What is Employee Turnover And How to Decrease Your Employee Turnover Rate

Let’s talk about employee turnover because it’s something all companies need to pay attention to. Turnover is when an employee leaves a company or has to be replaced. Some employee turnover is unavoidable, but if too many employees leave in a given period of time, it can completely ruin a company. Let’s not forget that turnover is expensive, some sources claim it costs around twice an employee’s salary to locate and hire a replacement.

With all that being said, it is time to figure out your company’s new hires and departures in a way that works best for you; and that all begins with understanding employee turnover so here’s your guide on what it is and how to decrease your employee turnover rate.

What is employee turnover?

As we mentioned already, employee turnover is when an employee leaves a company and needs to be replaced. Or better yet, it is how many people leave a company and are replaced by new hires in a given timeframe.

Voluntary VS Involuntary Turnover

Voluntary turnover is when an employee actively chooses to leave a company. The cause for this might be because of better job opportunities, conflict(s) within the workplace, disengagement, and so on.

Involuntary turnover is when an employer makes the decision to terminate an employee, and this could be because of poor performance, toxic behavior, and so on.

lego construction work

Undesirable VS Desirable Turnover

Employee turnover can also be undesirable when a company loses its high performing and valuable employees and finding a replacement is difficult and expensive. Additionally, employee turnover is desirable when a company loses its underperforming employees and replaces them with employees who can help to improve output.

How to calculate employee turnover rate?

The employee turnover rate is a calculation of the number of employees who left the company in a given time period, and it is a percentage of the total number of employees. Usually, the employee turnover rate is calculated and reported as a percentage per year, but you can also calculate it for different periods.

These are the three numbers you need to order to calculate the employee turnover rate:

  1. The number of employees that left (voluntarily and involuntarily) in a year,
  2. The number of employees that you started the year with, and
  3. The number of employees that you ended the year with.

In order to calculate the employee turnover rate, you need to add the number of employees you started the year with and the number of employees you ended the year with, and then divide that total by 2. Next, divide the number of employees that left in the year by the number from the first equation. Multiply your final outcome by 100 and the percentage you are left with is your employee turnover rate.

calculation for employee turnover rate

Do this to calculate voluntary turnover, involuntary turnover, and total turnover. For example, if a company has 100 employees at the beginning of the year. During the year six employees quit and nine are let go later in the year. The voluntary turnover rate for the year would be 6/100 or 6 percent whereas the involuntary turnover rate is 9/100 or 9 percent. The total turnover rate would be 15/100 or 15 percent because we added together the six employees who left voluntarily and the nine who were let go.

Take a closer look at your employee turnover rate

To better understand your employee turnover, you need to ask yourself these three questions:

“Who are the employees that leave?”

“When do they leave?”

“Why are they leaving?”

Let’s focus on “Who”

You need to take a look at which employees are leaving the company, regardless if the employee turnover rate is lower than your industry average. Why exactly should you look into WHO is leaving? Because if your top performers are leaving, you are going to want to take action as soon as possible otherwise, your company’s performance and profits are going to take a serious hit. However, if low performers are leaving, this is an opportunity to hire new employees who can boost engagement, productivity and profits.

Let’s focus on “When”

By knowing when employees are leaving, you can better understand if your recruitment and onboarding methods are working well. For instance, if a large number of your new hires are leaving, this can because of poor onboarding or because their job duties were not what they expected – this clearly tells you to better your onboarding experience from day one and to review the job descriptions at hand.

manager calculating employee turnover

Let’s focus on “Why”

It is pretty easy to understand why you would want to understand WHY your employees are leaving as this can help you change your company management style or policies. Add exit interviews to see if the employees leaving give similar reasons and ask if they have any useful suggestions. Think of it, if a majority of the employees leaving say it is because they feel as though their effort and feedback was not being appreciated then you know you need to work with your managers to help change their performance appraisal process. Or most employees are leaving due to a single manager’s attitude, you know what the root cause is and can address it immediately.

How to decrease employee turnover rate?

Here are some ideas on how you can decrease the employee turnover rate at your company:

    • Hire the right employees. When hiring employees, you need to know exactly what a good candidate looks so you can vet interviewees properly. You want someone who doesn’t just fit with the job requirements, but also will fit in perfectly with the team, management, and company culture.
    • Have amazing employee incentives. Take a look at what employee incentives you offer and make changes as needed. Get creative, because it’s not all about pay raises and promotions. Employees want more options to stay happy and engaged, like the ability to work from home, casual Fridays, bring your pet to work, and so on.
    • Celebrate achievements as often as possible. Recognize employees publicly, whether through an email, on social media or in a meeting in front of all their peers. This is a great way to help your employees feel valued.
    • Allow for growth. Present clear career paths that are challenging and motivating, talk about them at an employee’s annual and mid-year reviews. Encourage them to bring questions and requests to their managers during the year. Empower employees to take charge of their own work and also offer skill development and training.
    • Collect frequent feedback. Employees really want to be heard and to have validation that their opinion truly matters. Check-in and seek feedback on a regular basis so that managers can easily detect problems early and can implement solutions. Plus, employees will be happier knowing their feedback is being taken seriously.

surveys communication employees app

However, if it’s hard for you to gather information from all your employees, like through surveys, if you don’t have a place to celebrate achievements and if you struggle to keep your employees informed and connected to the company, you can use a tool like Connecteam.

Use Connecteam’s employee communication app to send surveys frequently. Simply create your own surveys, or use a ready-made template, and begin receiving feedback from your employees in minutes. Through Connecteam, you can send surveys on anything that matters to you, from understanding how onboarding is going (whether it’s the first day, first week or three months in), an annual performance survey, a weekly poll, and so on.

Connecteam also enables a suggestion box so your employees can share their ideas on anything that believe in, from HR changes to IT support to management to cosmetic changes and anything in-between. Start your free 21 day trial now and watch your employee engagement skyrocket.

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