Reducing Employee Turnover: 10 Actionable Tips to Retain Your Top TalentReading time 5min
Excessive staff turnover has a negative impact on the company, as valuable skills and expertise are lost with each dismissal. In addition, filling a vacant position involves high costs and a large amount of time. To identify trends and possible causes of staff movement, companies can calculate the turnover rate and use it to find solutions.
In this article, we will show you what is meant by the term employee turnover, how to calculate it and what measures HR managers can take to keep the rate in the moderate range.
What Is Employee Turnover?
Briefly, employee turnover defines employee exits and new hires. The term is used to refer to any movement of personnel within a company, such as voluntary resignation of employees, termination of employment, or internal movement between departments. Moderate turnover is desirable for companies, and this is an important component of human resource planning.
In economically stable times, many companies observe an increasing turnover rate because employees have several job alternatives available to them. In bad times, with rising unemployment rates, the rate decreases because a change would be too risky and employees prefer to stay in their current position.
Causes of Employee Turnover
In addition to the state of the economy, there are other issues that cause turnover to increase. These include:
- Unsatisfaction in the workplace
- Poor internal communication and low employee retention
- Inadequate employee benefits
- Excessive workload
- Personal reasons (such as family planning)
- Bad work environment
- Job offers from other companies are more attractive
Prior to the pandemic, the fluctuation rate was 33.1% and dropped to 29.8% in early 2020.
If the rate rises sharply at companies with no economic causes, internal research should be conducted into the causes. Here, the processes in the HR department also play a role, because a successful recruitment process and positive experiences with the Candidate Journey can counteract frequent departures.
Types of Employee Turnover
A moderate rate of resignations is nothing unusual, and hiring new staff may even bring a breath of fresh air into the company.
It becomes problematic when the rate skyrockets and costs rise. To analyze the causes, you should know the three different types of turnover:
1. Natural Fluctuation
A certain rate of attrition is always to be expected, because all employment contracts expire one day, and some employees retire or take early retirement.
Natural employee turnover should also include all fixed-term contracts and take into account factors such as parental leave, parental leave and studies.
2. In-company Fluctuation
Internal company turnover refers to all internal movements, such as a change of department. A moderate rate shows that human resource management is flexible and that employees have opportunities for advancement.
A rate that is too high negatively impacts the company culture and provides weaker retention within teams.
3. External Company Turnover
When employees decide to leave the company, this is referred to as external turnover. If this happens within the first twelve months of employment, it is called early turnover.
For high productivity, the external rate should be kept as low as possible.
How Can You Calculate the Employee Turnover Rate?
In most companies, the rate is calculated annually and can be broken down into individual divisions. The basic formula is:
( Personnel exits ÷ Average total headcount) x 100
Personnel exits refer to all non-operationally initiated leaves from the company. As soon as you have calculated your rate, you can compare it with other companies in the same industry. If the rate is calculated each year, trends will become apparent by comparing it to previous years in personnel movement.
Risks and Consequences of Staff Turnover
In addition to the lack of employee retention and the negative impact on team building, high turnover predominantly leads to incredibly high costs that can be prevented with the right solutions.
Direct costs include expenses for any severance packages, writing new job postings, conducting interviews, the onboarding process and training new candidates.
Indirect costs are incurred through loss of productivity as new staff must first be trained. High staff turnover also negatively affects the motivation of other staff and increases their workload.
Positive Aspects of Moderate Staff Turnover
Of course, staff turnover is not exclusively bad for a company. If the turnover rate is within the normal range, it also brings some advantages.
New employees often bring different perspectives and creativity, which have a positive effect on the company's development. Weaknesses within the organization are also better identified by new members than by employees who have been with the company for years.
Top 10 Successful Actions to Reduce Employee Turnover
High employee turnover can be lowered by improving employee retention. In doing so, you should always keep in mind why your personnel are leaving the company. Conduct a separation interview with the employees who are leaving your company and identify their motives.
In addition, regular employee reviews have also proven effective as a measure against high turnover. Ask your employees how satisfied they are with the current work situation and what suggestions they have for improvement. If individual meetings with all employees take too much time, the stocktaking can also be carried out by means of a written survey.
Actions to improve employee retention include:
1. Better opportunities for employee advancement
2. Workload analysis
3. Attractive offers for further development
4. Flexible working hours and home office
5. Transparent management style and flat hierarchies
6. Encouraging communication between team members
7. Fair compensation
8. Effective candidate journey
9. Fair distribution of tasks
10. Creation of interesting work content
A moderate turnover rate provides flexibility within the company and can even promote creativity. However, if the rate rises sharply, internal company problems exist that need to be solved quickly. High turnover is associated with many expenses and has a negative impact on employee motivation and productivity.
To avoid this, it is essential to strengthen employee retention and create a better work environment. First, analyze the causes of high turnover and then work out possible solutions – preferably together with the employees. By calculating the turnover rate, you can observe trends and react to them promptly.