Article
03 Sep 2021

Staff Turnover

Empty boxes on a desk waiting to be packed.

An organization's performance can be negatively impacted by employee turnover. Knowing why employees leave can help employers devise initiatives that help reduce turnover and increase employee retention.

What is employee turnover?

The employee turnover rate is the percentage of workers leaving an organization, expressed as a percentage of total workers over a defined period (typically year-over-year).

Leavers, voluntary or involuntary, include retirees, former employees, resigning, and those made redundant, and thus described as overall turnover or 'crude' turnover. Additionally, specific turnover data can also be calculated, such as redundancy-related turnover or resignation rates, the latter of which can be used in assessing the effectiveness of people management practices.

Are There Different Forms of Staff Turnover?

As a whole, "employee turnover" is perceived as a negative term. Employers are viewed as obligated to minimize turnover at all costs. Different types of turnover, however, impact the working environment differently, some negatively and others positively.

Employee Turnover Types That Are Positive

Employee turnover is beneficial when new employees bring to the company fresh ideas and perspectives and replace workers terminated due to poor performance. By adding new talent to an organization, productivity and profitability can be increased.

Investing in recruiting and selection processes for new and fully engaged employees can be expensive. Ultimately, however, employers realize a return on their investment in replacing a stagnant workforce.

Employee Turnover Types That Are Negative

Turnover is often seen as a negative factor: layoffs, business closures, and plant closures may be considered negative turnover - layoffs have an adverse effect on workers and the community. In some areas, losing jobs can have adverse effects on the economy of nearby companies in a downward spiral. For example, when workers suffer job losses due to a plant shutdown, nearby services, such as transportation, meals, and other services, lose revenue as well.

There are many reasons why an employee may decide to leave your company, whether they are positive or negative. There is more to employee turnover than just resignation or a ‘you’re fired!’

In addition to finding out why employees leave, whether they are leaving voluntarily or involuntarily, retiring or being transferred, managers should also find out what their true motivation is.

The general rule is that employees must retire at some point and that this can't be controlled by the company. However, there are times when employees become disengaged and opt to retire early for a variety of reasons. To engage and retain older and more experienced employees, organizations need to understand what led to this unexpected retirement. A great way to discuss this is to hold exit interviews

Transferring within an organization usually involves moving into a new position. There may be other intentions behind the move, even if this type of turnover is a sign of a healthy work environment. Is their interest in another department's role genuine or are they trying to escape a bad manager or high level of distrust toward their colleagues?

Employee turnover is primarily caused by:

  • Voluntary
  • Involuntary

Normally, employees leave their company voluntarily. Volunteer turnover occurs when employees resign, retire, or simply leave for other reasons. Attrition occurs when the number of employees at a company dwindles after a period in which many people retire or resign without being replaced. It is often considered to be a less disruptive way to reduce the workforce and payroll than layoffs when staff is reduced due to attrition.

Voluntary turnover is sometimes caused by unhappy employees, but there are times when employees do not resign because of their working conditions. Voluntary turnover for reasons unrelated to work includes:

  • Employee leaves a job to travel
  • Students who return to school after leaving the workplace
  • Stay-at-home parents choose to leave the workplace for personal reasons
  • In any organization, there is the possibility of the occasional "I quit!"."
  • Employees who leave on their own are considered involuntarily leaving. A company usually terminates an employee when it makes budget cuts, undergoes structural reorganization, or takes similar actions. Involuntary turnover and terminations may stress and worry employees who witness a regular occurrence.

What are the top reasons for employee turnover?

Employees departing an organization are often the ones who decide to do so. It can also be initiated by a company in a variety of situations. What can be done to reduce the turnover rate within the company if the company is at fault? If you want to make improvements, finding the right question is the first step.

