1. What is the employee turnover rate?
The turnover rate measures the ratio of new recruits to departures, i.e. the percentage of new hires and departures in relation to the number of employees over a given period of time.
There are many ways and frequencies to calculate this index, and each company does it depending on its activity, sector and size, we leave below one of the most common formulas to calculate it.
2. Why calculate the turnover rate?
Turnover rate is one of the most important red flags in a company, it indicates major problems within the organization that can denote toxic work environment, inefficient teams, little or no growth possibilities and lack of employee benefits, directly affecting team productivity and incurring large recruitment and selection costs.
Having a high rate can lead to the following results for the company:
-
Increased expense on training of new staff
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Growing dissatisfaction among the company's remaining employees
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Periods of crisis due to lack of trained employees for the job
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Poor external reputation of the company
3. Things to take into consideration when assessing turnover rate:
There is no general ideal number for all companies, the perfect turnover rate does not exist, it will always depend on many factors. The most advisable will always be to keep it as low as possible, however this may change depending on the company, never the rate of a bar or cafeteria will be the same as that of a bank or a real estate company. Therefore we leave here some factors to take into account to know when to worry or when it is a completely normal rate.
- Stage in the employee's personal life:
If a company hires a large number of young adults, who may still be in university and are doing work that requires less experience to make extra money, it is quite likely that after 1 or 2 years they will choose to change companies and start their professional career in another direction. The rate of a company with these characteristics will be quite high, however, it does not necessarily mean a bad sign.
If, on the other hand, a company is looking for talent advanced in their career, and with years of experience in the labor market, it is very likely that they will decide to look for job stability and stay longer, keeping turnover low. But this does not necessarily mean that they are satisfied with the company or the benefits. Herein lies the importance of listening to our staff.
- Company sector:
The business activity of the companies is a factor to be taken into account to evaluate the result of the calculation, depending on the physical difficulty of the work to be carried out in the company, its employees may choose to change sector or even dedicate themselves to other activities because their bodies no longer allow them to do so, such as agriculture, construction or factories.
- Reasons why:
| Internal factors | External factors |
|
Lack of opportunity for growth or career development |
Natural career progression |
|
Feeling burnout |
Internal promotion or transfer |
|
Negative feelings towards boss or management |
Family or life event |
|
Toxic work environment |
Competitive offer |
|
Lack of work-life balance |
Involuntary departure |
4. Ideas to reduce employee turnover rate:
- Be clear about the functions and needs of the job.
- Taking care of wage remuneration
- Effectively manage selection processes.
- Invest in technology that facilitates the work of employees.
- Encourage the professional development of its employees.
- Retaining talented professionals by facilitating work-life balance
- Time flexibility.
- Favoring an ideal working environment, encouraging teamwork and internal communication.
- Annual performance evaluation
- Prizes and awards
