What Is Staff Turnover? (Plus How To Improve Turnover Rates)
By Indeed Editorial Team
Published 20 July 2021
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Creating a workplace that promotes positive team interaction and collaboration, but also autonomy and self-sufficiency may help sustain a positive work environment. Consider staff retention solutions when reviewing staff turnover rates to maintain productivity, team communication and reduced recruitment costs. Understanding how to minimise high rates of staff turnover and implementing positive processes may also help team members feel appreciated and valued. In this article, we discuss what staff turnover is, why it occurs and ways to improve the staff turnover rates.
What is staff turnover?
Staff turnover is the loss of staff at an organisation. This calculation uses a set amount of time, typically one year, to determine on average how many employees leave your company. Staff turnover rates typically evaluate how many employees a company loses in total. However, many companies also calculate staff turnover rates for individual departments, teams or locations.
When calculating staff turnover rates within your company, such as for each department, it's important to keep in mind that some employees may have transferred to another department or received a promotion within your organisation. While these employees wouldn't affect your company's overall turnover rate, they could affect internal calculations.
Why does staff turnover happen?
Here are two reasons staff turnover occurs:
Voluntary staff turnover
Voluntary staff turnover refers to when employees leave a company by choice, like retirement or career change. As you review the many reasons for departures and calculate your yearly loss, consider the documentation for each, as some may be eligible for employment again. Employees may choose to resign from a company for reasons such as:
Receiving a more competitive job offer from another company
Moving to another city or country
Adapting to an unexpected family or life event
Deciding to change careers or fields
Involuntary staff turnover
Involuntary staff turnover is when company leaders decide to dismiss an employee from the company permanently. A manager might decide to dismiss an employee because of their workplace behaviour, such as poor performance. Sometimes companies may experience high involuntary staff turnover rates for reasons unrelated to employee conduct or abilities, such as company downsizing.
How do you calculate staff turnover?
Here are the four steps to calculate staff turnover:
1. Determine your time frame
Determining the time frame to calculate staff turnover is important to assess your staff loss in order to decide on the staff needed in the future. Many companies calculate their staff turnover rates annually, which may provide them with a better picture of their yearly staff budget. However, you may also want to calculate staff turnover rates during a specific company quarter or high-volume season.
2. Gather employee numbers
Consider collecting data for that time period. When determining the number of employees remaining during a specific time period, try only including permanent staff who departed permanently from your organisation. It might be helpful to account for temporary hires or employees on temporary leave as another figure regarding the organisation employee count. Consider finding out these three different employee numbers:
Number of staff your company had at the beginning of your chosen time frame
Number of staff your business had when the time period ended
Number of staff left within the time frame
3. Calculate average employees
To understand how to calculate the average number of employees, first consider this equation. Confirm the average number of employees who worked at your company within the designated time period. Add the number of employees you had at the start of the time frame with the number of employees you had at the end. Then divide the total number by two. Use the equation below to determine this:
Average number of employees = (employees at start of period + employees at end of period) / 2
4. Perform the calculation
The next step is to figure out your staff turnover rate. To do this, divide the number of employees who left your company by the average number of employees. Once you have the total, multiply it by 100. That number is your staff turnover rate for your chosen time period. Use this formula for calculating staff turnover:
Staff turnover = (employees who left / average number of employees) x 100
What is a high staff turnover?
High staff turnover is the number of staff that departed the company in a certain amount of time. The reasons for leaving may vary and may also affect production, product quality and team morale. Some factors that might contribute to high staff turnover may include:
Size of the company
Positions within the company
Geographic region or branch location
Industry and consumers
What is a good staff turnover rate?
When determining if your business has a good staff turnover rate, consider the details of your business, like what your company offers. A retail shop, for example, likely has a different optimal turnover rate than a technology company.
It may be helpful to calculate your staff turnover rates for multiple periods to assess what a good turnover rate is for your unique business. For example, if your company has been in business for 10 years, you may calculate employee turnover rates for each year within that decade and see if turnover has significantly increased, decreased or stayed the same.
Why is high staff turnover bad?
If your company has a high staff turnover, that could create challenges for your business, such as:
Weakening communication channels. Depending on the departed employee's role within your company, communication may become more challenging for their co-workers or team members.
Adding to workloads of remaining employees. If an employee leaves abruptly, their responsibilities often shift to their co-workers. The remaining employees might balance these additional responsibilities for weeks or even months, depending on how long recruitment takes.
Reducing productivity. A team or department's productivity rates often decrease when they have to manage both their normal duties and the departed employee's tasks.
Raising recruitment and training costs. Finding and training new high-quality employees may be costly for businesses.
How to improve staff turnover rates
Here are six strategies for improving staff turnover rates:
1. Offer benefits
Consider providing staff with improved benefits. If your company has the budget to spend money on efforts to keep your staff, consider adding or optimising your employees' benefits. Health insurance is often the benefit most appreciated by employees. Other benefits you might provide include:
Ability to work from home
Bonuses or commissions
Free snacks or beverages
You might also consider offering your employees customisable benefits. For example, an employee with children might prefer a different healthcare insurance plan than an employee without kids.
2. Express gratitude
Show your employees that you appreciate them. Even if your company doesn't have the budget for increased employee benefits, you can help sustain your staff by expressing your gratitude for all that they do. Take the time to thank your employees for their services and acknowledge their hard work. You may offer this praise to employees privately or acknowledge them in front of their entire team, such as during a staff meeting.
3. Provide development opportunities
Give your employees opportunities to develop their careers. Some employees who leave voluntarily do so looking for a better career opportunity elsewhere. Invest in your employees' long-term success by setting aside a portion of your company's budget for development initiatives, such as:
4. Optimise recruitment process
Figure out how to improve your company's recruitment process. A business may have a high turnover rate if they find it challenging to find excellent job candidates. See if you can determine ways to optimise your recruitment and application process. The best recruitment processes look different for every business, but might include:
Multiple rounds of interviews
Personality or behavioural assessments
Sample assignments similar to what the candidate would actually do on the job
Group or panel interviews
Software that screens CVs
5. Conduct exit interviews
Perform exit interviews with employees before they leave your company. An exit interview can be a great opportunity for you to find out more about why the employee is leaving. This knowledge may also help you improve select aspects of your business to reduce the likelihood of other employees departing for similar reasons.
For example, if an employee leaves because they received a job offer they feel gives them more opportunities for career growth. You might then look into ways to improve the development opportunities for others within that department or the entire company.
6. Give regular performance reviews
Provide your employees with performance reviews consistently. Giving your staff regular performance reviews lets employees discuss what they want from their career or from your company. Consistent performance reviews may also give employees a chance to discuss potential issues with their manager before those issues grow into larger conflicts or challenges.
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