Glossary of Human Resources Management and Employee Benefit Terms
Employee turnover, or employee turnover rate, is the measurement of the number of employees who leave an organization during a specified time period, typically one year. While an organization usually measures the total number of employees who leave, turnover can also apply to subcategories within an organization like individual departments or demographic groups.
Divide the sum total of the number of employees that leave within a specific period of time (month, quarter, year, etc.) by the average number of employees that work within the selected time frame. Multiply that number by 100 to calculate the employee turnover rate.
For example, if you have an average of 140 employees working during a month’s time and 26 employees leave, your turnover rate would be around 18.6 percent.
The equation would read as follows: (26/140)*100 = 18.57
Do not include temporary hires or employees who go on temporary leave in either factor of the equation. Incorporating these kinds of temporary shifts in workforce numbers will skew your turnover rate higher than it really is.
Voluntary turnover is any instance in which an employee actively chooses to leave. This can happen as a result of better job opportunities elsewhere, conflict within the workplace, disengagement, and more. And remember, if you are calculating turnover within a single team or department, turnover does not have to mean employees who leave the organization—just the group you’re analyzing.
Involuntary turnover is when an employer chooses to terminate an employee or remove them permanently from the group in question, possibly because of poor performance, toxic behavior, or other reasons.
Turnover is natural for any organization. While low employee turnover is the goal for most organizations, what determines low vs. high turnover is how actual turnover compares to a typical or expected rate, which can change depending on industry, job type, company size, region, and more—and that rate is very rarely zero. For example, an insurance company should not base their analysis of organizational turnover on the expected turnover rate of a fast food restaurant, and vice-versa.
There are many reasons why employees leave a department or an organization, and while some reasons for turnover are negative, some turnover is expected and perfectly normal. What’s bad is when turnover happens for negative reasons and/or when turnover happens at an unexpected rate. Some of the most common reasons for turnover include the following:
Lack of opportunity for growth or career development
Natural career progression
Internal promotion or transfer
Negative feelings towards boss or management
Toxic work environment
Family or life event
Lack of work-life balance
Understanding the causes of employee turnover can help businesses make the necessary changes to maintain their workforce at the desired level. Because of the many variables affecting turnover, benchmarks for acceptable or ideal turnover vary. It’s important for organizations to take individual and industry-related factors into account as they pinpoint their target turnover rate, study the reasons behind their voluntary and involuntary turnover, and make changes to impact the employee turnover rate for their own workforce
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