Employee Turnover: What it is & Why It Matters

Employee turnover is the rate at which employees leave a company and are replaced by new employees. Employee turnover rates significantly impact a business. Therefore, it is one of the most important metrics to track within a company. In this blog post, we will discuss employee turnover, how to calculate it, and why it matters.

What is deemed a high employee turnover rate?

Employee turnover rates vary by industry. However, it is important to keep the turnover rate as low as possible. Aim to maintain a turnover rate of below 10%. However, the average rate is between 10% to 12%. A turnover of 13% or above is high. Ireland’s turnover rate is currently 18.2%. This is the highest level of turnover the country has seen in years.

How to calculate the turnover rate?

It is important to factor in every employee that leaves a company within a certain time period when calculating turnover rates. Regardless if an employee leaves voluntarily, by either resigning or retiring. Or involuntarily, via redundancies or lay-offs. Smaller companies tend to calculate turnover by the year. However, larger organisations opt to calculate it by the month.

The calculation is fairly simple. However, the larger the organisation, the more complicated the calculation becomes. Divide the number of employees that leave during a particular time period, by the total number of employees. For example, if 10 employees leave a company of 100 total employees in a year, then the annual turnover rate would be 10%. This is a very straightforward example. However, for larger businesses, there are solutions available that can automatically track and calculate turnover rates.

Why does employee turnover matter?

High levels of turnover can be detrimental to an organisation. Firstly, it can lead to a loss of productivity among workers. Experienced team members leaving means there is a gap in the workforce. New employees can’t automatically fill that gap, as training takes time. Therefore, productivity lags. Secondly, turnover affects the morale of the workforce. The loss of a team member puts the remaining staff under pressure to cover more of the workload. This can lead employees to feel overwhelmed. And finally, high staff turnover can cost a business a fortune in recruitment and training fees. Additionally, high turnover can negatively impact a company’s reputation.

Is turnover always a bad thing?

An employee leaving is not always bad for the business. In fact, employees leaving due to receiving major promotions can be great for the business. Yes, it can be annoying having to replace a valuable member of the team, However, staff going on to bigger and better opportunities makes the recruitment process somewhat easier. As it solidifies your reputation as a business where workers learn the skills to grow their careers. Thus making your organisation a more attractive prospect to jobseekers.

Kaizen Provides Turnover Tracking Solutions

Kaizen Workforce Solutions provides the technology and data to allow our clients to manage employee turnover as part of our Workforce BI division. Our bespoke technology platform provides access to data scientists managing people as a strategic business function presenting real-time analytics, behavioural patterns and trends key for organisational decision makers. Contact a member of our Workforce BI team, to learn more about this solution.