Let’s Talk About Employee Turnover and What’s “Normal”

#HR

Definition
Normal employee turnover for a small company
Normal employee turnover for a big company
What causes a high employee turnover rate?
Managing dysfunctional employee turnover rates

Employee turnover is a natural part of any business as job-hopping becoming increasingly common in today’s workforce. However, when multiple employees leave a company within a relatively short period, managers need to start asking important questions. To gain clarity, it’s essential to calculate a healthy employee turnover rate and compare the staff attrition rate with industry benchmarks.

Understanding a healthy turnover rate provides valuable insight into the stability and health of a business. It measures the percentage of employees who leave a company over a specific period, typically annually.

Business owners and HR managers can gauge whether their good employee turnover rate falls within a normal range or exceeds expectations by comparing this rate to industry averages.

Definition

Employee turnover, a term widely recognised in the business world, refers to losing employees within a workforce. It encompasses various forms of employee separation, including layoffs, location transfers, resignations, retirements, terminations and unfortunate instances of employee fatalities.

Voluntary and involuntary turnover

Voluntary turnover occurs when employees willingly leave their jobs, often seeking better opportunities, career advancement or improved work-life balance. It may be driven by factors such as dissatisfaction with job conditions, limited career growth prospects or conflicts within the workplace.

Involuntary turnover involves employees being separated from their jobs due to circumstances beyond their control. This can include layoffs resulting from organisational restructuring, poor performance-related terminations or the end of fixed-term contracts. The employer typically initiates involuntary turnover, which can have various implications for the departing employee and the company.

Normal employee turnover for a small company

High turnover is a common aspect of business, affecting organisations of all sizes. When it comes to small and mid-sized businesses (SMBs), understanding the normal and low staff attrition rate is critical for effective talent management and business planning.

Research shows that SMBs have a higher turnover rate than larger organisations. According to industry data, the average turnover rate for SMBs stands at 12.0%, notably higher than the overall industry average rate of 10.6%. This higher rate can be attributed to several factors inherent to the nature of SMBs.

Factors contributing to higher monthly turnover rates in small companies include limited resources and growth opportunities in comparison to larger corporations. Smaller organisations often have fewer positions and narrower career paths, which makes retaining ambitious and growth-oriented employees challenging.

Moreover, SMBs may have more limited budgets for employee benefits and career development initiatives, which can impact employee satisfaction and retention.

Managing employee turnover with time tracking

TimeTrack’s HR Reports are instrumental in identifying areas of improvement. Analysing employee workload, productivity metrics and time utilisation data will provide valuable insights into potential time management issues.

Normal employee turnover for a big company

Research indicates that big companies generally experience a lower turnover rate than smaller ones. On average, enterprises boast a turnover rate of 9.9%, notably less than the overall average turnover rate percentage. This can be attributed to various factors inherent to the structure and operations of big companies.

One factor contributing to lower turnover in large enterprises is the greater stability and resources they can offer compared to smaller organisations. Big companies often have more extensive career paths, diverse job opportunities and robust employee benefit programs.

This provides employees with a sense of security, growth potential and a range of options for advancement within the company, reducing the likelihood of seeking external opportunities.

How to calculate employee turnover rate

To calculate the staff attrition rate, three key figures are required:

The number of employees who left during a specific time frame
Number of employees at the beginning of that time frame
Staff at the end of that time frame

The first step is determining the average number of employees during the set time frame. This is done by adding the number of employees at the beginning of the time frame to the number of employees at the end of the time frame and then dividing the sum by two:

Average number of employees = (Number of employees at the beginning of the set time frame + number of employees at the end of the set time frame) / 2

Once the average number of employees is obtained, the employee churn rate can be calculated using the following formula:

Employee turnover rate = (Number of employee departures / Average number of new employees in) x 100

This formula calculates the annual turnover rate as the percentage of employees who have left the company concerning the average number of employees. The resulting turnover rate provides valuable insights into employee attrition within the organisation.

What causes high employee turnover?

Various factors can influence high turnover, and understanding the top reasons behind it is important so companies may address these underlying issues and improve retention strategies.

Here are some of the key reasons that contribute to a high employee churn rate:

Lack of career opportunities and advancement

Employees who feel limited growth prospects within the company may become disengaged and seek opportunities elsewhere. The absence of clear career paths, development programs and promotions can lead to frustration and ultimately result in top talent leaving for organisations that offer better prospects for advancement.

