Generally, in business, having a high staff turnover is perceived to be a bad thing, but is it really? Here we aim to highlight both the downsides and upsides of having a high staff turnover rate so that you can make the right recruitment decisions for your business.
What Is A Turnover Rate?
EMPLOYEE TURNOVER MEANING:
Your labour turnover rate is the percentage of employees who leave your organisation during a specific period. Some turnover is inevitable and includes those who go for legitimate reasons such as more money, taking time off, temporary workers such as students, end of apprenticeships, and changing careers.
How To Calculate Your Average Staff Turnover Rate
CALCULATING LABOUR TURNOVER:
The calculation to work out your internal turnover rate is relatively straightforward and can be made for any period, such as per month, quarter, or year. You need three numbers to calculate employee turnover levels:
- The average number of employees – This is the number of employees at the start of the period (A) plus the number of employees at the end of the period (B), divided by two (Avg = (A+B)/2).
- The number of employees who left (L)
To get your monthly turnover percentage, divide the number of leavers by the average number of employees and multiply this by one hundred (Turnover = (L/Avg)x100).
Next, we look at the pros and cons of businesses with high turnover to see whether it is as bad as people think.
The Pros Of High Staff Turnover
The positive side of high employee turnover includes:
- Healthy turnover enables growth as a previous employee is replaced by a new hire
- Fresh insights & innovative ideas from new employees
- You can afford to lose underperforming employees (includes voluntary turnover and voluntary resignations)
- Introduces new concepts, skills, tools, and experiences
- Team development
- Promoting only staff you know to be good rather than risking high salary positions to other employees (internal recruitment)
The Cons Of High Staff Turnover
The negative side of high employee turnover and high staff attrition include:
- High recruitment costs (job advertising), time (writing job descriptions and interviewing), and resources – visit our interview hub for employers.
- High labour attrition and high turnover makes your company look like it’s not a good place to work – with low employee satisfaction you don’t have staff who advocate for you and have too many leavers reviewing your company.
- Project hindrance – having to retrain new people on company policies, tools, and systems,
- Low account continuity – clients hate having a constant change of account managers.
- Fearful team members may believe that they are expendable if there are too many losses and might seek a company with more stability. If well-liked employees leave, it can lower staff morale and encourage another employee leaving, creating an exodus of money invested in training and development.
- High employee turnover and being short-staffed can lead to additional pressure and increased working hours for those who remain.
- Harder to stick to commitments if team size changes too rapidly or dramatically.
There are pros and cons to high employee turnover, so it is essential to establish the reasons with leavers go and record these using HR software. Attitude surveys will give you insights into how your company is perceived by staff members when handling Human Resources management and poor performance management. You can also monitor other employee metrics such as employee wellbeing, employee engagement, company culture, and career development. To lower the turnover percentage, you could, for example, work hard on your company image via social media.
To lower the impact of staff turnover, you could adjust your recruitment process to promote within, for your highest-paid jobs, and only recruit for low-paid roles where the commission is low. Alternatively, you could opt for fixed-cost recruitment. Flat fee recruitment costs can be as little as £2,400 for an entire year and also save time and resources.
It’s up to you to decide which approaches and employee retention strategies are suitable for your business. However, for the cons of high staff turnover to be avoided, focus on control and let important staff know that they are valued, so they are more likely to stay.
Labour turnover is the percentage of how many employees are leaving your company over a set period. You can calculate your monthly average and compare this to the industry average to determine your organisation’s performance. Poor staff retention may be a sign that you don’t have a positive culture, and if the employees leaving are your top talent, turnover costs can be considerable as you need to hire for more senior positions.
Calculating staff turnover is vital for workforce planning and improving employees’ experience to work towards a low employee turnover rate. To calculate employee turnover, you need to divide the number of leavers by the average number of employees multiplied by one hundred. You will also need to establish the reasons why staff are leaving, determining the share of desirable turnover, involuntary turnover, and undesirable turnover.
A labour retention rate of 90% is consider good, so you should aim to reduce turnover to 10%.