In a company, human resources are not static, that is, during a year some vacancies are usually filled, and some people also decide to request resignation from the position. Up to this point, it is a natural situation. Now, when the outflow of personnel is high over a period of time, it begins to worry. So how do you know if employees’ movement in and out is in an appropriate range? The answer is the employee turnover rate.
Calculating the personnel turnover rate is essential to know the number of people who have left the company and how many have joined in the same period of time. The result can give you an idea of the areas to improve, and the possible causes of abandonment and is also an indicator to measure the company’s work environment.
Causes and effects of personnel turnover in an organization
The first thing you should keep in mind is that staff turnover is not a negative aspect in itself. It is a phenomenon that occurs when workers leave their jobs voluntarily or involuntarily, being replaced by new employees. However, it is necessary to calculate the employee turnover rate, because a high number of departures can be indicative of organizational health.
The causes of staff turnover can be diverse, such as unmet expectations, better opportunities elsewhere, lack of training, bad work environment, few opportunities for professional growth or dissatisfaction with the salary they receive.
The truth is that, whatever the cause, personnel turnover has significant effects on the company. Below, we summarize them:
- Loss of talent in the team.
- Costs associated with hiring and training new workers.
- It can demotivate the team.
- The adaptation process for new members can be slow and time-consuming, which can negatively influence productivity at work.
Why measure the personnel turnover rate?
If you are still not convinced about calculating the staff turnover rate, now we are going to give you some more reasons. And this measurement will serve as a barometer of stability and job satisfaction. In this sense, it provides you with valuable information about human resources management, helping to identify problems that may be causing employees to leave.
A high turnover rate can be an indicator of deficiencies in the work environment, dissatisfaction with company policies, or problems with compensation and benefits. Therefore, by analyzing this parameter you will be able to develop strategies to improve staff retention, optimize personnel selection processes, and ultimately, strengthen corporate culture and increase overall productivity.
Calculation of personnel turnover rate
Now, we are going to explain how to calculate the staff turnover rate. The general formula to calculate it is:
R = (D / PE) * 100
Where:
R represents the turnover rate.
D is the number of personnel who left the company during the analyzed period.
PE is the effective average of the period. In this case, PE is calculated by adding the number of employees at the beginning of the evaluation period and those at the end. The result is divided by two.
When dividing D by PE, multiply it by 100 to obtain the result in percent.
To interpret the results keep in mind the following:
- A low turnover rate, generally less than 10% annually, can indicate good employee retention and a stable work environment.
- A moderate turnover rate, between 10% and 20% annually, could be normal in industries with high demand for labour or in seasonal jobs.
- A high turnover rate, greater than 20% annually, can signal internal problems such as job dissatisfaction, lack of growth opportunities, or leadership issues that could require immediate attention.
A practical case
Suppose a company starts the year with 100 employees and at the end of the year has 90 employees. Additionally, during this time, 20 (D) workers left the company. The calculation would be the following:
- First, we calculate the effective average, which in this case would be ( 100+90)/2. The result is PE = 95.
- Then, we fill in the data of the formula, where R= (20/95) *100. When performing the first calculation it would be 0.21*100.
- At the end of the calculation, we obtain a 21% turnover rate.
Taking into account what was explained above, this is a high index, so the company should take action.
Six tips to reduce staff turnover in the company
Finally, we share six tips that can be useful to reduce staff turnover in the organization. Take note!
- Improve the recruiting process: Make sure you hire people who are well-aligned with the company’s culture and values. Conduct in-depth interviews and evaluate not only technical skills but also cultural compatibility.
- Provide a positive work environment: Create a work environment in which employees feel valued, respected and motivated.
- Provides career development opportunities: Employees tend to stay at companies where they have the opportunity to grow and advance their careers. It offers training programs, learning and development opportunities, and internal promotion possibilities.
- Offer competitive benefits: Regularly review and update the benefits you offer, such as health insurance, pension plans, paid vacation days, and wellness programs.
- Encourage open communication and feedback: Create an environment where employees feel comfortable expressing their concerns, ideas and suggestions.
- Conduct exit analysis: When an employee decides to leave, take the opportunity to conduct exit interviews and obtain valuable information about the reasons for their departure. This way you can take steps to retain future employees.
Now it’s your turn to put all this into practice to retain staff in your company and achieve a good work environment. If you want to expand your knowledge about this and many other areas related to efficient workforce management, do not hesitate to follow us on the Educa.Pro blog.