What is it?
Employee turnover refers to the rate at which employees leave an organisation and are replaced by new hires. It is usually expressed as a percentage of the total workforce over a specific period of time, such as monthly or annually. Turnover can be classified into two types:
- Voluntary Turnover: When employees leave by choice, such as for a new job, retirement, or personal reasons.
- Involuntary Turnover: When employees are terminated or laid off by the organisation.
Turnover is an important metric for understanding workforce stability, and high turnover rates can indicate problems within the organisation, such as low job satisfaction, inadequate compensation, poor management, or lack of career development opportunities.
Why is it important?
- Cost of Replacement: High employee turnover is costly for businesses due to expenses related to recruiting, onboarding, and training new hires. The time and resources required to replace employees can significantly impact a company’s bottom line.
- Impact on Morale and Productivity: Frequent turnover can lower employee morale, disrupt team dynamics, and decrease productivity, as remaining employees may feel overburdened by extra work or uncertain about their own job security.
- Loss of Institutional Knowledge: When experienced employees leave, organisations lose valuable institutional knowledge and expertise, which can be difficult to replace and may impact business continuity.
- Employer Branding: High turnover can damage a company’s reputation as a desirable place to work, making it harder to attract and retain top talent. Prospective candidates often assess turnover rates when considering job offers.
- Indicator of Organisational Health: Turnover rates can serve as an important indicator of employee engagement, satisfaction, and the effectiveness of the organisation's leadership and HR practices. High voluntary turnover could signal issues with company culture, compensation, or career development opportunities.
- Retention Strategies: Monitoring turnover rates helps organisations identify areas where they need to improve employee engagement and retention strategies, such as offering better career growth, enhancing work-life balance, or improving management practices.
