Table of Contents
1. Introduction
2. What is Employee Turnover?
3. Types of Employee Turnover
4. The Cost of Employee Turnover
5. Calculating Employee Turnover Rate
6. Step 1: Determine the Total Number of Employees
7. Step 2: Get the Average Number of Employees
8. Step 3: Calculating Separations and Turnover Rate
9. Bonus Step: Calculating Quarterly or Yearly Turnover Rate
10. Strategies to Reduce Employee Turnover
11. Conclusion
Introduction
Employee turnover is a critical metric in the field of people analytics. In this article, we will explore the concept of employee turnover and discuss how to calculate the turnover rate. Understanding and managing employee turnover is essential for organizations to enhance employee retention and minimize the costs associated with replacing departing staff.
What is Employee Turnover?
Employee turnover refers to the departure of employees from an organization due to various reasons such as dismissal, attrition, or other factors. It is important to differentiate between voluntary and involuntary turnover. Voluntary turnover occurs when employees willingly leave a company to work elsewhere, while involuntary turnover happens when employees are terminated due to poor job performance, absenteeism, or policy violations.
Types of Employee Turnover
1. Voluntary Turnover: This type of turnover happens when employees choose to leave a company for other opportunities.
2. Involuntary Turnover: Involuntary turnover occurs when employees are terminated due to performance issues, absenteeism, or policy violations.
The Cost of Employee Turnover
High employee turnover can be a costly issue for businesses. According to LinkedIn's analysis, the worldwide turnover rate is 10.9 percent. Replacing departing staff with new hires incurs direct replacement costs ranging from 50 to 60 percent of an employee's yearly income. Overall turnover costs can range from 90 to 200 percent of an employee's annual salary. It is crucial for organizations to address high turnover rates to minimize these expenses.
Calculating Employee Turnover Rate
Calculating the employee turnover rate involves three easy steps. Let's break them down:
Step 1: Determine the Total Number of Employees
To calculate the turnover rate, it is recommended to use employee headcount instead of full-time equivalents (FTEs). This figure should include all employees, including those on temporary layoff, leave of absence, or furlough. It is important to have an accurate count of employees, as it forms the basis for calculating the turnover rate.
Step 2: Get the Average Number of Employees
To calculate the average number of employees, you need to obtain the headcount from multiple reports run throughout a specific period, such as a month. Add up the headcount totals from each report and divide it by the number of reports used. This will give you the average number of employees during that period.
Step 3: Calculating Separations and Turnover Rate
In this step, you need to identify the number of separations within a specific period, excluding employees on temporary layoff, furlough, or leave of absence. Divide the number of separations by the average number of employees during that period. Multiply the obtained ratio by 100 to get the employee turnover rate.
Bonus Step: Calculating Quarterly or Yearly Turnover Rate
Once you have the monthly turnover rate, you can easily calculate the quarterly or yearly turnover rate. Simply add the turnover rates for each month to obtain the desired timeframe's turnover rate.
Strategies to Reduce Employee Turnover
To enhance employee retention and keep turnover rates at a moderate or low level, organizations can implement various strategies. Some effective approaches include:
- Regularly monitoring turnover rates
- Identifying key problems or challenges leading to higher turnover
- Keeping in touch with employees and addressing their concerns
- Providing growth opportunities for employees
- Conducting exit interviews to gather feedback and insights
Conclusion
Employee turnover is a crucial metric that organizations need to monitor and manage effectively. By understanding the calculation process and implementing strategies to reduce turnover, businesses can enhance employee retention, minimize costs, and create a positive work environment. Remember, controlling turnover is essential for the success of both the company and its HR department.
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**Highlights:**
- Employee turnover is a critical metric in people analytics.
- Voluntary and involuntary turnover are the two main types.
- High turnover can be costly, with replacement costs ranging from 50 to 60 percent of an employee's yearly income.
- Calculating turnover rate involves determining the total number of employees, getting the average number, and calculating separations.
- Strategies to reduce turnover include monitoring rates, addressing concerns, and providing growth opportunities.
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**FAQ:**
Q: How can employee turnover be reduced?
A: Employee turnover can be reduced by regularly monitoring rates, addressing concerns, and providing growth opportunities for employees.
Q: What are the costs associated with employee turnover?
A: The costs of employee turnover include direct replacement costs ranging from 50 to 60 percent of an employee's yearly income, as well as overall turnover costs ranging from 90 to 200 percent of annual salary.
Q: How can turnover rates be calculated?
A: Turnover rates can be calculated by determining the total number of employees, getting the average number, and calculating separations within a specific period.
Q: What is the impact of turnover on a company's bottom line?
A: Turnover can significantly impact a company's bottom line, and HR professionals play a crucial role in controlling turnover to minimize its negative effects.
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