Employee Turnover: What is it, and Why Does it Matter?

Employees leaving your organization is an unavoidable part of running a business. However, every time an employee leaves, it comes at a steep cost for your organization. This makes it all the more important to know how many of your employees are moving on, and why they are leaving your organization.

Sofia Von Platen
Sofia Von Platen
6 min read

In this guide, we will cover employee turnover, what it is, and why it is important. You will also learn more about what you can do to increase retention and lower your employee turnover rates.

 

What is employee turnover?

Employee turnover — also known as staff turnover — is the number of employees at the company who leave their roles and need replacing. These employees can be replaced by either internal or external candidates.

 

How to calculate your staff turnover rates

To calculate your staff turnover rate, you must do the following:

Divide the sum total of the number of employees who leave the company within a specific period of time (month, quarter, year, etc.) by the average number of employees who work within that same time frame.

Multiply the number by 100 to calculate your employee turnover rate.

Do not include temporary hires or employees going on temporary leave in either factor of the equation.

Example: Imagine that you have an average of 120 employees working during a period of a month, and that 25 employees leave.

The equation would read as follows:
(25/120) x 100 = 20.83

Thus, your employee turnover rate would be approximately 20.8 percent.

 

Types of staff turnover

There are two types of staff turnover: voluntary and involuntary.

Voluntary employee turnover counts employees who actively choose to leave the company. Voluntary turnover includes:

  • Voluntary resignations
  • Changing career path
  • Educational opportunities
  • Conflict within the workplace
  • Personal reasons
  • Retirement

Involuntary employee turnover counts employees leaving the company following dismissal. Involuntary turnover includes:

  • Failing to meet performance standards
  • Toxic behavior
  • Committing misconduct
  • Redundancy

 

 

Why are employee turnover rates important?

Employee turnover is one of the most important HR metrics because a high turnover rate can be incredibly costly. Replacing employees with new hires is expensive. It brings the cost of both hiring and training new employees, as well as having to build new working relationships.

Another factor is that when employees leave a company, it can create feelings of uncertainty and insecurity among those who remain. High employee turnover can also lead to increased workloads and stress for remaining employees, all of which can lead to decreased morale. Not only does this decrease the productivity of remaining employees — it also increases the likelihood that they will consider other options, thus contributing to a further increase in turnover.

These factors make it vital to strive for a lower turnover rate, which can decrease the cost of hiring and training, as well as contribute to a stronger workplace culture, an increase in morale, and stronger working relationships.

 

Reasons for a high turnover rate

In order to decrease your staff turnover rates, it is important to understand the reasons behind them. This will give you a better understanding of which aspects within your organization need to be improved for employees to want to stay.

Common reasons for high staff turnover rates include:

  • Low pay or poor benefits
  • Lack of work-life balance
  • Poor management
  • Lack of employee recognition or rewards
  • Poor or toxic workplace culture
  • Lack of career growth and advancement opportunities
  • Unclear or unrealistic job expectations
  • Lack of flexible working options or other outdated HR policies


If you find that any of the above are present within your organization, you should implement changes to improve your employee retention and decrease your employee turnover rates.

 

How to improve retention and decrease employee turnover rates

There are several strategies you can implement to improve retention and decrease your employee turnover rates. 

Download our white paper for 15 Strategies To Enhance Employee Retention.

We have touched on some of the reasons for employee turnover above. To improve retention and decrease turnover, you should work to counter any reasons your employees might have to leave the organization.

This includes:

  • Offering competitive salaries and comprehensive benefits packages
  • Providing employees with opportunities for professional growth and advancement
  • Fostering a positive work environment
  • Offering flexible work arrangements
  • Implementing a robust performance management system to offer improved feedback and performance evaluation
  • Implementing employee recognition programs to acknowledge and reward outstanding performance and contributions

For more information about employee retention, please read: “​​What is employee retention? A comprehensive guide.

Finally, one of the most important things you can do to decrease turnover is to implement employee surveys. Employee surveys enable you to learn directly from your employees what really makes a difference for them.

A recent survey conducted by Ernst & Young (EY) found a discrepancy between what employees actually want, and what employers think they want.

When asked to choose the primary reasons they would change jobs if they were considering another offer, 35% of more than 17,000 respondents chose “opportunity for increased pay”. Conversely, 37% of employers thought “learning and skills” were the number one factors that workers are in need of.

Employee surveys enable you to discover what moves the needle for your employees, helping you to avoid similar discrepancies. By implementing regular employee surveys, you can gather valuable information tailored specifically to your company and your workforce. You can then use the knowledge you gain to increase retention and counteract possible employee turnover.

The Empact app is designed with this very principle in mind; knowing the core drivers of your workforce will allow you to initiate strategies that make a difference. Create your own surveys that employees can fill out with ease from the comfort of their app.
Everything to do with employee engagement and retention is all included in your one-stop app with Empact.

 


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