The vast majority of visitors to LeaveMonitor will probably already have some idea of what “employee turnover” is. But, as a reminder, employee turnover is essentially the “proportion of employees who leave a company” over a set period, most often on a year-by-year basis, according to this article by CIPD. A high turnover is when lots leave your company in a given timeframe, a low turnover is when the majority of staff do not leave your company and are “retained”
The fact the word “retention” is used in conjunction with employee turnover in a number of scholarly articles is interesting. Why? Simply because, understandably, companies want to keep disruption to a minimum and keep as many loyal, hardworking staff as possible. Retention of staff is often seen as a positive thing.
Thus, employee turnover is seen, often, as a negative thing. However, a quick google search for what employee turnover is will prompt a suggested question by Google – is employee turnover good or bad? This article will address employee turnover and retention – the facts on employee turnover, figures on employee turnover and the feelings of an employer when looking at their figures. We will look at the pros and cons regarding turnover and establish what a balanced turnover looks like.
Statistics regarding employee turnover
In the USA, the average turnover rate in a company is between 12% and 15% per annum. Regarding the UK, an article regarding employee turnover by Monster agrees with the 15% average statistic for the UK. Remember – different industries by their nature have higher turnovers than others. For example, see this interesting exposition of different industries by LinkedIn.
It is good to aim for a 10% employee turnover rate in any given time span – as a general rule. This may differ company to company. It is important to recognise that, regarding turnover, one size certainly does not fit all. For example, my previous article on LeaveMonitor regarding employee benefits briefly mentions how Expedia, as a company, attracts staff due to generous cash bonuses when holidays are taken – their turnover is famously low. Before we go any further, let’s agree that higher than average turnover may not necessarily be bad for your company whilst a lower than average turnover may not necessarily be good for your company.
How to calculate my employee turnover rate
In case you are wondering how to find your employee turnover rate from the piles of paperwork in front of you – let me calm your nerves! It is easy to work out by following a simple formula. For arguments sake, let’s say your given timespan to work out turnover is one year. Your employee turnover rate is equal to the number of employees who left in that year, DIVIDED BY the average number of employees working for you in the same year, TIMESED BY 100.
Employee Turnover Rate = Employees Who Left / Average Number of Employees x 100
Now you’ve worked your rate out, let’s move on with the article.
Why employees leave a business
Employees may leave a business for a number of reasons.
- Feeling like they don’t fit in with the team
- Unhealthy or toxic workplace environment
- Lack of commendation, praise or rewards for hard work
- Poor HR management
- Bad interactions between employees or managers
The following sections of the article will explain why you may feel it is best to avoid high staff turnover whilst also viewing the situation with a positive spin on it. The above is merely to make you aware of reasons why such turnover may occur – and give you an idea of what to watch out for in your own company.
The negatives of high staff turnover
There is certainly good reason to be wary of a high staff turnover and to shudder at the very thought of your company being at or above the national average of 15% turnover. This section of the article will determine why high staff turnover is viewed as a negative thing and how this may be affecting your business. However – do not despair! After this section, things will get decidedly more positive!
- Client/business relationships in jeopardy
- It may seem like lots of valuable knowledge is lost in a high turnover. When good employees leave your firm, they take a wealth of knowledge and experience with them. This painful truth has been proven again and again.
- Unfortunately, this may directly affect client/business relationships as trusted “friends” inside your business are no longer working for you.
- This may also pose a continuity problem. Should talented individuals leave the business, certain software or tricky jobs may suddenly take longer to do or just be impossible. This could frustrate the team and clients. In addition, should an employee leave work unfinished, it may be difficult to contact them to retrieve their knowledge and information
- Team building
- The cheesy team building meetings… all gone to waste! Seriously though, if your teams are constantly changing, fluctuating and evolving, how can any of them build a rapport? Do they know each other well enough? Will they gel together as a team? No amount of falling backwards and trusting your colleague to catch you can fix this problem. Essentially, your team will become like Swiss cheese. Full of holes.
- Your company image
- Do you want to look like employees hate working for you? Of course not. Of course, with a high turnover rate, your company make not only look bad – but members of your team may begin to consider their positions in the company.
- Also, it costs between 6 and 9 months of an employee’s salary to replace them. Ouch.
How to use high staff turnover to your advantage
Turnover can create all sorts of opportunities for you and your business. The key to using a higher turnover to your advantage is to view it positively. You can use higher employee turnover as part of your company growth – part of your development as a business. Let’s look at a few positives:
- Improving the intake of talented individuals
- You may feel it is appropriate to seek to remove individuals who do not fit your company ethos or do not work hard enough.
- Although, as said, it may shed a bad light on your company having a high turnover, a higher turnover may encourage better workers to come to your business as it seems it has more job opportunities and scale to progress.
- Use this to your advantage and advertise the roles that come available and present the progression an employee can make if they stay with you as inviting!
- Your business will look like it is constantly evolving and moving with the times.
- Preventing laziness in the office
- Harsh but true, slackers in the office or those who have become overly comfortable with their role and do not desire progression do nothing to help your business.
- If these workers choose to leave and a more talented or committed individual takes their place, that is certainly a positive of a higher employee turnover!
- Diversity
- In the modern workplace, diversity is key to success. Different minds bring different talents, experiences and qualities to your workplace. Essentially, you could view a higher employee turnover as sorting the wheat from the chaff – creating a tailor-made team for your business.
Why low employee turnover may be negative
Basically, your business, with a low turnover, may begin to stagnate. As this article explains, it is advisable to create some kind of plans to create turnover if your business seems to be retaining employees.
Internal turnover may be a solution to this – shifting workers round different teams and projects. In addition, early retirement may be an incentive to bring fresh blood to the office. Further, you may be able to create new positions within the company, such as middle and senior management levels, which frees up room at the bottom of the company to take more staff in.
However, as referenced, please be assured low turnover can also be a sign of employee satisfaction as seen in the case of Expedia. Saying that, it’s also important to keep your business fresh and active.
Final comments on employee turnover
Essentially, the key to draw from this article is that all this is conditional on you and your company. Only you can know whether the negatives or the positives regarding high/low employee turnover apply to your firm. Use the above information provided to determine whether a change is needed. Don’t forget – internal turnover may also be a friend for your business.