How long does the average employee stay at your company? Do they tend to quit, or do you find that you terminate the majority of your outgoing staff?
These questions can be answered by measuring what’s called your employee turnover rate.
What is employee turnover? It’s a measurement of how and when your staff leaves your business. Here’s what you need to know about staff turnover and what it tells you about your business.
What is Employee Turnover?
Employee turnover refers to the number of employees who leave your business during a set time period. Most businesses measure their turnover rate over one year.
Within the wider concept of employee turnover, there are two further types: voluntary and involuntary turnover.
Voluntary turnover occurs when an employee quits. Involuntary turnover refers to the organization terminating (or firing) the employee.
The concept of turnover offers you more information than a simple headcount. It provides insight into your business, such as your ability to attract and keep talent over the short- and long-term.
Ideally, you want to have low employee turnover. Although, “low” is relative to your industry. For example, retailers and restaurants typically have a much higher turnover rate compared to a bank or hospital – or at least they should.
Why is Low Employee Turnover Ideal?
Low employee turnover is most organization’s goal, and what that means for you depends on your business. When you have low turnover, you have high employee retention.
Watching your staff leave can impact your business’s performance for a long list of reasons. The first is that hiring new employees is expensive. Depending on your industry, you could spend over $4,000 to fill a position. Ideally, you only want to spend that money when you’re filling an essential position. You don’t want to have to spend $4,000 over and over again to replace the same employees.
A revolving door of employees is costly for businesses. People don’t tend to quit jobs they love and find engaging. That means employees tend to disengage in the weeks or even months before they leave. One disengaged employee could cost a business as much as $16,000 per year.
As employees’ salaries go up, the amount of money turnover costs businesses also grows.
A cost of turnover calculator can give you a rough estimate of how much your employee turnover costs your business each year.
Do You Know Your Employee Turnover Rate?
What is employee turnover? It’s the difference between running a streamlined business full of engaged, competent workers and scrambling to find new talent every few months.
For better or worse, your employee turnover rate tells you a lot about your business. You’ll learn not only how many people leave but when and why they go. The insights you gain will help you strengthen your business, keep your top talent, and save you money.
Ready to build a stronger business? Visit our Tools and Resources section for more materials to help steer your business to success.