What is Employee Turnover?
Employee turnover refers to the number or percentage of employees who leave an organization and are replaced by new employees. Measuring employee turnover can be helpful to employers that want to examine reasons for turnover or estimate the cost-to-hire for budget purposes.
When an employee resigns from the company of their own will, we call this voluntary termination. Often, this employee will give reasons for leaving their job like they found a new job, they want to move to another city/country, or they have to deal with a personal matter that makes it impossible for them to work. When an employee does this, usually, they give their employer a written notice a month or a certain period based on the company’s policy.
Involuntary Employee Turnover
When an employer terminates the employee’s contract due to poor job performance, absenteeism, or violation of work, it called involuntary employee turnover. This also can be called firing, termination, or discharge. Why is it called involuntary? Because it’s not the employee’s decision to leave the company. Layoff also could be considered involuntary turnover although layoff procedures are usually different from termination.
To calculate the turnover rate, it actually very simple. Let’s say in one year your company employs 100 new employees and during that one year, there are 20 employees that get their contract terminate or they resign on their own. So, in that year your company’s turnover rate is 20%.
Employee Turnover Affect on Company
The bigger the turnover rate on a company, the more it affects the company in a bad way. Here are the reasons why:
Unnecessary Expense Spent
A company with a high turnover rate usually spent unnecessary expenses. This is because the more employees termination or resignation, the company needs to find new employees. This means the company needs resources for the hiring process such as posting a new job opening online or offline, screening CVs, interviews, and checking candidates’ references. Furthermore, this can lead to HR department productivity decreasing.
There a lot of reasons why the company’s turnover rate is high. If the employees resign on their own, it is important for the HR department to do exit interviews to understand better why the employees decided to leave. The company can use the data for internal evaluation and make some new changes in the operation so it can lower the turnover rate.
Decrease in Productivity
To find replacements for employees that no longer work in the company, the HR department needs some time. It can be one month or longer. During this time, the employees’ workload can increase to cover the absence of employees, and later it can decrease their productivity.
Also, the HR department can be affected too in terms of productivity. They can use the time and energy they spend on the hiring and onboarding process for other things.
Lowering Company’s Brand Image
A company that has a high turnover rate usually has not so a good brand image. For example, company A is one of the top company in Singapore and have a good image but the turnover rate in this company is very high. Talented talents who have good qualifications will think twice before applying to this company because everyone wants to have job security.
This is the problem with a company that has a high turnover rate. They can be perceived as having no job security for the employees or have some management problems that make employees only work for a short period of time in the company.
Tips to Lower Employee Turnover Rate
There are no exact recipes on how to keep the turnover rate as low as possible, but there are some tips for it.
Plan Competitive Benefits and Salary
The first tip to keep the employee turnover rate as low as possible is to plan a competitive salary and benefits for the employees. If your company can’t afford to pay a high salary to the employees, try to cover it with benefits. Such as insurance coverage, leave options, retirement bonus, work from home option, flexible working hours, free snacks and/or lunch, and performance bonus.
Encourage employees to take training to improve their skills. These can be skills for work or for their personal development. If the training is for work purposes and there’s some fee for it, offer reimbursement for employees. This reimbursement may full reimbursement or partial reimbursement.
Tell the managers or supervisor to not contacting employees outside working hours and days except it’s for urgent matters. Don’t encourage employees to take overtime. Instead, encourage them to use their working hours wisely and effectively. Also, if they request leave, give them approval. Make sure that the employees maintaining a good work-life balance.
Employee turnover is a common thing in companies. However, if the turnover rate is high, it will impact the business in a bad way. Therefore, the company needs to do its best to prevent a high turnover rate.