Staff turnover at a company is unavoidable. Employees retire, quit or change their job, choosing the most favorable offer. For the employer, it means additional costs and time to find new people and for their onboarding. How one can avoid staff turnover at their company and calculate the staff turnover ratio?
Staff turnover – what does it mean?
We speak of staff turnover when, in other words, people at a particular position in the organization are replaced by other people. It can be either voluntary or forced. Voluntary turnover involves a situation when the worker voluntarily decides to leave the company. In the case of forced turnover, the company decides to terminate the contract of employment with the employee e.g., due to redundancy or dissatisfaction with his or her performance.
Companies usually analyze voluntary staff turnover. As part of this type, one can distinguish a situation when leaving the company is advantageous from the company’s perspective (employees who leave are poorly motivated and inefficient) or has a negative impact on the functioning of the organization. The latter occurs when the employee who leaves the company is difficult to replace due to his or her qualifications or extraordinary performance at the particular position.
Staff turnover ratio
The purpose of such analysis is to reduce the turnover ratio as well as acquire and retain workers for a longer period. The staff turnover analysis allows for drawing conclusions, among others, on how superiors and recruiters perform in their roles or whether the company offers sufficient development opportunities to keep the employees for a longer period. It should be highlighted that the estimated costs of finding, employing and onboarding a new person for the vacant position is around 80 to 100% of that particular worker’s annual remuneration.
The staff turnover ratio constitutes the proportion of the total number of employees that left the organization within the last year until present to the average annual number of employees. The result is usually represented as a percentage value. How to calculate the staff turnover?
The voluntary turnover ratio is the most frequent method used for measurement of the staff turnover. Annual or quarterly calculations are considered to be the most helpful since turnover can be, for various reasons, distributed unevenly during the year and proper conclusions can be drawn only from a longer perspective.
In order to calculate the staff turnover ratio, divide the number of employees who decided to leave the company within the analyzed period by the number of people employed within the said period. Next, multiply the result by 100 to determine the percentage value.
How to interpret the turnover ratio?
How should you interpret the calculated value and determine whether it is high or low? Comparing the turnover ratio with the average in the industry is considered as a good practice. The said data may vary depending on the company’s scope of activity and its location. Areas exposed to a high staff turnover frequency often include traditional sales and gastronomy. High staff turnover can also be found in the marketing, e-commerce or IT sector. Lack of stable employment is also a frequent phenomenon among drivers, cashiers or blue-collar laborers. High staff turnover can also be expected at companies with seasonal business activity or that carry out intervention works where the number of workers is subject to periodic changes.
In other sectors, it is estimated that the organization should try to maintain the staff turnover at about 10%, whereby in most companies this ratio usually falls between 12 and 20 %.
A low turnover ratio helps in eliminating a significant portion of costs related to employment of new workers as well as in increasing the level of industry know-how which translates to higher effectiveness, quality of work and customer’s satisfaction.
A high turnover ratio usually means that the employment conditions at a company are less attractive than at other work places or that the recruitment and team management methods need to be verified.
Should staff turnover be considered as a negative phenomenon? Not necessarily. A complete lack of replacements in the staff, also in the long run, is unfavorable. A moderate staff turnover helps the company keep its competitive advantage and introduce new knowledge and ideas to the organization. What is more, the inflow of new employees motivates senior employees. However, if workers frequently leave the company and you often need to recruit new people, this is a sign that you must undertake proper steps in order to maintain the staff turnover at a safe level.
How to prevent an excessive staff turnover?
If you notice a problem with high staff turnover at your company, the best way to begin is to determine the reasons for it. You can do this by finding the answer for the three following questions:
- Who are the workers that leave the company?
- When do the dismissals take place?
- Why do the workers leave the company?
In the first case, try to find out whether the people who leave the structures of your company have performed well on that particular position and whether their work has efficient. If the workers who leave have low motivation, it might be better to replace them with new people with greater involvement. However, if the staff turnover is relatively low and the company loses its best workers, you should immediately take corrective actions to encourage them to stay in the company.
It is also important to determine the period when employees leave the company. If it happens just after they join the organization, the problem might be in the candidate’s inadequacy for the position or there is a need to improve the onboarding process. You should also verify whether the job descriptions match the actual range of duties. If the company loses long-term employees, it might be because they do not see any further opportunities for development.
In order to answer the third question, you should carry out interviews such as periodic or exit interviews. This way, you will learn about employees’ suggestions and motivations. Thus, you will be able to create a work place that people will be eager to stay in.
Good practices include:
- Proper training of the HR department or using an experienced employment agency. Determining the key competencies, motivations and values of the candidate already at the recruitment stage in order to match the person with the position.
- Monitoring of payroll trends and competitors’ remunerations in order to keep the valuable employees.
- Introduction of incentives, bonus systems or additional benefits that will increase the workers’ involvement and level of satisfaction.
- Creating a positive and supportive working environment that will encourage employees to share their knowledge and accomplishments. Providing workers with praise and constructive feedback.
- Establishing clear rules for professional development and promotion possibilities as well as discussing progress at work during quarterly meetings.
- Ensuring that the managers have proper interpersonal skills and know how to ease the conflicts in the team or detect professional burnout.
How to protect yourself against a problematic staff turnover?
Staff turnover has a great impact on the functioning of the whole organization. When employees frequently leave the company and you must keep recruiting new people, it becomes expensive and time-consuming. What is more, there will be a risk that your newly recruited employee will quit the job after several months. Do you want to ensure a more efficient recruitment process and a lower staff turnover? You should consider using the services of an employment agency.
The EWL Group employment agency offers comprehensive services within the scope of management of the employment process: from recruitment and selection of candidates, obtaining necessary documents and legalization of employment, to HR and payroll handling as well as issues connected with transport and accommodation. The agency has a network of recruiters who will quickly and accurately choose the proper people to work at your company. The established base of candidates allows for fast and accurate recruitment. Additionally, you get access to candidates from abroad and full support in the legalization process of the employment.
The long-term experience in employment allows us to perfectly recognize the customer’s needs, find proper candidates for a particular position and, as a result, reduce the staff turnover in the organization.
Thanks to the employment outsourcing service, our customers can:
- reduce costs of recruitment,
- improve the workflow,
- focus on the development of their business.
- For companies that want to dynamically react to the changing staffing needs, we also offer the option of employee leasing.
