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?
Your 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 turnover rate
The calculation to work out your turnover rate is relatively straightforward and can be made for any period, such as per month, quarter, or year. You need three numbers to make the calculation:
- 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).
In this article, we look at the pros and cons of businesses with high staff turnover to see whether it is as bad as people think.
The pros of high staff turnover
The positive side of high staff turnover includes:
- Healthy turnover enables growth
- Fresh insights & innovative ideas
- You can afford to lose underperforming employees
- Introduces new concepts, skills, tools, and experiences
- Team development
- Promoting only staff you know to be good rather than risking high salary positions (internal recruitment)
The cons of high staff turnover
The negative side of high staff turnover include:
- High recruitment costs (job advertising), time (writing job descriptions and interviewing), and resources.
- It makes your company look like it’s not a good place to work – 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 a well-liked person leaves, it can encourage others to go too.
- Being short-staffed can lead to additional pressure.
- Harder to stick to commitments if team size changes too rapidly or dramatically.
There are pros and cons to high staff turnover, so it is essential to establish the reasons with leavers. 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 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 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.