Employee Turnover Definition
Employee turnover, or staff turnover, is a measurement of how many employees are leaving a company. It’s a way to track whether a company has more employees leaving than is typically expected. This includes employees that either quit, were let go, or retired. However, companies that measure their employee turnover often separate these to manage each type of turnover.
Employee Turnover Ratio
When most refer to employee turnover rate, they are talking about the ratio of the total employees that leave during that time period. The ratio is often calculated on an annual basis and expressed as a percentage. For example, the industry standard for one business might be 5%, so you can compare each time period to the annual percentage. The business should examine each month’s percentage to see where the problem might be.
How to Calculate Employee Turnover
When calculating turnover, first make sure to group by different reasons for leaving and by job title. The more categories you break it down into, the more work it is. But the information will be more useful.
For example, if a car dealership separates the turnover rate among the salespeople and mechanics, it will be better able to isolate the issue. Another useful way to segment employees is by experience with the company or in the industry. This could show that a company needs to do a better job training new hires, or it could show a problem retaining the most experienced employees because of poor benefits.
Once you segment the company’s employees into useful groups, a simple calculation finds the turnover ratio or percentage. The calculation is the number of employees who have left divided by the total number of employees in that segment (# left in time period/# total employees in segment.) For example, if Company 1 lost one of its fifteen employees in one year, its annual turnover would be 6.67% or 1/15.
High Employee Turnover
What does high employee turnover mean? Depending what industry you are in, high turnover could mean a number of things. In a booming economy, it could mean that the job market is attractive enough to encourage job hopping. It could mean that the company is not hiring the best types of people for the position. In extreme situations, it could be a sign that the company is stagnating and is unattractive to new talent. In all cases, high turnover requires attention to the employees to find where the causes lie.
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