Employee Turnover Rate: How to Calculate it (& Tips for Improvement) 

Employee turnover is costing companies money and resources. Find out why your employees quit and how to reduce your turnover rate.

July 10, 2020 By Sara Ana Cemazar Share on Twitter! Share on Facebook! Share on LinkedIn!
employee turnover
employee turnover rate

Many organizations today struggle with high employee turnover rates. On the one hand, employees are more responsive to the job market and they switch jobs more often. On the other hand, organizations are investing into improving their employees’ experience to retain them as long as possible. 

In this article, we will discuss employee turnover – what it is, how it is calculated and how to decrease it. As you will learn, one of the most successful ways to increase your employees’ job satisfaction and reduce employee turnover rate is employee recognition. 

📚 Therefore, check out our Employee Recognition and Rewards Solution Buyer’s Guide to find the right recognition solution for improving your employee experience. 

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What Is Employee Turnover  

Simply put, employee turnover represents a number or percentage of employees that leave a company. Employee turnover is usually calculated on an annual level and is one of the main HR metrics. Its direct opposite is employee retention. 

There are two kinds of employee turnover – voluntary and involuntary. Voluntary employee turnover happens when employees decide to quit, be it for relocation, better job opportunity or other circumstances. 

In turn, involuntary employee turnover presumes that a work relationship with an employee was broken by a company. Employers choose to terminate employees for various reasons, such as poor performance, bad company culture fit, unprofessional behavior or other. 

How to Calculate Employee Turnover Rate 

It is easy to calculate employee turnover rate. The formula goes as follows:

employee turnover formula

According to SHRM, an average turnover rate was 18% in 2016 in the US and does not fluctuate a lot. According to LinkedIn, the average turnover rate for all companies around the world is 10.9 percent. 

📚 However, employee turnover rate differs across industries. For example, retail, staffing and fast food industry have high turnover rates that go up to 300%, while finance and insurance industry are usually the ones with the lowest turnover rates. 

Top Reasons for Employee Turnover 

Employee turnover is costly for any employer, with research showing that it costs on average 6 to 9 monthly salaries to replace an employee.

employee retention

There are many reasons why employees quit. However, there is a good number of reasons for employee turnover that employers themselves can mend. It is important to know what causes employee turnover in order to prevent it, and by doing that, improve the employee experience in your organization. 

Poor management 

Managers with developed leadership skills facilitate employees’ growth, sense of ownership and high employee motivation. After all, one in two employees have quit their jobs to get away from their managers at some point in their career. 

Furthermore, research shows that managers account for an astounding 70% of variance in employee engagement. This is exactly why it is necessary to equip your management with training about appropriate management styles. 

More specifically, managers are in direct contact with your employees every day. If there is a high employee turnover in your organization, their input is crucial for discovering why it is so. After all, managers are not only responsible for employee engagement, but also for enabling good recognition practices, feedback, and boosting employee morale.  

employee turnover

Poor company culture 

A somewhat elusive term, company culture is an important factor in your employees’ daily lives. Many companies invest time and resources into creating positive company culture where their employees feel safe and comfortable working. 

Poor company culture where there is no trust among colleagues, no cooperation between departments and toxic behavior is usually responsible for employee disengagement, lack of motivation and poor job satisfaction. In the end, all these elements lead to employee turnover and are costly for your organization. 

Lack of acknowledgement for good work 

Yet another research shows that employee recognition is crucial for employee retention. 66% of employees say they would quit their jobs for lack of appreciation of their work. 

reasons for employee turnover

Furthermore, lack of employee recognition also leads to lower productivity. Employees need to know that they are valued and that their work is important for achieving organizational goals.  

Employee burnout 

Employee burnout represents not only a physical and psychological damage to employees themselves, but also indicates organizational problems like lack of wellbeing programs or culture of overworking. Once employees experience burnout, they are more likely to quit because of the severe stress imposed by their jobs. 

Moreover, employees who say they often or always experience burnout at work are 63% more likely to take sick days. In summary, employee burnout is costly since it not only induces higher employee turnover, but also absenteeism. 

Lack of opportunities for career advancement 

Millennials are now a dominant age group among employees, with statistics showing they will comprise 75% of US workforce by 2030. With younger generation in the workplace, the demand for career advancement is becoming one of the most desired ways of acknowledging employees’ work. 

career opportunities

Many companies today lack to promote within, while Millennials are prone to leaving workplaces that do not facilitate their growth. In fact, 49% of Millennials expect to quit their jobs within 2 years. 

Since employee turnover is costly, and especially in industries where new employees need longer training, it is cost-effective to facilitate employee growth, promote from within and allow younger workforce to take on more demanding positions in your company. 

Lack of feedback 

Employees have said it themselves – 65% of employees want more feedback to get a better sense of their performance. Without feedback, employees do not know which parts of their jobs to focus on or which skills to upgrade. Furthermore, the sense of growth and self-development is missing, thus leading to employee turnover. 

Poor communication 

One of the most important aspects of successful workplaces is good communication. It cannot be stressed enough how vital it is to ensure proper flow of information among colleagues and how crucial it is to ensure collaboration solutions. 

When communication is poor, your workplace is not functioning at its best and employees get frustrated by insufficient information or too much of it. In the end, poor employee communication strategy leads to poor employee engagement which is directly correlated with employee turnover. 

How to Reduce Employee Turnover 

Luckily, there are many techniques for reducing employee turnover. Moreover, the following techniques will not only improve your employee retention, but also enhance relationships among employees, increase job satisfaction, and make your company a better place to work at. 

