Employee Turnover Rate: What It Means and How To Improve It

Cassy Aite
July 20, 2022
Employee Turnover Rate: What It Means and How To Improve It

Like most things in life, you can’t hold on to employees forever. While it’s often one of the downsides of business, people leaving for new opportunities is to be expected. 

In this guide, we’ll talk about employee turnover rate and how you can improve it. We’ll also take a look at the pros and cons of employee turnover and how it can impact your organization. Plus, we’ll offer some creative ways to optimize your employee retention for the future. 

What Is Employee Turnover?

Employee turnover refers to people leaving a company. When you measure the number of employees leaving over a defined period, that’s the employee turnover rate. 

Turnover happens naturally at any organization. People can leave your company for a whole host of reasons. Maybe they’re retiring or taking a new career direction. Turnover can also happen through layoffs or transfers. You might also need to terminate some contracts if you’re restructuring. Many employees simply find another opportunity elsewhere and hand in their resignation.

How Do You Figure Out Your Employee Turnover Rate?

Knowing your employee turnover rate offers useful information you can use when hiring, restructuring, or looking for opportunities to change and grow the company. Luckily, it’s not difficult to figure out. To calculate your employee turnover rate, use this simple formula: 

Number of separations (employees who have left) ÷ Total number of employees x 100 = Employee turnover rate

If your company has an employee count that changes often, take your average number of employees from the last six or 12 months. It’s also helpful to take both a short- and long-term look at your employee turnover rates to see if it’s changed much over the last three, six, or 12 months. 

You can use a similar employee turnover calculation to review how many employees leave during their first year, or however long your probationary period is. 

To do this, divide the number of employees who left during their first year by all job leavers over that same period, then multiply by 100. The resulting figure will give you greater insight into how many new employees leave compared to established employees. With this data, you can more effectively tackle any issues related to employee retention. 

What’s the Average Turnover Rate for Employees?

When you’re working inside a company, it can be hard to know how your turnover rate compares to others. Research from the U.S. Bureau for Labor Statistics shows that the average annual total separations is around 45%.

To help you get a sense of how your company performs compared to others, the Bureau of Labor Statistics is a useful resource. Here, you’ll be able to search through data on hires, job openings, and separations over a period of time through their JOLTS reports. You can filter this by sector and category to better understand the labor market within your industry or location. 

Naturally, turnover rate varies from company to company. Some may thrive on bringing new people into their organization regularly, so a high turnover rate is less of an issue. Meanwhile, other companies aim to hire key staff and retain them long term. 

The Upside of Employee Turnover

Jimmy Fallon gif saying "Great job!"

It’s often hard to say goodbye, but that’s the reality of doing business. Whether people are leaving on good terms or not-so-good terms, there’s always a positive takeaway. Here are some of the benefits of employee turnover and how you can use them to your advantage. 

A Chance to Hire the Right People

When someone leaves your company, it’s often because the two of you aren’t a great match for each other. While an exiting employee can cause some disruption, it can also give you the chance to hire someone who better fits your company and culture. Keep this in mind when someone hands in their resignation, and look at it as a chance to rebuild your team with fresh ideas, new perspectives, and renewed energy. 

Opportunity to Reflect and Make Changes

Dealing with employee separation can be tough, especially if it’s unexpected. However, you can use this moment as a wake-up call to make changes elsewhere. Maybe now is the perfect time to survey your employees to find out what they’re looking for in their employer. Or perhaps it’s time to introduce those health and wellness stipends you’ve been considering.

Employee turnover offers an excellent opportunity to find out why someone decided to leave. You can then use that feedback to help shape aspects of your organization moving forward. 

No More Time and Money Spent on Employees Who Don’t Want to Stay

While we can spend a great deal of time on employee retention and keeping everyone engaged and enthusiastic, sometimes it’s better to move on — especially if the employee is indifferent or not aligned with the company’s goals. 

In most cases, someone leaving the company feels like a setback.But it creates room to invest that time and energy where it can make a positive impact. Look for ways to support existing employees more fully through employee engagement, introduce new programs and initiatives such as lunch programs or health and wellness programs, or make improvements in your company culture. 

The Downside of High Employee Turnover

Animated illustration of Yoda

With any upside comes a downside, and the most obvious one here is the loss of a valued member of your team. There are also a handful of other drawbacks that can affect company culture, relationships, and hiring. 

