Calculating Employee Turnover Rate & Strategies to Reduce it

Owen Jones

Sometimes, employees leave the companies they work for. That’s just a fact of life. But when too many employees leave citing the same reasons, then the company, not the employee, might just be the problem.

As a human resources professional, you have to be wary of high turnover rates because these will definitely have a negative effect on the company (more on these later). In this article, let’s discuss high turnover meaning and strategies to reduce it. But first, let’s get our definitions in order.

What is Employee Turnover?

Employee Turnover

Employee turnover is the number of employees who leave your company over a specific period, typically one year. Although employee turnover usually covers the total number of employees who leave a company, it can also be calculated per department or unit in the organization.

Employee turnover doesn’t just refer to employees leaving voluntarily from the company. When an employee is fired due to poor performance or a bad attitude, for example, that counts as employee turnover as well. Only, it is involuntary.

Some employee turnover is, therefore, inevitable. A sudden spike in employee turnover, however, is not because it can be reflective of the bad workplace environment that prompts employees to leave in the first place. Companies with high turnover are seen as bad places to work. Consequently, companies with a bad reputation struggle to attract the best talent.

How To Calculate Employee Turnover Rate?

Calculate Employee Turnover Rate

Calculating the employee turnover rate is not hard. Let’s say you want to get the monthly company employee turnover rate. There are three things you’d need to know first:

  • Number of active employees at the start of the month (S)
  • Number of active employees at the end of the month (E)
  • Number of employees who left during that month (L)

Now get your average number of employees by adding the number of active employees you had at the start of the month, and the number of active employees at the end of the month, and then divide the answer by two. The formula would look something like this:

(S+E) / 2 = Average number of employees for the month (A)

To get the monthly employee turnover rate, divide the number of employees who left the company during that month by the average number of employees for the month. Then multiply the answer by 100 so you can get a percentage:

(L/A)x100= Monthly employee turnover in percent

Most companies use the annual employee turnover rate because the longer period provides better insights. The way you do the calculation is the same.

Industries & Jobs With The Highest Employee Turnover

Industries & Jobs With The Highest Employee Turnover

Now that you know how to calculate the employee turnover rate, your next question probably is, what constitutes a low and high turnover rate?

The answer will depend on your industry. It’s difficult to give an ideal employee turnover rate because factors that are industry-specific also affect employee turnover. What I can give you, though, are the employee turnover jobs and high employee turnover industries.

Let’s dive in:

Tech

Tech had the highest employee turnover rate in recent years. In 2017, it had a 13.2% turnover, according to a LinkedIn study. That’s 0.2% more than the employee turnover rate for retail (more on this later). In previous years, retail had consistently been at the top of the list of industries with the highest employee turnover.

Within the tech industry, there are industries that have shown the highest turnover rates:

industries with highest turnover rates
Source: LinkedIn

There are certain high turnover jobs, too. The job of user experience and designer, for example, had a turnover rate of 23.3%. This was followed by the data analyst post, and the embedded software engineer post, with 21.7% each.

But the high employee turnover rates in the technology industry, in general, may have more to do with competition for staff. As competition in the sector increases for scarce resources, companies offer more competitive salaries and benefits to compete, which prompts some employees to jump ship when they find better opportunities.

Percentage of Technology Companies Reporting Aggressive Hiring Plans

The table above from the Radford Global Technology Survey Quarterly Workforce Trends Report shows that in particular, there has been a spike in the number of companies looking to hire aggressively, particularly in India, where the technology sector is booming.

In other words, while there is a high turnover rate in some fields in tech, these employees leaving still get jobs in the technology industry.

Retail and Consumer Products Industry

Retail and Consumer Products Industry

The retail and consumer products industry has historically already had a high employee turnover rate. According to the LinkedIn survey, within the retail industry, restaurants had the highest turnover rate, at 17.2%:

Retail and Consumer Products Industries with the Highest Employee Turnover Rates
Source: LinkedIn
Within the retail industry, retail sales personnel had the highest turnover rate, at 19.3%, followed by food service professionals, at 17.6%, and hospitality professionals, at 17.0%.

Although it’s hard to say for sure the main reasons for employee turnover in the industry, the fact that the jobs with the highest turnover are low-level and seasonal may explain a lot. Also, the rise of eCommerce in retail means that fewer people are needed in-store.

Media And Entertainment Industry

Media And Entertainment Industry

The employee turnover rates in the media and entertainment sectors are constant. Whether it’s newspapers, online media, sports, or travel and tourism, the employee turnover rate is basically the same according to LinkedIn: from 13% to 13.2%.

The same cannot be said of jobs in the film sector. Animators have the highest turnover rate, at 25.6%, followed by 3D artists, with 22.3%. Marketing specialists are in third place, with a 19.8% employee turnover rate.

The high turnover jobs based on the data are mostly project-based (or have a clear beginning and end, depending on the duration of the movie shoot, for example). The high turnover rate could explain the exodus of employees. If that is the case, these statistics should be treated with a degree of caution, as it’s not an accurate measurement of employee turnover.

Causes of Employee Turnover In The Workplace

Causes of Employee Turnover

I’ve mentioned that some employee turnover rate is inevitable. When employees retire, for example, that’s not within the company’s control. The same can be said of employees making the personal decision to shift careers.

There are, however, reasons for employee turnover companies can do something about. In this section, let’s look at those:

1. Lack of Growth

No one wants to be stuck in the same old job, doing the same old routine. In fact, according to Business2Community, the presence of career development opportunities ranks third among the non-monetary company offers that make employees stay.

