How to calculate employee turnover: is there a formula? Does it Work?
In order to answer the question on how to calculate an employee turnover rate, we first need to define what we mean by employee turnover.
Staff turnover is the number or percentage of employees leaving your organisation during a certain period. Particularly high or low staff turnover generally indicates that you need to make some changes within the business.
Companies tend to assess employee turnover on a monthly or annual basis, but you can choose whichever time period is most useful to your business.
You can express staff turnover in different ways. It’s often helpful to represent it as a percentage of your total workforce. Alternatively, you could simply represent it as the number of employees who left in that time period.
What’s more, categorising staff turnover as voluntary/involuntary and desirable/undesirable will help to produce useful insights into staff retention. Analysing the turnover rate of employees leaving before 12 months also helps to indicate whether retention is an issue or not.
Staff turnover or staff attrition?
You may hear the terms staff turnover and staff attrition used interchangeably. They are actually two different things.
Staff turnover is inevitable and healthy, when you find the right balance. Being able to accurately track your staff turnover rate is the first step to finding that balance. It will also help you understand your employees” experience of working for you.
If your staff turnover is higher than expected, don’t take it personally. Try to un-pick why employees are leaving and spot any trends. Small changes can make a big difference to your employees working lives. There are always myriad other issues to manage in a business but ultimately, these small steps will add up and help you to improve staff retention.
What is staff attrition?
Staff attrition occurs when a position isn’t filled with a new employee. It also occurs naturally, when you lose employees due to personal health, retirement, resignation or eliminating a position, for example.
What causes it though?
- Lack of personal development
Opportunity for growth and development is crucial for retaining good employees. If an employee feels stuck in a dead end position or role they will start to look elsewhere and to other businesses to develop their career income and status.
- Too much work – overburdened
As we’ve moved through the pandemic, it’s quite likely that employees have taken on more responsibility to pick up the slack whilst colleagues are off sick or on furlough or busier with other commitments, however leaving this unchecked and creating a work and life imbalance and often end up in burnout and couple with little or no appreciation, employees become frustrated and look for alternatives.
- Poor employee selection during recruitment
Finding the perfect ideal employee is increasingly difficult and today the market is most definitely a candidates’ market, however forcing a match with a prospective employee because filling the vacancy is essential will most likely lead to dissatisfaction on both sides. Selecting an employee out of desperation that doesn’t have the same values, cultural view and expectations will most likely be discontent with their role and fail to deliver the commitment required.
- Decision making issues
Micromanaging employees (especially those in leadership positions) gives new and old employees the impression that you they can’t be trusted to make decisions and run the business in the right way. Over managing has the impact of removing innovation, creativity and commitment. Employees respond better to decisions and ideas that they have formulated. Stifled, over managed employees are more likely to get frustrated with the lack of freedom and autonomy and move to a role where they can make decisions and perform well.
- Feedback and Recognition when the going gets tough
Even when times are difficult, avoiding feedback can be very damaging to the employee employer psychological contract. Feedback is the first step to ensuring that your team can succeed and when a team member is struggling giving an honest review of their performance with ideas on how to manage workload might be all that is needed to enable refocus and improve delivery. Ignoring a problem and leaving an employee to flounder might result in the employee giving up and becoming disheartened in their lonely position of underperformance.
The real cost…
One thing that sometimes maybe isn’t taken into consideration is the true cost of staff turnover. Think how much goes into the following:
- Recruitment cost of posting jobs online and the fees for doing so, recruitment agency costs, the time for interviewing.
- Admin costs from a HR perspective.
- Induction/training sometimes your staff will need external training courses which often come at high expensive.
- Productivity of new employees and the staff training them.
- High staff turnover can have a huge impact on an organisation’s finances, so it’s important to tackle it head on.
How to improve it?
Employees need to know that they are a valued part of the team and playing an active part in their professional development will demonstrate that you are jointly invested in their success. This will contribute to increased company loyalty. Promoting and advertising development opportunities within the business will help to continually improve the workforce whilst increasing the capability of team members and attracting new vibrant and ambitious talent.
Employees need to know that their contribution is valued by their line manager and the company. Making a specific effort to recognise contribution and publicise success goes a long way towards improving employee relations. Offering rewards and celebrating all types of success is crucial for boosting morale. Paying a fair market benchmarked salary that increases alongside development will also support the stability of the team as they grow and develop within the organisation.
Getting the right candidates in the first place is not easy but weeding out candidates that don’t meet the cultural criteria is essential. Approaching recruitment with the correct tools in place will help. Clearly define the role you are looking to fulfill – look at the past and make sure it is still the right description. Review the skills and qualifications that are required and define the right parameters for selection. Use interviews efficiently and carefully to probe about cultural fit, and aspirations, to ensure you understand what the candidates feel they need to thrive and deliver for you.
In today’s marketplace work life balance is one of the key criteria for employees both existing and new. Balance is important. If your employees are knee deep in work, they will be unhappy. Encourage your employees to take a look at their own schedules and manage time differently and better – does the team take a full hour for lunch during the day.
Helping employees to manage workload is key and communicating the support and methods for improving the situation will be crucial to change the perceptions of all colleagues so that all types, styles and approaches to work are inclusive and workable within the team.
If you would like to speak with us about how address staff turnover within your organisation, head over to the organisational change and HR services section of our website – or give us a call on +44 (0)1491 414 010.