Staff turnover rate: metrics that matter

In a company, human resources are not static. Throughout the year, some vacancies are filled, and some people decide to leave their positions. So far, this is a natural situation. However, when the employee turnover rate is high over a certain period, it becomes a cause for concern. So, how can you determine if the inflow and outflow of employees are within an acceptable range? The answer lies in the employee turnover rate. 

Calculating the employee turnover rate is essential to know how many people have left the company and how many have joined within the same period. The result can give you an idea of areas for improvement, potential causes of resignations, and also serves as an indicator to measure the company’s work climate. 

Causes and effects of employee turnover in an organization

The first thing to keep in mind is that employee turnover is not inherently negative. It is a phenomenon that occurs when workers leave their jobs voluntarily or involuntarily and are replaced by new employees. However, it is necessary to calculate the employee turnover rate because a high number of departures may indicate the company’s organizational health. 

The causes of employee turnover can vary, such as unmet expectations, better opportunities elsewhere, lack of training, poor work environment, few opportunities for career advancement, or dissatisfaction with salary.  

Regardless of the cause, employee turnover has significant effects on the company. Here’s a summary:  

• Loss of talent within the team.
• Costs associated with hiring and training new employees.
• It can demotivate the team.
• The adaptation process for new team members can be slow and time-consuming, negatively impacting work productivity.

Why measure the employee turnover rate?

If you are still unsure about calculating the employee turnover rate, here are a few more reasons. This metric serves as a barometer of job stability and employee satisfaction. It provides valuable insights into human resources management and helps identify problems that may be causing employee departures. 

A high turnover rate may indicate issues in the work environment, dissatisfaction with company policies, or problems with compensation and benefits. Therefore, by analyzing this parameter, you can develop strategies to improve employee retention, optimize recruitment processes, and ultimately strengthen the corporate culture and boost overall productivity. 

Calculating the employee turnover rate

Now let’s explain how to calculate the employee turnover rate. The general formula is: 

R = (D / PE) * 100 

Where: 

R represents the turnover rate. 

D is the number of employees who left the company during the analyzed period. 

PE is the average number of employees during the period. It is calculated by adding the number of employees at the beginning and end of the period and dividing the result by two. 

By dividing D by PE and multiplying by 100, you obtain the result as a percentage. 

To interpret the results, keep the following in mind:  

• A low turnover rate, generally below 10% annually, may indicate good employee retention and a stable work environment.
• A moderate turnover rate, between 10% and 20% annually, could be normal in industries with high labor demand or seasonal jobs.
• A high turnover rate, above 20% annually, may point to internal issues such as job dissatisfaction, lack of growth opportunities, or leadership problems that require immediate attention.

A practical example

Let’s suppose a company starts the year with 100 employees and ends with 90. During this time, 20 (D) employees left the company. The calculation would be as follows: 

1. First, calculate the average number of employees, which in this case would be (100 + 90) / 2. The result is PE = 95.

2. Then, apply the formula: R = (20 / 95) * 100. After the first step, it becomes 0.21 * 100.

3. The final result is a 21% turnover rate.

Based on the explanation above, this is a high rate, meaning the company should take action. 

Six tips to reduce employee turnover in your company

Finally, here are six tips that can help reduce employee turnover in your organization. Take note! 

1. Improve the recruitment process: make sure to hire people who align with the company’s culture and values. Conduct thorough interviews and evaluate not only technical skills but also cultural fit.

2. Offer a positive work environment: create a workplace where employees feel valued, respected, and motivated.

3. Provide professional development opportunities: employees tend to stay longer in companies that offer opportunities for growth and career advancement. Provide training programs, learning opportunities, and internal promotion paths.

4. Offer competitive benefits: regularly review and update benefits such as health insurance, pension plans, paid vacation days, and wellness programs.

5. Encourage open communication and feedback: create an environment where employees feel comfortable expressing concerns, ideas, and suggestions.

6. Conduct exit interviews: when an employee decides to leave, take the opportunity to hold an exit interview and gather valuable information about their reasons. This will help you take action to retain future employees.

Now it’s your turn to put all this into practice to retain your staff and foster a positive work environment. If you want to expand your knowledge on this and many other topics related to efficient workforce management, be sure to follow the Educa.Pro blog.