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Turnover Rate

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HR Glossary

Turnover Rate

What is Turnover Rate?

The turnover rate refers to the percentage of employees that leave a company in a given period of time. Employee turnover is when employees of a company leave the company and are replaced by new employees. 

A high turnover rate indicates wrong hiring decisions and costs the company a lot of time and money. Employee turnover bears huge costs for the companies. Companies tend to avoid high turnover rates as it helps in building a stronger workforce and avoids any unnecessary costs. 

Employee turnover can be divided into two subcategories-

  • Voluntary turnover-  It means when employees of the company leave the job voluntarily due to many reasons of their own.
  • Involuntary turnover- It means that the employees of the company are made to leave their job forcefully. 

What Causes Employee Turnover?

Here are some of the most common reasons for employee turnover- 

  • Toxic work environment- Employees tend to leave the companies where their ideas are not valued. A toxic work environment takes a toll on everyone’s mental health. If a company doesn’t have a good organizational culture and has a toxic environment, the employee turnover would be comparatively higher in that company. 
  • No space for growth- If an employee feels that there is no space left for them to grow in their present company, they tend to leave that company. Everyone likes growth in life and doesn’t want to settle for stagnancy or boredom in a job.
  • Lack of benefits- If the employee feels that they are not being compensated according to their work, they tend to leave their jobs. Employees need fair compensation and benefits for the work that they do.
  • Employment termination- It is an example of involuntary turnover. It happens when the company fires an employee and replaces them with another employee. There might be different reasons for the company firing an employee, for eg: poor skills, bad behaviour, etc.

How to Calculate Turnover Rate?

The turnover rate is the percentage of employees that left the company within a given period of time. 

It is important for companies to calculate and know about their turnover rate so that they can analyze it carefully and make HR the hiring decisions accordingly.

  • The first step towards calculating the turnover rate is to find out the total number of employees working in your company.
  • The next step would be to calculate the average number of employees in your company,
  • After that, calculate the number of employees that have left the company in a given period of time, say one month.
  • Divide the number of employees that left the company by the average number of employees in your company to get the employee turnover rate of your company.
  • You can use this process to find the monthly turnover rate, annual turnover rate, etc.

We hope this blog helped you understand the turnover rate. For more informative blogs;

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