How to Calculate & Improve Staff Turnover

Given current talent and skills shortages across all areas of the economy, it has become business-critical for employers to understand their staff turnover rates and optimise employee retention.

Organisations with higher than industry-average staff turnover rates will be facing higher recruitment, training and development costs, and risk damage to their reputation and employer brand.

Delving deeper into the reasons behind high staff turnover can offer employers the insight needed to rectify workplace problems and improve staff retention.

In this guide for employers, we explain what we mean by staff turnover, how to calculate employee turnover for your organisation and how to use this figure to help improve employee retention.

 

What is staff turnover rate?

Your staff turnover rate refers to the percentage of your workforce that leaves and needs to be replaced.

High staff turnover means a lot of people are leaving and you are having to recruit – whether internally or externally – to fill those roles. Recruitment is a time and cost-intensive process. Employee retention, particularly of valued talent, is preferred to ensure strong organisational performance and avoid disruption to operations.

 

Why it’s important to calculate your staff turnover

Employee turnover rate is a useful measure of how your organisation is performing since retaining staff is generally preferable to recruiting.

Another important consideration is your employer brand. With so many online employer review sites, it is much easier for job applicants and employees to consider alternative employment prospects and weigh their options. A strong employer brand is critical to effective recruitment and retention of employees.

Measuring your staff turnover can help you to understand who is leaving and why. People leave employers for many different reasons. They may choose to resign to start a new job with a new employer, or they may be changing career, or retiring. These exits would be classed as ‘voluntary staff turnover’.

In comparison, ‘involuntary staff turnover’ is where the employer terminates the individual’s employment. Fair grounds for dismissal include gross misconduct, poor performance or redundancy.

It’s important to distinguish between voluntary and involuntary turnover rates when looking to identify if there are problems with retention.

 

How to calculate staff turnover

Before you can calculate staff turnover, you will first need to decide how frequently you want to measure turnover. In most cases, it would usually be annually, but if you are concerned that turnover is high or increasing, you may want to use a quarterly or monthly rate.

Next, you need to determine the number of staff that were employed at the start of this period; the number of staff that were employed at the send of this period; and finally, the number of staff who left your organisation during this time.

Use these figures to calculate your average number of staff by adding the number of staff at the beginning and end of the period, and dividing this by two. This is your average number of staff.

Finally, to calculate your employee turnover rate, divide the number of staff who left within the timeframe by the average number of staff you employed during this period. Multiply this number by 100 to determine your employee turnover rate.

 

What is a healthy staff turnover rate?

A zero staff turnover rate is highly unlikely. People can and do leave, for many reasons, and likewise, employers may have to terminate employment in certain circumstances.

Staff turnover rates can vary between sectors, but in general, employee turnover of 10% or less is typically considered desirable.

Sectors and roles which typically suffer high employee turnover include retail workers, servers within hospitality and nurses and carers within healthcare, while industries such as professional and financial services typically experience lower turnover rates.

 

Low staff turnover rate: why are your staff staying?

If you find that your turnover rate is low, avoid being complacent! It’s beneficial to delve into why this is the case through ongoing employee engagement and feedback programmes. You want to understand from your workforce what you’re doing right and to continue the dialogue so that should issues arise, these can be brought to your attention and dealt with to avoid impacting your retention rate.

 

High staff turnover rate: why are your staff leaving?

If you are dealing with high voluntary staff turnover, you will want to understand why people are choosing to leave.

Reasons for high voluntary staff turnover can include not offering a competitive compensation package; lack of career progression and opportunities; employee burnout; not providing adequate training; failing to provide clear job description; toxic workplace culture; poor management styles; poor work/life balance.

We look at some of the more common reasons for people leaving:

 

Management problems

When supervisors frequently criticise employees, the workplace becomes toxic and employees resign. Managers who micromanage people, or who adopt the opposite approach and leave them unsupported, can also increase employee turnover. Individuals who find their line managers unpleasant to deal can become demotivated and disengaged, eventually seeking employment elsewhere.

 

Lack of career opportunity

When opportunities to progress are not available, people move on.  To keep your best and brightest employees satisfied, provide access to training programmes and promotions to help them progress within your organisation.

 

Employee burnout

High-pressure workplaces and insufficient downtime invariably lead to employee burnout. People feel overwhelmed when they are overworked and overcommitted. In the absence of opportunities to reorganise their schedules, overworked employees may seek alternative employment.

 

Who is leaving?

Another important aspect of measuring turnover is not only understanding why people are leaving, but also who is leaving.

A high turnover of more junior staff who require less training may be less of a concern than regular loss of more senior personnel who have valuable skills and knowledge, and who, crucially, are more costly to replace.

 

How to reduce staff turnover

Once you have the insight into why people are leaving of their own accord, you should take action to address these issues.

