Losing valuable employees is both disappointing and costly. Fortunately, it's possible to positively impact your company's employee turnover by gaining insights into its dynamics and exploring the underlying reasons affecting employee retention.
What Is Employee Turnover?
First, what defines employee turnover, and how does it occur? Simply put, employee turnover is a measure of how many employees leave or are replaced in an organization over a certain period, often expressed as a percentage of the total workforce. Ideally, turnover should be measured both company-wide and for specific departments or units to gain a nuanced understanding.
Different Types of Employee Turnover
Employee turnover can result from better salary offers or new career opportunities elsewhere. Or perhaps dissatisfaction with management or colleagues. When an employee chooses to leave for any reason, we refer to it as voluntary turnover. This type of turnover can also stem from factors beyond an employer's control, like employees retiring or relocating.
Involuntary turnover occurs when employees are forced to leave, whether because of layoffs due to downsizing or terminations for misconduct.
A high turnover rate is undeniably problematic. Yet, could there be benefits to some degree of turnover? Indeed, there can be! In an ideal workplace, the right employee is always at the right place. Realistically, there are always going to be some employees who underperform, lose motivation, and might even spread negativity. It often revitalizes team morale and productivity if such individuals move on, allowing for fresh, enthusiastic talent to come in. Additionally, a certain level of turnover can introduce beneficial new perspectives and knowledge to the group.
In summary, employee turnover encompasses a wide array of scenarios. By monitoring and analyzing turnover through its various causes, a company is best positioned to guide it in a favorable direction and retain valuable staff.
The Importance of Keeping an Eye on Employee Turnover
It's pretty obvious. Employees are the heart of a successful business, and bidding farewell to skilled staff is never pleasant. However, numerous other reasons exist to proactively manage the company's turnover rates. First is the cost factor. The more employees an employer loses, the higher the recruitment, onboarding, and training expenses. Additionally, Sweden is currently experiencing a significant talent shortage (in Swedish), complicating the recruitment of new employees with the desired skills when someone leaves.
Furthermore, it always takes time for new hires to fully adapt to their roles. During this transition, productivity and quality may suffer, placing additional strain on the workgroup. But the impact doesn't stop there. Departures can also disrupt the dynamics, motivation, and cohesion within the team. In the worst-case scenario, this can set off a chain reaction of resignations – with more employees leaving for perceived better opportunities elsewhere, thereby encouraging others to follow suit.
Calculating Employee Turnover
To proactively manage turnover, it's essential to understand its extent. This involves calculating the turnover rate, typically done by dividing the number of employees who have left during a given period by the average number of employees during the same period, and then multiplying by one hundred to get the percentage.
A simple definition of staff turnover is thus: the number of employees who have left / average number of employees * 100
For example, if a company has an average of 100 employees during a measurement period, and 5 leave, the turnover rate would be 5% (5/100 x 100). Some companies choose to calculate both the number of employees who left and the number who started in relation to the average number of employees.
It can also vary which categories of employees are chosen to include. As a rule, it is recommended, for example, that staff turnover for seasonal employees is measured separately from permanent staff to get as nuanced a picture as possible. Different calculation models can serve different purposes. Therefore, which model you choose isn’t the most important thing, just remember to be clear about how the measurements are made and to stick to your definitions in order to be able to make comparisons over time.
Read more: navigate effectively with smart HR metrics – seven tips.
What Is a Normal Employee Turnover Rate?
The desirable turnover rate varies by industry and occupation. SCB statistics (article in Swedish) indicate that turnover tends to be higher in jobs with lower educational requirements. A turnover rate of 10 percent (calculated based on employees leaving) is a commonly used benchmark, somewhat below the average for Swedish government agencies, which is about 12 percent, according to Arbetsgivarverket (article in Swedish).
Reducing Employee Turnover: What Can I Do as an Employer?
Stay or leave? Numerous factors influence an employee's decision to seek opportunities elsewhere, and while some departures are unpredictable, research suggests over half of all voluntary resignations could have been prevented. But how? Here are six strategies proven to be effective to retain employees and reduce turnover:
- Ensure competitive salaries and attractive benefits.
- Offer plenty of career and development opportunities so that employees feel they can grow and develop within the company.
- Implement flexible schedules and work conditions for better work-life balance.
- Hire the right people from the start by evaluating and improving the recruitment process.
- How is the team spirit? Encourage social activities that contribute to a good sense of community in the workplace.
- Dissatisfaction with leadership is a common reason for turnover – prevent this by offering your managers continuous training and coaching to help them develop in their roles.
Read more: How to Retain Your Employees – Eight Tips
Solicit Feedback from Employees
Another effective way to manage staff turnover is to understand what is expected of you as an employer and how well you meet those expectations. And who are the best people to ask about this? That’s right: the employees! The most successful employers are those who don’t just rely on the annual performance review but ensure that feedback becomes a regular part of everyday work. Regular one-on-ones between managers and employees, group discussions, anonymous surveys, and pulse surveys – there are many options.
Last but not least, when a departure is inevitable, make sure to conduct a thorough exit interview to learn as much as possible about the employee's experience with you and why they chose to leave. What insights can you gain to reduce the risk of similar situations occurring in the future?
Looking to Proactively Manage Your Company's Employee Turnover?
Efficient tools can simplify managing employee turnover. Our HR dashboard offers a quick snapshot of turnover rates and other vital metrics in an easily understandable and visual format, enabling timely and appropriate actions. To learn more about our dashboard or other features of our comprehensive Flex HRM solution, please contact us!