Some common turnover causes are:

Salary is unsatisfactory

A company that provides low wages and is reluctant to offer raises is likely to have employees always looking for a higher-paying position. Companies cannot always keep up with other companies by offering a competitive salary. Nonetheless, the managers ought to examine alternative methods of rewarding their employees for maintaining workforce motivation. During your hiring process, you can help to avoid this scenario by discussing the potential of future pay rises. You won't completely remove this reason but you will be able to avoid high employee turnover. 

Growth Opportunities Are Limited

People don't like feeling stuck in their professional or personal lives; being stuck isn't a pleasant feeling. You want the least to happen to your business when an employee is discouraged. Do not be shocked when staff members leave if you do not offer them career development opportunities.

Toxic Working Environment

Employees are more likely to leave a company where there is constant fighting. Healthy and stress-free working environments are preferred. Getting your employees' loyalty is not about making everyone your friend, but rather creating an environment of acceptance and understanding for them to feel integrated.

Team Members Are Treated Differently

It only takes a short amount of time for other employees to become angry when somebody gets treated differently than all of the other workers. Playing favorites is not the only way to perpetuate inequalities. Different stereotypes exist that may unintentionally shape how we perceive people from different backgrounds and genders. Individual employee experience and employee recognition are paramount to reducing high turnover rates. Although top performers should be recognized, leaving people out and treating them differently could leave them looking for a new job on Linkedin in no time. 

Overworked Employees 

Employee burnout and stress are often caused by overworked employees. Employees who are overworked and burnt out often jump ship for companies who understand the value of work-life balance. This is where employee engagement comes in. If you are actively completing employee engagement, you are able to discuss and monitor work levels and whether they are feeling as though they are being asked to churn out work. 

The Pandemic

This has had a huge impact on many companies. The pandemic has caused businesses to have to let go of many great employees as well as led to them taking opportunities elsewhere. 

Head Clashes With The Boss

There is something wrong with this manager's professional relationship if so many of his immediate subordinates leave in such a short period of time. Most employees who leave their company voluntarily aren't doing so to earn a higher salary, contrary to what managers may believe. At least 75 per cent of voluntary turnover reasons can be attributed to managers, according to Gallup Business Journal. Company culture is one of the things that impacts this, as managers are usually working by the rules and regulations of the company. 

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How Do You Determine Staff Turnover?

Human resources are responsible for monitoring the annual turnover rate. Monitoring employee departures is crucial to minimize the causes of employee turnover so companies can identify and minimize reasons. HR can control turnover through a number of quantitative methods.

Your employee turnover calculation can be calculated using various formulas. You can use either the BDA or Schlüter formulas (you can download this helpful template here for your calculations).

There is often a difference in results depending on the reference value used in these two formulas. So when calculating and comparing your turnover rate over the long run, use the same formula every time. Obtaining reliable comparison values can only be accomplished through this method.

Here are some examples of the formulas, explained by way of a practical example. Your choice of time period is up to you. A monthly calculation of staff turnover is perfectly acceptable, or you could opt for a quarterly or annual analysis. The employee headcount at the beginning of the period was 120. The average employee headcount for the period was 119. There were 14 departures from the company during the period (voluntary departures). Twelve employees were hired during the period.

The BDA Formula

According to the German Employers' Associations Confederation, the BDA formula must be used. A classic method for comparing employee turnover with the average number of employees is employed here. It is calculated by multiplying voluntary departures by the average headcount for the period, * 100. The turnover rate is 14/119 x 100 = 11.76 percent.

The Schlüter Formula

It takes into account the employees at the beginning of the period plus any new hires instead of using the average headcount. So, the headcount is considered to be a key data value. Time period value is associated with employees leaving a company. You can automate turnover rate calculation with innovative HR software solutions. Turnover rate = departures / (those at the beginning of the period + those hired in a subsequent period) * 100 Turnover rate = 14/(120 + 12) * 100 = 10.61%.

Staff Turnover Has a Negative Effect on Costs

An organization can incur a lot of costs from employee turnover, mainly if the employee's resignation is voluntary and has to be followed by a replacement process. Among these replacement costs may be the cost of searching for a suitable substitute, interviewing the successful candidate, inducting them into the organization, training them informally and formally until they achieve a reasonable level of performance that is equivalent to the person who quit.

