Employee Turnover is the number of employees to be replaced by the organization in a given period of time. When an employee leaves or is asked to leave, organization has to hire a replacement as long as the position exists. The total number of employees leaving and being replaced is called Employee Turnover and is estimated as percentage .
Employee turnover is calculated for a fixed periods of time usually annually. However it can be calculated on monthly basis also. If an employer is said to have a high turnover it means that employees of that company have a shorter average tenure .Employee turnover is often used to compare companies and businesses.
Formula to calculate employee turnover rate is – (No of separations/total employees )*100
• Terminations = 300
• Number of employees = 500
Employee Turnover =( 300/500) * 100 = 60
Impact on business
A high turnover rate is not favorable for the business as replacing an employee involves various direct and indirect costs and consequences. Some of them are listed below –
- Recruitment of replacements cost including advertising, screening and interviewing, and services associated with selection, references and background check, psychological testing etc.
- Administrative hiring costs.
- Lost productivity associated with the interim period before a replacement can be placed on the job.
- Lost productivity due to the time required for a new worker to get up to speed on the job.
- Costs of training the new employee.
- Costs associated with the period prior to voluntary termination when workers tend to be less productive.
Tips to control Employee Turnover
Some measures to control employee turnover rate are-
- Hiring the right candidate for the job and set clear job expectations.
- Maintain competitive compensation structure , as per the industry standards.
- Maintain employee engagement activities and a positive work environment.
- Good reward and recognition scheme.
- Make clear career path for each position and employee.
Employee Turnover vs Attrition
Though the terms are often used interchangeable in HR , they have relatively different scope and impact. The major difference between the two is that when turnover occurs, the company seeks someone to replace the employee. In cases of attrition, the employer leaves the vacancy unfilled or eliminates that job role.