Employee Turnover Rate Explained

Sam
September 17, 2021
5 Min Read
Photo by
Pawel Pych for Tooploox

Table of Contents:

Almost all businesses have employee turnover. It's the natural order of things. Not everybody is meant to work for a company forever; some people will stay at their job for five years, and others will remain happy with theirs for decades. 

However, when employees leave a company in droves, that's not good: it hurts employee morale and company culture, and potentially cripples both employee and client relationships (and if you're lucky enough to be in an industry where word doesn't get around quickly, it may take you much longer than expected to recover). Thus, we need to understand what it is - and by doing so, hopefully learn how to lower your employee turnover rate.

What Is employee turnover rate?

Employee turnover rate is defined as the percentage of employees who voluntarily and involuntarily leave a company in any given year. For example, if you have 100 workers, and three quit over the course of 12 months (or get fired), your turnover rate would be 3%.

Why does employee turnover rate matter?

Employee retention is an important part of business success. Having loyal employees not only prevents the high turnover cost and disruption that come with hiring and training new staff; it also encourages employee productivity and gives companies a competitive edge in retaining top talent.

Moreover, there's an element of corporate culture which tends to build up when employees know they're wanted - which managers often attempt to capitalize on through employee engagement and other morale boosters. Here are the top three reasons why employee turnover matters:

  1. Low Employee Turnover Rate is Good for Your Company's Reputation
  2. It Can Make Firing Difficult Employees Easier
  3. High Employee Turnover Can Hurt Client Relationships and Business Outputs

Does your business have a high employee turnover?

As we mentioned earlier, it's impossible to completely eliminate employee turnover. Even if you do everything right, there may come a time when an important member of your team decides to leave - and they likely won't tell you twelve months before they quit.

That said, having high employee turnover (both voluntary turnover and involuntary turnover alike) is one of those things that no business wants. Not only does it create extra work for hiring managers, it can also make the company as a whole far less productive, as new team members have to learn the ropes on the job. Today, we'll discuss what impact a high turnover rate can have on your company - and what you can do about it.

Are there any positives to employee turnover?

Your business will likely benefit from low employee turnover since doing so will allow those employees who stay with the company to be more proactive in their roles. Additionally, low turnover rates are typically viewed as positive by investors because they indicate that an organization is able to keep its key people and attract new talent. To determine how high employee turnover is within your business today, take inventory of:

  • How many employees voluntarily left over the past year?
  • How many employees were involuntarily terminated (fired) over the past year?
  • How many employees are currently employed at your company?

Can you lower your business's employee turnover rate?

Though it may be difficult to lower employee turnover rate, there certainly are steps that you can take which will help. Keep in mind that these suggestions won't all apply to every organization - and some might not even work depending on how far down a negative path your business has gone. Here are the top three ways to potentially reduce staff turnover:

1. Hire well

The biggest mistake managers make is to hire a new employee for their skills or qualifications, whether they're a good fit for the team or not. To avoid this, look for cultural fit as well as aptitude when filling open positions. In addition to the obvious benefits of hiring people who mesh well with your working environment, you can also expect increased retention rates.

2. Address high turnover rates

If your business is experiencing a high turnover rate, make sure to address it publicly and discuss what's contributing to the issue (e.g., limited opportunities for advancement or lack of salary increases). By taking responsibility and sharing plans for improvement, you might be able to retain some staff long enough to prevent future voluntary turnover down the line and all direct costs associated with it.

3. Redefine managerial roles

The role and responsibilities of a manager has become increasingly difficult over time as employees seek more freedom and autonomy; meanwhile, managers are often stuck following rules set out by HR or upper level management. To alleviate this power struggle, consider redefining management roles and changing how managers go about their jobs. You'll likely need to take some time to break down responsibilities and see which ones you can do without, but it might be well worth it for the sake of employee retention.

How to learn more about employee turnover rate

According to the Bureau of Labor Statistics (BLS), an organization's turnover rate is calculated by dividing the number of employees who voluntarily leave or are terminated during a specific period by the number of employees expected to work full-time over that same period (in other words, those who work at least 35 hours per week). The BLS breaks this calculation into two separate groups: voluntary quits and involuntary terminations; then, each group is further divided into two subgroups: between voluntary turnover and involuntary turnover.

Additionally, BLS data also showed that the national turnover rate in 2015 was just over 16%, with private industry rates higher than public sector rates across most industries (with the exception of education). Education had the second highest turnover rate at 17%.

Need further assistance? Matter can help! Matter helps organizations build a positive work culture, and may very well help in lowering your business’ employee turnover rate by empowering good employees through praise and constructive feedback. To learn more about employee turnover rate, visit the BLS website or check out our comprehensive guide to employee turnover.

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