What benefits would increase your loyalty and engagment within the company
Source: Business2Community

If you want your employees to be in it for the long haul, make sure you make it clear to them from the start that they have a future in the company if they work really hard.

Always remember, your employees are not robots who have no plans. People have professional goals and want to advance in their chosen careers. If the job they have now isn’t helping them attain those goals, then leaving won’t be as hard.

2. Too Much Work

If you ask former employees of companies with high turnover why they left, too much work is probably one of the reasons they will give you.

Everyone loves a job that pays the bills, but not if it leads to stress, and worse, even sickness. Too much work results in burnout and that, according to the Harvard Business Review, costs about $125 billion to $190 billion a year in healthcare spending in the US. The real costs on the company, however, can be even greater, with low productivity as a result of lost talent.

In other words, all companies should respect their employees’ time, too. There’s a reason employees use an employee time clock app to log in and out of work. Once the clock strikes 5 p.m., they can basically do whatever they want. But that also means they’d have to be in the office at exactly 9 a.m. the following day.

3. Lack of Recognition

Giving credit where credit is due is key to employee retention.

According to The Balance Careers, 55% of employees believe employee recognition will make them feel valued. Of the respondents of the study, 58% also said employee recognition will improve employee engagement in the company, a crucial element for employee retention.

Then there’s the relationship between recognition and productivity. According to TinyPulse, 69% will work harder if they felt their efforts were being recognized. That translates to higher company productivity overall and increased profit.

4. Little Opportunity to Decide

 Managers should manage their team, but that doesn’t mean they should “suffocate” them. I don’t mean that in the literal sense of the word, of course. I meant they shouldn’t micromanage employees to the point they can no longer do anything without the manager’s stamp of approval.

If employees have little opportunity to decide, morale is affected in a bad way. This is because they become frustrated with the loss of autonomy, and lose the desire to go the extra mile when given a task. And when there’s low morale, there’s low productivity.

When employees are given little opportunity to decide, they also become too dependent on the manager, they no longer think outside the box and grow.

5. Poor Employee Selection

Employees sometimes leave companies because it’s just in their DNA to do that. Although there is nothing companies can do about the DNA of a person, they can still control the people they hire.

HR should hire, not just the candidate with the skills for the job. It should also look at the candidate’s attitude and values. If they don’t match the company values, then even if the candidate is the best for the job skills-wise, might as well go for the next-best one who is likely to be happy in your office. Because when that person is happy, that person is more likely to stay.

How to Reduce Employee Turnover Rate?

How to Reduce Employee Turnover Rate?

Now that you know the primary reasons for employee turnover, let’s discuss the strategies to reduce employee turnover and prevent your employees from leaving:

1. Ensure Clear Career Path For Employees

As the HR, you should also work closely with the company managers to identify employees with potential. Once identified, their immediate supervisor should guide them so they can have the necessary skills to grow. The idea is to help them comply with the requirements needed to climb the corporate ladder.

On your part, provide managers and employees with potential the necessary support they need. You can, for example, sponsor training and seminars. Organize events with senior company officials as resource speakers, and employees as the audience, too. This way, your employees will know more about how the management started out in the organization, and how, with hard work, they got to grow and reached success.

2. Ensure Good Work-Life Balance

Don’t make it all about work with your employees. Remind them to take their lunch breaks. Take them out on company outings once in a while. Organize social events in the office. Make it clear to them that while the company values productivity, it’s not at the expense of their health.

Make sure you monitor the workload given to employees, too. If a member of the team is bogged down with work, some of the tasks can be assigned to other members of the team who can do it just as well. Delegate, so not one member of the team becomes overworked and becomes so frustrated the person leaves.

3. Give Credit Where Credit Is Due

It’s always a good idea to recognize hard work. When companies do this, they make employees feel valued and motivate employees to work even harder.

As the HR, you can, for example, organize a special recognition day for employees who stood out during a given period. For example, recognize in a company- wide event the company’s salesperson who sold the most products during the first quarter of the year. Or give extra vacation leaves to that person who was never late to work.

You can offer monetary rewards if you can, too. Be creative. Look for trends in employee rewards programs and be inspired. If you give credit where credit is due, you will keep your employees happy and engaged. And leaving the company for them will be out of the question.

4. Tell Managers Not to Micromanage

Don’t get me wrong. Managers who are hands-on are great. What companies don’t want, though, are managers who are overly hands-on and their co-workers can’t get anything done without them.

 As the HR, brief your managers on how the company would like things done. Although management of the team is necessary, it shouldn’t be to the point the entire workflow gets bogged down because the managers need to approve everything. Tell them to give employees some leeway to decide things. This way, employees will feel they have something to contribute. And they develop their decision-making skills.

5. Do the Selection Process Right

Don’t just breeze through the selection process when you’re looking to fill a position in the company. The selection process is there, so companies will be spared from hiring candidates who are actually not a good fit in the company. So take your time and conduct the interview properly with an effective talent management process.

Ask relevant questions. You want to gauge the candidate’s skills AND the person’s attitude and personality. Hiring someone just because that person was the first one with the necessary skills to apply for the job is never a good idea.

You have to wait for the right person. Not force one candidate to be the right person just so you can announce the position has been filled.

Bottomline

HR should monitor employee turnover rate. A low turnover rate is indicative of a great workplace. A high one, however, should be cause for alarm.

The good news is, you as the HR have the power to help ensure a low employee turnover rate. All you need is to do is follow the strategies I’ve outlined here. The bottomline is this: Place company employees at the heart of any company policy. If you do this, there’d be no reason for them to leave.

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