All businesses, big and small, aim to have an optimal workforce at all times. Good employees are good for business. However, there is always a chance that an employee will leave the company at some point. It is part of the business world and employment cycle. Whether the reason is for a better opportunity or moving to another city, employers have to deal with people leaving and replacing them with new talent if they choose to. In running a business, employers pay close attention to employee turnover. Let’s find out more about what it is.
What is employee turnover?
Employee turnover refers to the number of workers who leave an organization and are replaced with new employees within a specific period. Usually, it is measured every year.
Is employee turnover the same as employee attrition?
Both employee turnover and employee attrition involve employees leaving an organization. Because of this, it is easy for some people to think that these terms mean the same thing. The truth is, they are not the same. What is the difference between the two?
Employee attrition happens when an employee leaves the company because of natural causes like retirement, job elimination, or even the passing of the employee. When the employee leaves, the company intentionally does not replace the employee.
On the other hand, employee turnover happens when an employee leaves for personal reasons or is terminated by the company. When the employee leaves, the company fills the vacant position by hiring a new employee.
Are there different types of employee turnover?
Yes, there are generally two kinds of employee turnover.
Voluntary turnover – this is when the employee chooses to leave on their own volition. There can be multiple possible reasons why employees voluntarily leave an organization. They may be looking for a better opportunity, want to take a break from working, do not see any room for growth in the company, or any other personal reason.
Involuntary turnover – this is when the employer decides to terminate an employee because of poor work performance, rule violations, behavioral problems, or other reasons.
How is employee turnover calculated?
Here are the steps to compute a company’s employee turnover rate:
Find out the average number of employees during the year.
Take the sum of the number of employees at the start of the year and the number of employees at the end of the year.
Divide this number by two.
Find the number of employees who left the company. Divide this number by the average number of employees during the year (you got this number in Step 1).
Multiply this number by 100 to get the employee turnover rate in percentage form.
Or, another way to compute for employee turnover rate is by using this formula:
Number of Employees Who Left Within a Specific Period
Average Number of Employees Within a Specific Period
Your company had 45 employees at the start of the year and 55 employees at the end of the year. Throughout the year, 5 employees resigned for personal reasons. What is your employee turnover rate?
Find out the average number of employees for the year.
45+ 55 = 100
100 ÷ 2 = 50 (average number of employees for the year)
Divide the number of employees who resigned by the average number of employees for the year.
5 ÷ 50 = 0.1
Multiply this by 100 to get the employee turnover rate in percentage form.
0.1 × 100 = 10%
Your company’s employee turnover rate is 10%.
Why is it important for businesses to measure employee turnover?
Businesses can benefit from measuring and understanding their employee turnover. When an employer identifies the reasons why employees leave, they can address problems as necessary. Gaining clarity on employee turnover will lead to a healthier organization.
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