Employee Relationships

The people around us play a part in how we feel about our work. With an energized, supportive, and motivated team, we’re encouraged to head towards our goals — even when it feels challenging. We naturally build relationships around coworkers, so when one leaves, it can affect the group at large. 

Suppose your employee turnover rate is higher than average. In that case, you might find people don’t get the chance to — or are reluctant to — develop the kind of supportive relationships that benefit everyone. It can be hard to stay focused on a project if the team members keep changing, or you’re having to train new staff members every month. 

A recent survey suggests that 37% of people rate working with a great team as one of the main motivations for staying at a company. The same survey also found that 54% of people have stayed at a company longer thanks to its strong sense of community. 

Structure or Culture Issues

Staff turnover is inevitable for any company. However, if you notice a consistently high or growing employee turnover rate, this could be a sign that people aren’t comfortable in the workplace. Whether it’s an unsupportive manager or a company culture mismatch, it’s crucial to identify the issue and address it so you can ensure a happy, healthy, and fair work environment.

Extra Costs for Hiring and Training

Bringing new people into your company can be exciting. But it can also put a strain on resources, namely the cost and time involved in hiring, onboarding, and training. 

For companies that hire large groups of people regularly or seasonally, you might find yourself getting a better deal on recruitment support or training. If your employees are leaving more than you’d like, you could find yourself in a continual state of recruitment and training. Not only does this take up a lot of your time, but it’s costly and can disrupt the workflow for your existing employees. 

4 Ways to Find the Right Balance With Employee Turnover

Find the right balance with employee turnover

Every time an employee leaves, it’s an opportunity to introduce change for the better. Here are four ways you can make the most of staff turnover — from introducing new benefits to improving your processes.

1. Review Your Salary and Benefits Packages

Ideally, your exit interviews will give you valuable insight into why someone has decided to move on. If the reason is money related, it might be time to review your salary and benefits packages. 

Take some time to research how your salaries compare to those at similar companies — both locally and nationally. If you hire remote workers, compare international and remote-first salaries too.

If your compensation packages are low, find out if you can raise them. It’s also a good idea to explore other advantages you can offer, such as monthly allowances and stipends. For inspiration on perks and other fringe benefits that will make your company more attractive, see our list of 120+ stipends from leading organizations

2. Invest in More Ways to Help Employees Feel Appreciated

Pen and scissor illustration that reads "I appreciate you"

Research shows that an overwhelming 79% of people decide to leave a company because they feel unappreciated. Everyone wants to feel valued and acknowledged, so it’s no surprise that this is the top reason people leave.

To ensure this isn’t an issue in your firm, be generous with employee appreciation — let team members know when they’ve done something great. Revisit your bonus program or introduce one that rewards people for job performance and contributions in other areas like culture, support, and innovation. 

Booster programs are a great way to give your employees a little pick-me-up with coffee or snacks in the office. In a recent study of more than 100 office managers, 70% believe there’s a correlation between office food and productivity.

3. Offer Professional Development Opportunities

A whopping 93% of people would stay in their job longer if their company invested in their careers. That’s a massive amount of people who may have stayed if they felt supported. Even if you can’t always create new positions for people who crave career advancement, you can support your employees in other ways. 

Be open and transparent about realistic career paths, and explore how they can achieve their goals. Offer professional development stipends that give your employees access to learning, courses, training, and other avenues to further their development. Make it as easy as possible for people to stay curious and grow, and there’s a good chance they'll want to stay.

4. Improve Your Hiring and Onboarding Process

One of the main reasons employees leave is because they don’t feel aligned with a particular company culture or how things are done. Avoid this in the future with a clear and transparent hiring and onboarding process. 

Make it simple for people to figure out whether they’re a good culture fit from your website and hiring process. Let people know how you work, how much autonomy there is, and what’s expected of them.

Match the words you use in your hiring process with your culture, so people can get a feel for the environment before they join. Do the same with your onboarding process and use it as an opportunity to welcome people into your community. Share all the things you do to help them stay happy, focused, and motivated. 

Optimize Your Employee Turnover Rate for Greater Success

Employee turnover rate: Smiling lady dancing

While it sounds like a cryptic figure, your employee turnover rate is easy to calculate once you know how. And once you know what it is — and how it compares to the average — you can shape your organization to improve or sustain it. There are pros and cons that come with handling employee turnover, but there’s almost always something positive you can do about it.. 

Combine your newfound knowledge on employee turnover with a renewed take on pay and benefits, and you stand to shift your employee turnover rate in the right direction. To see how Hoppier can help you introduce a stipends program for your organization, book a free demo

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