Is Your Staff Turnover High or Low?

Monitoring and tracking employee turnover can help your business improve areas that may be causing employees to leave, as well as gauge how attractive your company is to employees. In the absence of preparation for high turnover rates, your bottom line may suffer. Ellen Mullarkey, vice president of business development at Messina Group, explains. 

Keeping track of your employee turnover rate is a great way to see if your business is a good place to work if you hire several times a year.

It's imperative that your business clearly defines the purpose behind its turnover analysis, no matter which tool you use. A low turnover rate is indicative of high employee satisfaction: A low turnover rate is the result of high staff satisfaction. 

The goal of your organization should be to ensure employees' satisfaction and morale are always growing within the workplace. Therefore, the best way to monitor the performance of your turnover rate is to compare it to a benchmark turnover rate. It is also possible to compare the turnover rates of your company with those of other companies and industries. 

A good retention program can help you keep your employees and reduce turnover costs regardless of which industry is your business, though the normal rate of employee turnover varies by industry. 

High Staff Turnover and Its Causes

Talented employees are often the key to a company's success. In spite of this, a company's efficiency and effectiveness could suffer if it experiences frequent turnovers. In a similar fashion, an organization that maintains a consistent workforce could also grow through its employees' consistent performance. It is important for your company to understand the causes and effects of turnover in order to be able to create strategies and policies that increase the likelihood of retaining valuable employees.

Causes of High Turnover

It's likely that your employees will leave your organization if they don't feel valued, challenged, and well-compensated at work. When managers provide feedback to their workers along with opportunities for professional skills development for their employees, workers know that they are valued. When an employee is not given the right environment for growth, whether it be challenging work, a career path, or other benefits, there is a possibility they will move to another company that meets those requirements. Yet, at the end of the day, even if people are doing interesting work and they have plenty of opportunities, if they are paid poorly or have no benefits, they will make a decision to accept a position elsewhere in order to make more money and take advantage of company perks.

Effects of High Turnover

Having a high turnover in your workforce means that your company has people running it who are not experienced and who are not particularly motivated because of their coworkers regularly leaving. The products and services you provide to your customers will be of inferior quality since they are manufactured and delivered by people who don't have enough experience in their roles to do them efficiently.

In the event of a turnover occurring frequently, a business will be faced with continuous training costs because new employees will need to come up to speed and also be forced to pay for the mistakes that they will make due to their inexperience. Also, you are not only losing the money that it's costing you to train your previous employees but all the expertise and experience you have acquired in the past as well. The problem arises when you are running a business that is heavily dependent on specific industry knowledge and training, and you allow others, maybe even your competitors to take advantage of that knowledge and training for free

Conclusion

In today's highly competitive market, it is already well established that organizations of all sizes, technological advances, and, bureau of labor statistics are facing challenges in improving human resource management. Employee turnover can be attributed to a variety of reasons, including dissatisfaction with one or more factors. In addition to contributing to the improvement of operating results, there are also ways to prevent turnover in the workplace.

As a result, there needs to be a better understanding of the consequences of high turnover rates on the organization, as well as a willingness to change established personnel management practices. In today's competitive environment, an organization's ability to perform is heavily influenced by the employees. Employees play a crucial role in determining an organization's success.

In order for organizations to perform successfully, the way in which people are managed plays a significant role. It has been perceived that gaining employee commitment has the following advantages: lower labor turnover, better employee performance, and flexibility in their roles, leading to higher quality products and a stronger competitive advantage. In comparison, a highly productive and well-trained employee can ensure that the productivity of the organization increases significantly, which is why it is vital for the organization to ensure that it retains this kind of employee. By engaging in fair, ethical, and fair-minded human resources practices, businesses facilitate this commitment by increasing communication, encouraging participation, establishing supportive management, and creating reasonable rewards.

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