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Employee Turnover

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What Is Turnover?

When employees leave a company and have to be replaced, that's called turnover. A certain amount of turnover is unavoidable, but too much can ruin a company.

Some employees will always retire, move away, go back to school, or leave the workforce. This level of turnover is not only unavoidable, it can be beneficial. It brings new people into the organization with new ideas and a fresh perspective.

Types Of Turnover

The two general types of turnover are voluntary and involuntary. Voluntary turnover is when the employee chooses to leave for whatever reason. Involuntary turnover is caused by layoffs and similar actions where the decision for an employee to leave is made by the company and not the employee.

As a general rule, voluntary turnover is the measure used to discuss and compare employers. It is the type most directly affected by the front line supervisors. Involuntary turnover, caused by layoffs, can be a long-term result of high levels of voluntary turnover.

What Is Turnover Rate

Turnover rate is a calculation of the number of employees who have left the company and it is expressed as a percentage of the total number of employees. Although turnover rate is usually calculated and reported as a percentage per year it can be for different periods.

How To Calculate Turnover Rate3

You calculate the turnover rate by dividing the number of employees who left by the total number of employees at the beginning of the period. This number is expressed as a percentage. You can calculate voluntary turnover, involuntary turnover, and total turnover.

For example, a company has 100 employees at the start of the year. During the year six employees quit and nine get let go in a layoff late in the year. The voluntary turnover rate for the year would be 6/100 or 6%. The involuntary turnover rate was 9/100 or 9%. The total turnover rate would be calculated as 15/100 or 15% because the six employees who left voluntarily and the nine who were laid off are added together.

What Can You Do About Turnover?

For involuntary turnover, the best thing you can do is manage the company well so you don't have to do layoffs. Certainly there are things that happen unexpectedly that put your company into financial difficulty and a possible solution for that is to lay off employees. First, you need to work harder so there are fewer of these "unexpected" problems. Second, layoffs are a short term fix, detrimental to the company, and should be the last resort.

To reduce voluntary turnover you make the pain of leaving higher than the pain of staying.

The greatest single influence on employee satisfaction is their direct supervisor. So if you are in upper management, make sure your supervisors are well trained.

Bottom Line

If you are a supervisor, whether you supervise front-line employees or managers, it is in your best interest to keep turnover low. It makes your job easier because you don't have the time and training costs of new hires to replace the employees who quit. It saves the company money because there are direct costs to having to find and hire new employees. And your own supervisor will evaluate you as a better manager if your voluntary turnover is low.
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