Attrition Rate
Employee Attrition Rate: Understand, Calculate & Improve It
What does the turnover rate in your company tell you? Employee turnover is a serious matter. A high turnover rate may mean that something needs to change immediately in your company. If turnover increases over time, it may also indicate a deep problem in your organization and company culture.
In any case, it is a shame when an employee leaves. But if many of them leave, that is worrying. In this blog, we provide helpful guidance on identifying different types of fluctuation and correcting a rate that is out of control.
What is the turnover rate?
The turnover rate is a metric that indicates the rate at which employees leave a company voluntarily or involuntarily. It indicates the pace of employee turnover as a percentage and serves as a key indicator for HR to evaluate employee retention efforts and understand organizational dynamics.
How do you calculate the turnover rate?
You take the number of employees who left the company and divide it by the average number of employees over a certain period of time. It is often expressed as a percentage (%).
The four main types of turnover
| Type of fluctuation | What does it mean? |
|---|---|
| Voluntary turnover | When an employee leaves voluntarily |
| Involuntary turnover | When an employee is fired |
| Internal fluctuation | When employees change internally |
| Demographic-specific turnover | When a specific group (age, gender, ethnicity) leaves the company |
What types of employee turnover are the worst?
This primarily concerns voluntary and demographically-related fluctuations. That’s because both can indicate structural problems within your company.
The first type, voluntary turnover, could indicate deficiencies in the way you develop your employees. They may be leaving your company because they are not getting what they need or want, or because they are not satisfied in their role. A good place to start is to determine the reasons for an employee’s departure, usually through an appraisal interview.
Additionally, demographic-related fluctuation may also be a cause for concern. Because it could indicate a toxic corporate culture that is harming your company from within. Diversity management is crucial here, and a company that lacks it may have significant internal issues that are worth examining.
Why is your turnover rate important?
Staff turnover can negatively impact your company’s performance. That’s why it’s important to know the status of your turnover rate. The first impact is felt in hiring costs. Replacing a well-trained employee can range from 120% to more than 200% of annual salary.
Unless there is an extremely rigorous handover process, institutional knowledge will leave the company. This is because it is almost impossible to transfer all the knowledge an employee has acquired over the years. Of course, this only applies if you don’t have a succession planning process in place for the next level.
The departure of an employee also has an impact on the employees around him. This often results in already overloaded team members having even more work to do. Their departure can also lower morale, increase stress, cause employees to burn out, and perhaps even affect the company’s overall performance.
The departure of an employee definitely changes the dynamics of a team and can even negatively impact the company’s employer brand and employer value proposition (EVP). For example, recruiters often say that they have a hard time recruiting new employees if the company has a high turnover rate.
What is the difference between turnover and turnover?
Although these terms are often used interchangeably, it is sometimes argued that turnover is more of a long-term concept. In most cases, turnover is combated by hiring employees to fill gaps as quickly as possible. In this case, turnover means dressing the “wound” of your organization, while turnover is a signal to treat the potential cause.
HR Toolbox, for example, defines the two terms separately and says: “Vacancies that become vacant due to fluctuation are not immediately filled. Fluctuation, on the other hand, is a more short-term key figure.”
Try it: Turnover Rate Calculator & Formula
Whether you call it turnover or churn (or less precisely: turnover), it’s important to know how to calculate employee turnover.
So here’s an example: Let’s say you ended the year with 200 employees in your company. However, 40 employees left the company during the same period. The result would be as follows:
Annual turnover rate = (number of departures/number of employees) x 100 Annual turnover rate = (40/200) x 100 Annual turnover rate = (0.2) x 100 Annual turnover rate = 20
But you can also be more specific and look at fluctuation within a specific time frame. This could lead to getting early fluctuation under control, the fluctuation that occurs within the first 90 days of employment (within the probationary period).
An example of this could look like this. Let’s say you hired 60 employees within 90 days and 15 of them quit during that time. It could look like that:
Early turnover rate = (number of departures/number of employees) x 100 Early turnover rate = (15/60) x 100 Early turnover rate = (0.25) x 100 Early turnover rate = 25
The point is to use the fluctuation rate formula to get the most accurate picture of fluctuation in your company. HR software that can create these reports in no time is a great help.
What is considered a “high” turnover rate?
In general, high turnover rates indicate that employees are moving fairly quickly, while low turnover rates mean that employees are staying with your company for a longer period of time.
The turnover rate also depends on the size of your company. If the turnover rate is more than 20% over the course of a year, your team should dig into the numbers.
If the fluctuation rate, i.e. H. If the proportion of new employees leaving the company within the first six months is over 15%, you should take a close look at your onboarding processes (simply to ensure that all employees can get up to speed quickly).
