incurring recruitment costs, a high employee turnover rate signifies deeper problems within the organisation.
In this guide, we’ll explain what staff turnover is, the reasons behind it, how to calculate staff turnover, and what you can do to improve rates and keep hold of talent for longer. Let’s start by exploring the meaning of staff turnover.
What is staff turnover?
Staff turnover is the number of employees who leave an organisation during a particular period of time. It’s usually calculated annually and represented as a percentage. Also referred to as employee turnover, it’s an important metric to determine the effectiveness of recruitment and retention strategies, and can help to highlight problems within the organisation.
There are two types of staff turnover: voluntary and involuntary. While most organisations calculate staff turnover as a single percentage, it can also be beneficial to break it down into more specific categories to gain deeper insights. For example, as well as employee turnover for voluntary and involuntary departures, employers may choose to investigate turnover rates for new hires, individual departments, and different levels of seniority.
Let’s explore voluntary and involuntary turnover in more detail.
1. Voluntary turnover
Voluntary turnover covers only the employees who choose to leave the organisation of their own accord. Common examples of voluntary staff turnover include leaving the organisation to take another role elsewhere, changing career path, voluntary resignation, and retirement.
This metric is important to analyse as it can help businesses to identify patterns that could signify deeper problems within the organisation. For example, if employee turnover rates are noticeably higher for one department than for others, this could mean that there are issues with management, team dynamics or salary.
2. Involuntary turnover
Involuntary turnover refers to the departure of employees who have been dismissed from the organisation. Common examples of involuntary staff turnover include redundancy and dismissal due to poor performance or inappropriate conduct.
This metric can help businesses to identify issues in the workplace that could be mitigated by working to improve employee satisfaction or optimising recruitment strategies. For example, high employee turnover rates related to poor performance could be related to a lack of hard or soft skills within the workforce. This could be improved by reassessing hiring practices to better focus on these missing skills.
Reasons for high staff turnover
However large or small your business, some turnover is to be expected, and is a normal part of employing staff. Staff turnover is only a problem when it happens for negative reasons, or when rates become unexpectedly high.
In fact, it’s even more important for businesses to understand why their employees are leaving than it is to understand how many are leaving. This information can help employers to identify and address problems that are causing people to leave, allowing them to improve the working environment, boost employee morale and improve staff retention rates.
Some of the common reasons for high rates of employee turnover include:
- Inadequate pay or benefits
- Unsatisfactory work-life balance
- Poor management or leadership
- Toxic work environment
- Lack of opportunities for career growth
- Insufficient training or development
- Lack of recognition or appreciation
- Unclear job expectations
- Lack of job security
- Competitive offers from other companies
How to calculate staff turnover
departures, you might even choose to calculate turnover on a quarterly or even monthly basis.
Regularly calculating turnover makes it easier to compare data year-on-year, and allows managers and HR professionals to accurately report on current rates, as well as to track the success of improvement strategies.
Let’s take a look at how to calculate staff turnover.
Step one: Calculate the average number of staff
The first step of calculating staff turnover is to find the average number of employees for the period you’re analysing. It’s important to exclude temporary and seasonal staff from this number, as these departures are predetermined and could distort the true rate of turnover.
To make this initial calculation, you’ll need to know the number of employees at the start of the period, and the number of employees at the end of the period. Add these two numbers together and divide them by two to find the average number of employees during that period.
For example, if you have 100 permanent employees at the start of the month and 90 at the end of the month, the average number of employees is 95.
Step two: Calculate the turnover rate
To calculate the staff turnover rate for this period, you need to divide the number of employees who left the company by the average number of employees. You then need to multiply the result by 100 to express the rate as a percentage.
In our example, 10 employees left the company, so we need to divide this by the average, which was 95, then multiply it by 100. This gives us an employee turnover rate of 10.53% for the month.
How to analyse your staff turnover rate
Knowing what your staff turnover is only benefits your organisation if you actually analyse the data and use it to make improvements. The responsibility for improving staff turnover lies with the employer. However, as poor leadership is one of the key reasons for employees leaving, it’s also important to ensure that senior employees such as managers and team leaders are involved in any turnover improvement strategies.
When analysing your employee turnover rate, look for patterns that might point to deeper problems in the organisation. For example, you might notice that there are certain times of the year when employees are more likely to leave, or certain departments that have a higher rate of departures than the company average. It’s also important to assess the cost of staff turnover, which includes hiring and recruitment, staff training, and lost productivity during the replacement period.
The UK average turnover rate sits at around 35%. In the example we looked at above, the turnover rate was 10.53%. This is significantly lower than the average rate for staff turnover, meaning that this company’s retention is very good. However, employee turnover rates vary between industries and length of service, so it’s important to identify more specific averages for your organisation to ensure the most effective analysis.
Increasing employee retention
To improve employee retention, you first need to understand why people are leaving. Some reasons may be outside of your control, such as retirement or relocation, but many can be addressed internally to keep your employee turnover rate down.
Conducting exit interviews can give you important insights into the reasons why employees are leaving, which can help you to more easily identify areas for improvement. For example, there could be a pattern of employees leaving due to poor management or toxic team dynamics. You could address this by providing additional management training and implementing conflict resolution strategies.
In many cases, a lack of engagement and connection to the company can cause employees to seek opportunities elsewhere. Implementing employee engagement strategies not only improves staff turnover but also supports employee wellbeing, creating a more positive, productive working environment that promotes long-term business success.
Flexible working and staff turnover
Flexible working may have been more of a nice-to-have than a necessity 5 years ago. However, the COVID-19 pandemic has meant that more and more organisations are embracing hybrid working to support a healthy work-life balance for employees. While some businesses have been keen to push for a ‘return to normal’, offering flexible working has been shown to reduce staff turnover.
Research by EY following the COVID-19 pandemic found that 9 out of 10 workers globally wanted flexibility in where and when they work. Not only that, but 54% of employees are likely to quit if they aren’t offered the flexibility they want, with millennials twice as likely as baby boomers to quit. If you’re looking to reduce your employee turnover rate and aren’t offering flexible working, this could be a key area to address as a first step.
Retain talent with performance management software
After reading this guide to employee turnover, you should have a good understanding of what staff turnover is, why it’s important, and how to calculate staff turnover. By regularly analysing the number of employees that leave your organisation compared to the average number of employees during a set period, you can gain essential insights into the functioning of your working environment.
Once you’ve identified areas for improvement, you can then implement suitable strategies and make improvements. This could include delivering management training, increasing wages, offering flexible working, or providing meaningful employee benefits, all of which can help your organisation to improve talent retention.
To support your staff turnover strategies, it’s a smart idea to implement HR performance management software, which can help to streamline the process. From standardising the performance review process to supporting individual goal setting for employees, this tool offers a wide range of functionality to support HR and management teams. To see how PeopleHR can help your organisation, register for a free trial today.
