The turnover rate of a company directly influences the running of a business in different ways. Turnover rate affects employee performance but it also has a decisive influence on the employer branding of your company.
- What does a turnover rate mean?
If a given position or multiple positions end up unfilled frequently and the same position has to be filled regularly, then there’s a high turnover rate.
- Kinds of turnover
1. Voluntary rotation: takes place when an employee leaves the company voluntarily.
2. Involuntary rotation: takes place when an employee leaves the company involuntary.
- The reasons of the turnover rate at your company
In some cases the main motive will be the employee’s responsibility, but a lot of times it may have to do with the way of doing things in your company.
- Consequences of a high turnover rate
Low productivity in your employees is a direct cause and one of the most visible. Additionally, constant changes worsen the atmosphere and fail to create a shared company culture.
- The cost of a high turnover rate
The costs associated to employee rotation are quantifiable and have an important economic impact in your company.
- Lowering the turnover rate
Offering benefits you can lower the turnover rate in your company.
What does a turnover rate mean?
We can say that each time an employee enters or exits a company there’s a rotation in staff. If a given position or multiple positions end up unfilled frequently and the same position has to be filled regularly, then there’s a high turnover rate.
A high employee rotation has some pretty negative effects on a company and if you find yourself at that point is important that you stop and analyze why that’s happening so you can take action and make the right decisions to lower it.
To conduct a better approach of the turnover at your company you have to take into consideration the data extracted from all the people that has abandoned your company at least this last year. In this calculations you shouldn’t include those who have abandoned the company for reasons like retirement, you should only take into account people who have left because they weren’t happy with the company, their position or their responsibilities.
Kinds of Turnover.
The truth is, there’s not just one kind of job rotation but can be divided in two big groups:
Like the name says, this kind of job rotation takes place when an employee leaves the company voluntarily. The causes for this can be different, but the more common are: finding a better job in a new company, disagreements between colleagues, consider you aren’t being appreciated or paid enough and not adapting to the company’s culture, etc.
Evidently, you can never satisfy everyone nor the condition you offer will be to the liking of all, but within your possibilities you have to create a comfortable atmosphere in your company and recognise the merits and achievements of your employees so they can feel validated and their work recognised and compensated.
These are causes that come after hiring an employee but sometimes they can also come from a bad recruitment process, where the new employees are hired without paying enough attention to them matching the position or the company culture.
2-Involuntary job rotation
If the worker leaves the company not because they want but because they have to be fired, then the employee rotation is involuntarily. And even then you have to think about how that can be caused by something that’s being done wrong. These kinds of involuntarily rotations can’t be avoided 100%, but it’s best to minimize them to the lowest possible.
The reasons of the turnover rate at your company
In some cases the main motive will be the employee’s responsibility, but a lot of times it may have to do with the way of doing things in your company. In these cases one has to think, what can I do to lower the turnover rate in my company? So here you’ll find some of the more common causes of turnover and a few advises on how to reduce it.
Not being able to grow inside the company
No one likes to feel stuck in their personal or professional lives, everyone searches for an evolution in their job and inside the company. A discouraged employee means a cost of 3.400€ for every 10.000€ of their salary, discouragement means apathy and demotivation and that’s the least you want happening to your business.
Avoid that creating an environment with opportunities for your employees. Give them training for their personal growth and tools that will help them improve the abilities required for their job. Show your workers -with promotions and benefits- that those who work, win.
The salary is not right
Sometimes you won’t be able to offer a competitive salary to fight other companies. In those cases you have to try and complement what you offer your candidates and make your job proposition more attractive. Try to not distance yourself from the average salary in your sector for a similar job and then catch up and increase the appeal with flexible retribution.
Most companies still work with a hierarchical system, which is good to see who controls who and who commands who but that can bring some problems too. You don’t need to eliminate this hierarchy, you just have to make clear everyone’s responsibilities and who answers to who and who supervises who.
Bad working environment
A company where everyone is bickering and quarrelling is a direct path to employees leaving. No one likes to work in a toxic environment where they don’t feel at ease, and the more this bad feeling lasts the surer workers will change jobs.
You don’t need to be friends with everyone, but to gain your employees loyalty you have to make them feel integrated and create an atmosphere of camaraderie and understanding. Have in mind employees spend at least a third of their day working, and spending that time doing so in a bad mood ends up taking its toll.
An employee works for the salary they get, but not only that. There are a lot more motivations than money that will make them feel comfortable in your company. One motivation can be to share their work with their colleagues. If an employee’s goal is not aligned to the goals of the team and company they won’t match and will end up clashing.
Bad recruitment process
Choosing a good candidate for a position is more than picking the best CV. A good candidate will have the abilities and skills needed for the job but you have to watch out and make sure this person matches with the company culture. It won’t be of any use to hire the best professional if they don’t share your values and visions. The cost of a bad hire can be very high.
Consequences of a high turnover rate
At this point we’ve seen the principal causes for a high employee rotation. Let’s see now the consequences of that. Keep reading and check what you’ll face in case of a high turnover rate.
Low productivity in your employees is a direct cause and one of the most visible. If there’s always a vacant position everyone will have more work to do, leaving some responsibilities unattended and not completed. And even when you finally have someone for the position they will need an adaptation period, they won’t be productive from the start and the internal working of the team will be affected. Employee rotation costs can be up to a 150% from the new employee salary.
Given the high amount of time they spend together, employees end up being like a family. That means that every change inside a company can have an important emotional impact in the whole team. Constant changes worsen the atmosphere and fail to create a shared company culture. Furthermore, the employees that remain in the company will think they could be the next to leave, and that doesn’t help retaining talent or improving work relations.
Being the company with the best job conditions and the one where all employees are satisfied generates a good employer branding. A satisfied worker is a very good way to attract and retain talent. Don’t let employee rotation affect your employer branding.
The cost of a high turnover rate
The costs associated to employee rotation are quantifiable and have an important economic impact in your company. the lower productivity we talked about, the need to train new employees and other factors to take into account sum up to a number you shouldn’t let to happen.
Turnover rate estimates
If you want to calculate a turnover rate you have to measure the numbers of comings and goings in your company in a given period of time. If you take a company with 200 employees where in a years there’s been 20 incorporations and 10 leavings de turnover rate will be 5%. The mathematical formula should be the following: ((20-10/200)*100).
Once you have the results you have to analyze them and see if you are among the standard turnover rate or higher. Have in mind that a turnover rate of a 0% is not good either. Yes, it reflects positively your skills to retain talent but in the long run it could mean an inability to change and evolve.
Now with Factorial Pro you can get turnover reports and HR analytics in your company.
Lowering the turnover rate
Offering benefits you can lower the turnover rate in your company. Benefits and flexible payment plans, as we’ve said, are the best way to retain your talent and optimize the ROI of your recruitment processes.