What is it?
Turnover rate refers to the percentage of employees who leave an organisation over a specific period, either voluntarily (resignations) or involuntarily (terminations, layoffs, retirements). It is calculated by dividing the number of employees who have left the company by the average number of employees during the same period, then multiplying the result by 100. Turnover rate is a key metric for HR departments as it provides insights into the organisation’s employee retention and overall workforce stability. There are two types of turnover rates:some text
- Voluntary Turnover: When employees choose to leave the organisation for reasons such as finding a new job, dissatisfaction with their role, or personal reasons.
- Involuntary Turnover: When employees are terminated or laid off due to performance issues, restructuring, or other company-driven factors.
- Formula for Turnover Rate: Turnover Rate (%) = (Number of Employees Who Left ÷ Average Number of Employees) × 100
Why is it important?
- Indicator of Employee Satisfaction: High voluntary turnover rates often indicate low job satisfaction, poor management, or lack of growth opportunities. Tracking turnover can help identify underlying issues affecting employee engagement and retention.
- Cost of Turnover: High turnover is costly for businesses. It includes the direct costs of hiring and training new employees as well as the indirect costs of lost productivity and institutional knowledge. Monitoring turnover helps organisations manage these costs and improve employee retention strategies.
- Helps with Workforce Planning: Knowing the turnover rate helps HR departments and leadership plan for recruitment, workforce development, and succession planning. By understanding patterns, organisations can better prepare for future hiring needs.
- Impacts Company Culture: High turnover can negatively affect company culture and morale, as remaining employees may become demotivated or overburdened with additional responsibilities. Addressing turnover issues can help maintain a positive and productive work environment.
- Influences Employer Branding: Companies with high turnover rates may struggle with their employer brand, making it difficult to attract top talent. Candidates often look at turnover rates when evaluating job opportunities, so improving retention can enhance an organisation’s reputation as a good employer.
- Compliance and Risk Management: In certain industries, particularly those with safety or compliance concerns, tracking turnover is essential for maintaining operational consistency and reducing risks related to inexperienced or poorly trained staff.