What does a 10% turnover rate mean?
This number means, for example, that out of 100 employees, 10 will leave the company over the course of a year. If you have a total of 50 employees, five of them will leave the company. It is the proportion of employees who will leave relative to the total number of employees currently employed in your company.
Remember: turnover rates vary widely
According to a source citing the US Bureau of Labor Statistics, “About 3 million Americans quit their jobs every month.”
However, this is not the global norm. It is very important to remember that turnover rates vary greatly depending on the industry, country and type of job. While Monster states that the average turnover rate in the UK is around 15% per year, LinkedIn reported in 2018 using its own data that the global average is 10.9%.
They also reported very wide ranges in fluctuation, even within certain industries. For example, in a LinkedIn survey, software/technology companies had an average turnover rate of 13.2%, while user experience designers had a turnover rate of 23.3%, while the eLearning sector showed a turnover trend of only 11.6% .
To further illustrate the difference in turnover rates, a survey by XpertHR published in 2019 showed that the average turnover rate for sales and marketing employees was 31%, while the turnover rate for HR employees was only 17.2% and the turnover rate for engineers was only 8.8 % fraud.
HR best practices: other KPIs to keep an eye on
Does your HR department want to dive deeper into analytics and reporting for your company? Here’s a quick overview of some other articles you might find helpful:
- Bradford factor values
- Employee engagement metrics
- Recruitment KPIs
Best Practice: Find out why employees are leaving
While your company’s turnover rate is important – especially if the number has changed significantly over a period of time – what’s even more important is knowing why employees are leaving in the first place.
If employees leave because they have to – they move to a new city, they change careers, their family circumstances force them to change – then there is nothing you as a company can do about it.
However, employees don’t just leave the company because they have to. You may be pressured into doing this, whether intentionally or because something is wrong with your company. In this case, it’s worth paying attention to what caused them to leave the company so you can fix the problem.
What affects your turnover rate?
To improve turnover rates, it is important to find out why employees are leaving the company.
That’s one of the reasons many companies use exit interviews: employees are more willing to talk honestly about what they didn’t like about the company. Or about what went wrong when they have a safe job somewhere else.
When they leave, it’s helpful to ask questions about:
| Potential Factor | Ask yourself |
|---|---|
| Managers | Do managers motivate employees properly? |
| Team atmosphere | Is culture an important factor for leaving? |
| Recognition programs | Does an employee feel recognized for their work? |
| Compensation and Benefits | Are the employees in your company compensated appropriately? |
| Mental health | Are stress and workload important issues? |
| Workforce Demographics | Does your company have a diversity problem? |
People often leave companies to get a promotion, get a raise, or move to a company with better conditions for professional development. Therefore, money is often an important factor. But there is also a saying that says: People don’t leave their job, they leave their boss.”
A good manager is very important for employee satisfaction. However, employees leave their jobs not only because of their bosses, but also because of their role and the value they see in their work.
An employee is more likely to leave a job if the job responsibilities are unclear. Or if the work consists of seemingly unimportant tasks and they don’t feel like what they’re doing is meaningful.
Is a high turnover rate good?
A low turnover rate is not always a good thing. Some companies with a low turnover rate become stale over time without new employees contributing new ideas. Likewise, getting a difficult employee to leave a company can be difficult.
If they are not a cultural fit with the company or what they do, it can impact productivity and morale across the company. It can be a good thing if they leave. However, in most cases, a high turnover rate is bad.
When should you focus on employee turnover?
Being aware of your turnover rate is certainly a good thing.
This is how you can determine how many employees are leaving and why they are leaving. If you have a high turnover rate, you should address it.
Addressing underlying issues can help improve business:
| Possible problems | Possible solutions |
|---|---|
| Performance | Can you create a framework that helps employees develop? |
| Productivity | Are there tools that can help employees focus on their work and not on administration? |
| Moral | Do you need to focus on your culture and create value? |
However, a change in employees can also be an opportunity for the company. This allows you to restructure a team or department and possibly even save costs. This can be done either by hiring younger employees, dividing tasks among other team members, or promoting employees internally.
Importantly, a high turnover rate should not be a cause for concern without reason. First, compare the rates in your industry and the averages in your country. What may seem worrying may actually be completely normal.
But you should be aware of what happens when the turnover rate starts to increase. Then it’s time to thoroughly review your employee data and make changes without haste.
Staff turnover: Best practices for when employees leave the company
While it hurts to lose talented employees and it’s expensive to replace them, it’s also wise to let them go graciously and painlessly. It’s easier if employee records are up to date and easy to find, and you’ve documented the proper termination processes. And, if they are willing to follow.