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According to HR terms, employee turnover is the percentage of employees that leave or are asked to leave an organization within a certain period of time.
Although a company typically measures employee turnover rate in terms of the overall number of leaving employees, it can also apply to other organizational divisions like departments or groupings.
The employee turnover rate is a good indicator of a company’s efficient hiring process, work culture, and management of employees.
If a skilled and efficient employee leaves a company, it can cause high turnover. Later, this high turnover rate can harm an organization’s productivity and overall performance.
Employee turnover can be divided into two categories: Internal and External. Internal turnover usually takes place within an organization when an employee leaves their current position and moves on to a new one.
Internal turnover typically does not have any adverse effects and is mainly handled by the company’s HR department and Recruitment department. It also helps employees move forward in their careers and avoid the high cost of external turnover.
However, external turnovers can dent a company’s budget because then the company has to use more resources to train and build skills to get the new employee accustomed to the company.
Employee turnover is primarily divided into four sub-divisions:
Voluntary turnover is when an employee decides to leave their position at a company for several reasons, like moving to a different area, joining a new company, or personal issues. This term is also referred to as “quitting.”
When an employee decides to leave voluntarily, they usually give a verbal or written notice of resignation.
Involuntary turnover occurs when a company lets go of or fire an employee. Involuntary turnover usually occurs due to employees' low performance and skill-building ability. It can also be a result of workplace violation, dishonesty, fraud, etc.
In this situation, the company ‘fire’, ‘terminate’, or ‘discharges’ an employee from their work position. It is called involuntary turnover as it was not the decision of the employee to leave.
Voluntary leave always doesn’t affect a company negatively. Sometimes, it becomes beneficial to the company when a low-performing employee leaves voluntarily.
Desirable turnover occurs when the company replaces the previous low-performing employee with new hires who are more skilled and experienced.
Such turnover helps the company achieve growth and develop a better-skilled team. Moreover, infusing new talents and skills gives a company the upper hand over its competitors.
Undesirable turnover occurs when an excellent-performing, skilled employee leaves a company even though the management doesn’t want it. This negatively impacts the company’s performance and makes it more difficult to replace such an experienced employee.
Employee Turnover directly affects a company financially and performance-wise, but it does not happen suddenly. Some common reasons for employee turnover are:
Some of these reasons are vital causes of negative employee turnover. If a company doesn’t calculate and analyze its employee turnover, it won’t be able to find the issues and will keep losing skilled employees.
Calculating employee turnover can be quickly done using three simple data: The number of employees leaving or let go of, the number of employees at the beginning, and the number of employees at the end.
First, you need to find the average number of employees in the set time period (year, quarter, month):
(Number of employees at the beginning of a specific time + Number of employees at the end of a specific time)/2 = Average number of employees
Now, you just have to divide the number of employees leaving by the average number of employees and then multiply the result by 100 to get the employee turnover.
(Number of employees leaving/Average number of employees) x 100 = Employee Turnover
An example can make the calculation easier. If you have an average of 170 employees in a specific time and 35 employees leave within the particular time, then your employee turnover will be:
(35/170) x 100 = 20%
Keeping a company’s employee turnover under 10% indicates that the company is stable and working efficiently.
Every company will have an employee turnover rate, but it is crucial to identify the flaws of employee departures and handle them with care. Some tips to reduce a company’s employee turnover are given:
