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Employee Turnover

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5 Minutes Reading Time · 11.03.2021
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Employee turnover is an important phenomenon every business or company has to deal with. In its latest study, Skillspanorma found that a high percentage of elementary workers and managers look for better job opportunities every year.

And, when these employees leave the company, the cost or loss isn’t trivial. It is especially true if you have a small business or you’re a startup. Experts and analysts estimate that the cost of employee turnover is higher than 20 percent compared to the salary of that position, onboarding, and recruiting cost. French staff costs, for example, are the highest according to statistics .

However, learning everything about employee turnover calculation or employee turnover rates helps you assume the cost with lost workers. Plus, you will be able to build a strategy or business plan to anticipate the amount of staff turnover. Determining the cost of employee turnover prepares your business to face and deal with voluntary terminations.

The article, in this regard, includes everything from employee turnover definition to employee turnover rates and calculation to help you understand your business economy at large.

What Is Employee Turnover

Typically, employee turnover is the percentage or number of staff members who leave a company or organization replaces them with new employees. Experts define a high employee turnover rate as the loss of workforce overtime.

This may include any worker’s departure, terminations, location transfers, resignation, layoffs, and deaths. Many businesses calculate their employee turnover rate as a means of anticipating the impact on customer services, productivity, and staff morale.

Top Causes of Employee Turnover

Over Work

Excess work causes stress at the workplace, which is one of the main reasons employees leaving the organizations.

Unfortunately, overwork is not something very uncommon in companies. It has become a norm. According to recent reports by LSE, western European countries have extreme working hours with the highest number of overworked and burned-out employees.

It doesn’t end here; most overworked employees compromise their health and suffer from medical issues. In many cases, the employee suffers depression and fatigue when they work over 55 hours or 6 days a week.

That is the reason why overworked employees have a higher tendency to leave the organizations. The burned employees browse or look for new job postings.

Lack of Onboarding

When employees go through a well-designed boarding process, they are likely to stay with the company. A structured onboarding program helps businesses improve employee engagement and allows new members to become a part of the culture and team.

However, the lack of onboarding for new employees demonstrates that the company has no interest in them. Employees feel as they are not contributing or do not fit in the culture.

When employees feel that the company is not committed to offering resources or training they need to reach their career goals, they lose interest in serving it.

Toxic Culture

Toxic culture is not only common but also misunderstood reason for increased employee turnover rate. It refers to an environment that doesn’t allow people to fit in. Simply stated the corporate culture that lacks support for its employees and sabotages morale fails to retain new talent. In fact, toxic culture can drive away from its potential employees.

When a company exhibits prominent signs of corporate culture, its retention rate suffers. No matter how competent people an organization has, it will increase their stress level if it has a toxic culture. This can affect their mental and physical health and erode their motivation to work there. Note that self-preservation always trumps the commitment of the workers towards their employers.

How to Calculate Employee Turnover

Calculating employee turnover is simpler than you think. To estimate an average employee turnover, you need three digits including;

  • The number of current employees in month’s beginning (B)
  • The number of current employees in month’s end (E)
  • The number of workers left the company during the month (L)

Calculate an average number of workers by adding numbers of initial and final employees and dividing your answer by two. The general formula for this calculation is (Avg = [B+E]/2).

Now divide the total number of workers who left the company by the average number of workforce. Multiply your answer by 100 to estimate your final employee turnover percentage [L/Avg] x 100].

If you want to calculate annual or quarterly employee turnover rate, it may take longer for figures to give you a meaningful pattern. You can use the formula;

Annual employee turnover rate %= No. of workers who left X 100 / [(B) + (E) /2]

How Much Does Employee Turnover Cost

The cost of employee turnover in 2021 may vary. This is something companies need to understand and manage. According to recent studies, when a company replaces a salaried worker, it may cost it an average of six to nine months of salary.

For instance, a manager earning $60,000 annually is $45 0000 to $30 0000 in hiring and training expenses.

How to Reduce Employee Turnover

  • Interview candidates and recruits carefully to make sure they have the skills your company is looking for. It helps you find the employees who fit well with the culture, co-workers, and team. This is a common practice in Japanese firms.
  • Encourage creativity of your staff when appreciating certificates, flexible work schedules, benefits, and bonus structures.
  • Recognition is a cost-effective way to make and maintain a productive workforce.

A high employee turnover rate can hurt a company’s bottom line. Experts say that it may cost double an employee’s salary to hire, train a new replacement. And it can also damage the confidence of the remaining workers.

Summing Up

All in all, employee turnover is an important aspect that plays an integral part in a company’s growth. It also impacts on employee retention rate. Thus, businesses should not only consider this while hiring employees but also when making growth strategies. They should focus on building an environment that cares for employees and implements strategies to retain them.

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