Effective use of exit interviews can help to identify the underlying reasons for people leaving, enabling you to make necessary changes.

This could include:

Preventing burnout

Each person and team should have a manageable workload that corresponds with their job descriptions.

By optimising your workload, you will have a favourable impact on both your average absence cost and employee attrition rates.

 

Providing opportunities for growth & development 

Opportunities for growth and development are incentives that inspire employees to improve their overall job performance.

Assuring that internal development opportunities exist or can be created will help you retain ambitious employees seeking professional advancement and personal development.

Providing in-house training does not have to be difficult or costly. Training might consist of one-on-one mentoring, employee observation, and online instruction.

 

Offering competitive salary and benefits

Workers that are rewarded for their efforts will experience more job satisfaction and demonstrate greater productivity.

 

Improving equality

By law, all employees should be treated equally and fairly. Inequality and a lack of diversity in the workplace have a detrimental influence on everyone, since they limit you and your employees and expose you to significant discrimination claims, resulting in reputational harm and increased tribunal expenses.

 

Investing in leadership development & training

Your management team has a significant impact on job satisfaction overall. Ensure that your line managers are knowledgeable in all aspects of people management. Assist them in developing appropriate skills to help avoid workplace friction and disputes.

 

Communicating clearly with your personnel

Communicate clearly with your employees from the outset of their job and throughout their tenure. Keeping your employees informed will reduce the likelihood of confusion, uncertainty and misunderstandings.

 

Alternative ways to measure how long employees stay with you

As well as employee turnover rate, it can also help to look at:

• Employee retention rate. This reflects the number of employees who have remained with a company over a given time period. A healthy number for this is roughly 90%, although this varies by business and sector. Staff turnover is effectively the opposite of your retention rate.
• Employee tenure. This is used to determine how long employees remain with a company. One calculation focuses on the length of time current employees have been with the company, while the other focuses on longevity and counts the total number of months worked before departing.

 

Can employee turnover ever be beneficial?

The extent to which staff turnover is an issue will depend on factors such as your sector, type of organisation and the type of workers who are leaving.

For example if your business is seasonal, you may need to downsize your workforce at certain times of the year. In this instance, a high involuntary turnover rate is necessary because it is costly to maintain unneeded staff on the payroll.

In cases where employees have breached company policies, such as matters of underperformance and gross misconduct, involuntary termination can become justifiable and necessary, although dismissal should always remain a last resort.

Unproductive employees are costly to maintain and can impede others’ performance, while those who display toxic traits can negatively impact workforce morale. In these cases, staff leaving may benefit the organisation if they are replaced by new, enthusiastic talent, resulting in improved productivity and morale.

Dismissals are fraught with risk. Dismissals that appear straightforward can quickly become complicated if the employer fails to follow the law. You need to ensure compliance with your obligations by following a fair dismissal process, including final payments, notice periods, and overdue holiday pay.

Other employees may find it challenging to cope with involuntary terminations. When individuals are dismissed, and especially when terminations occur frequently, other employees can feel less secure. If you have to dismiss an employee, reassure the remaining employees, be open and honest about the reasons while respecting confidentiality, and commend them for their hard work.

 

Need assistance?

Attracting, retaining, and motivating employees is more vital and difficult than ever before in a competitive labour market. This is such a crucial aspect of any successful firm that we strongly advise you to build a clear and professional employer branding strategy. Employer brand, applicant experience, and employer value proposition are your hidden weapons for attracting and retaining the greatest talent the market has to offer.

Measuring and monitoring your employee turnover rate is an effective way to improve staff retention. If your staff turnover rate is greater than the average for your industry and immediate competitors, you should take steps to rectify this.

It is also advisable to take feedback from your current employees – how do they feel about the organisation and what is it like to work there? Also, regularly check employee review sites to see what people are saying about your organisation and your competitors.

DavidsonMorris’ HR consultants and employment law specialists work with employers to support with issues relating to staff turnover and retention. For expert advice, contact us.

 

Staff turnover FAQs

What causes staff turnover?

Common causes of employee turnover are a lack of growth and professional advancement, ineffective management, inadequate pay or benefits, and a negative workplace culture.

How do you calculate staff turnover?

Calculate your employee turnover by dividing the number of staff leaving within the set timeframe - monthly, quarterly or annually - by the average number of staff you have. Multiply this number by 100 to determine your turnover rate.

What does high staff turnover mean?

If your organisation's staff turnover rate is higher than average for your industry, it may be indicative of workplace issues such as poor management, toxic working environment or uncompetitve compensation packages. Delving deeper into the reasons behind the turnover through, for example, exit interviews, can offer employers the insight to rectify issues and improve staff retention.

Last updated: 25 January 2023