Here are some of the ways you can reduce your employee turnover rates. 

employee turnover facts

Listen to your employees 

First of all, you need to know how your employees breathe. What do they like about their work? What bothers them? What would they change? 

You can ask these and more in an employee survey. By giving your employees voice, you are sending the message that their opinion matters. However, a common mistake among employers is to conduct employee surveys, but not act upon them. Therefore – do not just ask, listen! Use your employees’ grievances to pinpoint the biggest issues in your company and develop a plan for minimizing those issues.  

Companies also do mistakes by only sending company-wide surveys while it is important for managers to also show empathy and listen to their teams by sending more regular pulse surveys. Employee survey solutions should allow managers to create and easily disperse surveys among their teams for fast and efficient checkups to detect emerging problems. 

Employee surveys are easily carried out with employee survey solutions such as SurveyRocks, which allows automatization and user-friendly reporting so you and your managers can easily track your employees’ pulse. 

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Check your employees’ pulse with SurveyRocks.

📚 You can also check out these 70 employee survey questions to get some ideas for examining your own workforce’s feelings and opinions. 

Recognize your employees’ work 

As shown earlier, employee recognition is one of the most effective ways to reduce your employee turnover rate. Simply put, employees quit the jobs if they feel their effort is not recognized by their peers or managers. 

Apart from reducing turnover, employee recognition has numerous other benefits. According to HR professionals, employee recognition positively affects employee experience, engagement, happiness and work relationships. 

employee recognition benefits

You can start by simply thanking your employees for their good actions and behavior. In fact, 80% of Gen Y say they prefer on-the-spot recognition over formal reviews. 

📚 Of course, employee recognition has more effect if a recognition program is planned and executed thoroughly. Check out our Employee Recognition Playbook to learn how to set up an employee recognition program in your company and reap the benefits of this excellent employee retention method.

employee recognition playbook

Give feedback regularly 

Your employees need to know how well they are performing in order to improve their work, but also to get a sense of accomplishment when achieving a goal. Research shows that 43% of highly-engaged employees receive feedback at least once a week. 

Providing your employees regular feedback has the power to make employees more engaged, productive and aware of their performance. In such instances, your employees thrive and the chances for employee turnover decrease. 

Some of the best feedback practices include informality, orientation towards goals and continuity in exercising feedback. Ensure your employees have the right solutions for giving and receiving feedback, and disperse employee evaluation forms among your managers to keep their reviews consistent. 

Allow flexible work arrangements 

82% of employees said they would be more loyal and less likely to leave if they had more flexible jobs. Remote work is increasingly popular way of working that allows for a better work-life balance and adjustments in your employees’ personal schedule. 

📚 Read what are the benefits of remote work for employers and employees alike. 

Invest in employee wellbeing 

Employee wellbeing takes into account not only your employees’ physical, but also psychological health. By doing that, it has the power to decrease chances of burnout or illnesses that cause employee absenteeism and employee turnover. 

In fact, research shows that employee wellbeing is also cost-effective. Johnson & Johnson estimated that their wellness programs saved them $250 million on healthcare costs over the last decade. 

employee wellbeing effect

Foster team spirit 

Improving work relationships between your employees has many benefits. When your employees know each other better, they cooperate more effectively and trust their colleagues with sensitive tasks. 

By promoting team spirit, you also make your company a more comfortable place to come back to every day. Your employees feel like a part of the team or even work family, which makes it harder for them to quit their jobs and risk losing friendly atmosphere to work in every day. 

Therefore, try organizing informal meetings, lunches or team buildings to create bonds between your employees. You can also incorporate gamification features into your recognition or wellness initiatives to incite competition between teams, turning your workforce into a cohesive community. 

Communicate effectively 

As explained before, workplace communications are crucial for your employees’ experience. If your employees need to collaborate and communicate with others in order to deliver projects, they need to have a seamless experience of communicating and delivering their tasks. 

Effective workplace communication has many aspects which depend on your company’s size, industry and company culture. It is noteworthy to mention that too little communication can be as damaging as too much of it. Namely, if you do not segment your audience and send as much company-wide announcements as you can, your employees lose interest and stop reading your emails. 

Instead, opt for solutions that allow for communication with employees according to their role, location and other relevant parameters. Also, facilitate easy communication between managers and teams for more effective collaboration. Last but not leastprovide your employees with training on effective communication and develop their soft skills to improve the state of your workplace communication and reduce employee turnover. 

How Semos Cloud Can Help You Reduce Turnover in Your Company 

Semos Cloud is the world’s most complete Employee Experience Suite that can help your company improve its retention, transform company culture and increase your employees’ job satisfaction. 

With our Employee Recognition Platform JobPts, you can easily recognize your employees’ work and facilitate peer-to-peer recognition. This leads to decrease in employee turnover as employees are acknowledged for their good work. 

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Recognize and reward your employees with JobPts.

Furthermore, SurveyRocks allows leaders and HR professionals to better understand their employees’ engagement levels, concerns and feelings. 

We created FeedBck to facilitate 360 degree feedback, which is crucial for your employees’ sense of their own performance, growth and job satisfaction. 

As your employees’ wellbeing is crucial to their health, productivity and happiness, find out which features from our Employee Wellbeing Platform Healthain can help you achieve your employees’ wellness goals. 

For effective teamwork, you can use BoardFlo that allows a seamless collaboration experience.  

As one of the main staples of high employee retention, we also offer our customers efficient communication solution, Nurture, that enables you to segment your workforce and deliver personalized messages. 

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Keep your workplace informed with Nurture.