To mitigate this, companies can provide regular training and development opportunities, create mentorship programs and establish transparent performance management systems that enable employees to see a clear path to advancement.
Poor time management

Poor management within an organisation can significantly impact employee satisfaction and retention. Managers play a crucial role in setting the tone for efficient time management practices. When managers are ineffective or fail to provide clear guidance and feedback, it can create a negative work environment that affects employee morale and job satisfaction.

Employees who experience poor time management practices may feel undervalued and unsupported. They may struggle with work overload, unrealistic deadlines, or a lack of prioritisation, leading to increased stress.
Workload and work-life balance

Workload and work-life balance are critical factors in maintaining employee satisfaction and retention. Employees who consistently face a heavy workload without sufficient time for personal commitments and self-care are more likely to experience burnout and seek opportunities elsewhere.

To address this challenge, organisations should implement people strategies that prioritise work-life balance and support employees in managing their workload effectively.

This can include offering flexible work arrangements, such as remote work options or flexible working hours, to empower employees to balance their personal responsibilities better. It’s also important to establish realistic workload expectations by assessing and adjusting workloads to ensure they align with employees’ capabilities and resources.
Lack of recognition and appreciation

Employees want to feel valued and appreciated for their contributions. Companies that fail to recognise and reward employees’ efforts can decrease motivation and job satisfaction.

Employees who feel undervalued may seek opportunities where their contributions are acknowledged and rewarded. By incorporating an employee forum, businesses can create a space where employees can actively participate in shaping the work environment.

Compensation and benefits

Compensation plays a significant role in employee retention. If employees feel their compensation is not competitive or fair compared to industry standards, they may explore job opportunities that offer better financial rewards.

Similarly, inadequate benefits packages and perks can contribute to higher employee turnover reduction and rates. Employers should regularly review and benchmark their compensation and benefits offerings to remain competitive with industry standards.

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Managing dysfunctional employee turnover rates

Reducing employee turnover requires a thoughtful approach that addresses the underlying issues and creates a positive work environment.

Prioritise your recruitment strategy

It starts with hiring the right employees. Develop accurate job descriptions, streamline the recruitment process and ensure a thorough evaluation of candidates to help identify individuals who are the best fit for the organisation.

Invest in onboarding new staff

The onboarding process is critical in setting the tone for an employee experience within the organisation. Providing comprehensive training and support during the initial weeks of employment can help new hires integrate smoothly into the company culture, understand their roles and responsibilities, and feel valued and supported.

A positive onboarding experience can foster employee loyalty and commitment, reducing the annual turnover rate and improve employee retention.

Elicit and respond to employee feedback

Open and effective communication is essential for building a strong company culture and addressing employee concerns. Actively seek employee feedback through surveys, one-on-one meetings or team discussions.

By creating an environment where employees feel heard and valued, organisations can identify areas for improvement and implement changes that enhance the employee experience, satisfaction and engagement.

Engage and recognise your team

Employee engagement is a key driver of retention. Encourage employees to take on new challenges, provide opportunities for growth and development and recognise their achievements and contributions.

Engaged employees are likelier to feel a sense of purpose, job satisfaction and loyalty to the organisation. Regularly assess employee engagement levels and implement strategies to foster a positive and motivating work environment.

Conclusion

Creating a stable and positive work environment is essential for reducing low employee turnover rate and reaping the associated benefits. By prioritising the needs and preferences of your team and taking proactive steps to improve their work experience, you can foster a sense of stability and satisfaction that encourages employees to stay in their roles for longer periods.

This, in turn, contributes to a healthier bottom line for the organisation. By reducing monthly employee turnover rate, businesses can save on costs associated with recruitment, training, and human resources management functions while cultivating a more cohesive and high-performing team.

Hibba Imran

Being a digital marketer, I have been working with different clients and following strict deadlines. For me, learning the skill of time management and tracking was crucial for juggling between tasks and completing them. So, writing about time management and monitoring helps me add my flavor to the knowledge pool. I also learned a few things, which I am excited to share with all of you.

Let’s Talk About Employee Turnover and What’s “Normal”

#HR

Table of Contents

Definition

Voluntary and involuntary turnover

Normal employee turnover for a small company

Managing employee turnover with time tracking

Normal employee turnover for a big company

How to calculate employee turnover rate

What causes high employee turnover?

Lack of career opportunities and advancement

Poor time management

Workload and work-life balance

Lack of recognition and appreciation

Compensation and benefits

Save time with our Time Clock

Managing dysfunctional employee turnover rates

Prioritise your recruitment strategy

Invest in onboarding new staff

Elicit and respond to employee feedback

Engage and recognise your team

Conclusion

Time Tracking

Planning

Info

Company

Solutions