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The job market has been challenging over the past few years. In 2022, during the "great resignation," more than 4.5 million people, or about 3% of the U.S. workforce, quit their jobs every month. Some experts thought this trend would disappear, but a new study shows otherwise. LinkedIn believes that even more people will leave their jobs in 2024, with 46% of professionals considering it.
Employee turnover is a major concern for businesses of all kinds. An excessive turnover rate can cause problems in the workplace, lower confidence, and raise costs significantly. Organizations that want to keep a stable and engaged workforce must understand this trend, what's causing it, and what options might work.
Employee Turnover Meaning
Employee turnover is a broad concept that includes more than just the quantity of employees that quit an organization. It is an essential indicator of an organization's health, showing its capacity to recruit, retain, and motivate employees.
When an employee leaves the company to seek better chances, career advancement, or personal reasons, this is called voluntary turnover. However, if the employer initiates a termination, usually through layoffs, dismissals, or forced resignations, this is called involuntary turnover.
When many employees leave, it can be extremely harmful to the business. It can cause higher costs for hiring and teaching new employees, less work getting done, the loss of institutional knowledge, and harm to morale and the company's culture. Having many employees leave may negatively impact the company's image and make it harder to hire the best talent.
How to Calculate Employee Turnover Rate
Employee turnover rate is an important measure that shows how successfully a company retains their employees. A high turnover rate may suggest underlying concerns such as low employee morale, insufficient salary, or a lack of growth possibilities. Understanding a company's turnover rate might assist in identifying and addressing these concerns.
Using the following formula, a company can determine the staff turnover rate, which is broken down into monthly and annual periods of time:
1. Monthly Employee Turnover Rate
The monthly employee turnover rate indicates the number of employees that have stayed on during a specific month. This is the formula:
Monthly Employee Turnover Rate% : ( Employees who left in a month / Average number of employees in a month ) x100
First, to calculate the monthly employee turnover rate, identify the number of employees who left the organization during that month, regardless of their reason. Next, figure out the average number of employees by adding up the number of employees at the beginning and the end of the month, then divide by two. Take the number of employees leaving and divide by the previous calculated average. Finally, multiply the number by 100 to get a percentage of the turnover rate. For example, an average company with 50 employees would have a 4% turnover rate if two employees left in a month.
2. Annual Employee Turnover Rate
Calculating the annual employee turnover rate provides a helpful summary of how effectively an organization keeps staff in the longer term. This metric measures the rate at which employees leave a company within a year. To find this, use the following formula:
For example, in 2023, a company had 75 employees at the beginning and 80 employees at the end of the year. During the year, 5 employees left the company.
Then, the company had an employee turnover rate of approximately 6.45% for 2023.
This annual turnover rate simply evaluates a company's total employee retention success. Monitoring this rate over time can reveal patterns and possible issues that need to be fixed, such as high turnover in specific departments or during particular times of the year.
Average Employee Turnover Rate
Knowing the average employee turnover rate enables companies to evaluate their performance. A recent study from the Work Institute states that the global turnover rate has gone up from 18% in 2023 to about 20% in 2024. This rise shows that businesses are still struggling to retain their employees.
It's important to realize that turnover rates can be quite diverse depending on the business, its size, location, and the state of the economy.
Here is an example of the average turnover rate in the US by business, as reported by Mercer.
What Causes a High Employee Turnover?
High employee turnover can be a sign of underlying issues within a business. Understanding these issues is the first step toward developing effective solutions. Here's a closer look at some common causes of high turnover:
1. Lack of Opportunities for Growth
Employees who feel stagnant in their jobs and can't see a clear way to move up or improve their skills are more likely to look for challenges and growth elsewhere.
2. Inadequate Compensation and Benefits
Uncompetitive pay and benefits packages might make employees feel undervalued, leading them to consider other career possibilities. To attract and retain talent, it is important to compare benefits and compensation regularly to industry standards.
Also read: Employee Benefits in Indonesia: What You Need to Know
3. Poor Work-Life Balance
Burnout, an excessive workload, and a lack of flexibility can all lead to dissatisfaction and resignation.
4. Toxic Work Environment
Poor management, a lack of appreciation, and interpersonal conflicts are all symptoms of a toxic work environment, which can lead to employees leaving the organization.
5. Lack of Purpose and Meaning
If employees don't feel connected to the company's mission or see value in what they do, they may lose interest and look for other opportunities that will make them satisfied.
6. Little to No Feedback or Recognition
Employees need to believe that their contributions are recognized and appreciated. Employees who receive regular feedback, both negative and positive, are more likely to comprehend their performance and feel engaged in their jobs.
7. Bad Hiring Procedures
Poorly specified job descriptions, insufficient screening methods, and a lack of concern for cultural fit might result in hiring people who are not a good fit for the organization or the function, resulting in early leaves.
How to Decrease Turnover and Increase Employee Retention
Retaining employees and reducing turnover is an ongoing process that needs a complete method focused on making employees feel valued, supported, and motivated.
1. Invest in Employee Development
Help employees grow by offering learning and development opportunities such as training, workshops, and mentorship programs. Set up clear career paths for the employees to give them a sense of direction and encourage them to move up in the company.
2. Offer Competitive Compensation and Benefits
Ensure that the industry and region offer competitive salary and benefits packages. Review compensation and benefits offerings regularly to verify that they are in line with employee needs and trends in the market. To reward and motivate employees, consider using incentives that are based on performance.
3. Promote Work-Life Balance
Offer flexible work options, like the opportunity to work from home or flexible schedules, to help employees find a healthy work-life balance. Encourage an atmosphere where employees aren't afraid to take time off to recharge and avoid getting burned out. Make sure that employees don't have excessive work and give reasonable deadlines.
4. Cultivate a Positive Work Environment
Create a healthy and inclusive environment in which employees feel respected, valued, and supported. Encourage employees, as well as management, to express themselves to each other and give feedback. Recognize and reward employees for their work to make them feel valued and motivated.
Also read: 10 Best Practices for Managing Remote Employees in 2024
5. Communicate the Company's Vision and Values
Communicate the company's goal, vision, and values clearly so that employees understand their part in the larger picture and feel linked to the company's purpose. To develop a sense of ownership and involvement, consistently reinforce business principles and involve employees in decision-making processes.
6. Gather Employee Feedback
Regular surveys, open-door policies, and exit interviews are excellent methods to get feedback from employees. Take this feedback constructively to find ways to improve and to address employee issues directly.
7. Focus on Onboarding and Integration
Create a thorough training program to help new employees adjust to their new roles and the company. Assign mentors or buddies to offer guidance and support. Check-in with new employees frequently to make sure they're settling in and to address any concerns they may encounter.
8. Leverage Technology
Use HR technology to improve operations, track employee data, and gain insight into workforce trends. To give employees more control over their HR needs, encourage them to use online portals or mobile apps for self-service.
Reduce Turnover with Talentport
High employee turnover can be a significant drain on resources. Reduce the risks involved in frequent hiring and training by forming a team of dedicated remote specialists with Talentport. Our thorough screening procedure ensures that you are linked with top-tier talent, lowering the likelihood of early exits and increasing your company's productivity.
Start building your remote team today! Explore Talentport and find your professional talent match.
