Advice

Staff turnover: How to calculate it, what causes it and how to reduce it

13 min read

03 April 2019

Recognising that you have a problem is often the first and most important step to solving it. But with so much else to keep track of in a small business, it can be difficult to identify staff turnover as an issue.

This all changes when you are able to quantify your staff turnover rate and better understand the state of your business. Real Business explores what staff turnover is, its causes and solutions, and how to calculate your staff turnover rate.

What is staff turnover?

Staff turnover is the number or percentage of employees leaving your organisation during a certain period. Particularly high or low staff turnover generally indicates that you need to make some changes within the business.

Companies tend to assess employee turnover on a monthly or annual basis, but you can choose whichever time period is most useful to your business.

Learn what staff turnover is

High or low staff turnover often means you need to make some changes.

You can express staff turnover in different ways. It’s often helpful to represent it as a percentage of your total workforce. Alternatively, you could simply represent it as the number of employees who left in that time period.

What’s more, categorising staff turnover as voluntary/involuntary and desirable/undesirable will help to produce useful insights into staff retention. Analysing the turnover rate of employees leaving before 12 months also helps to indicate whether retention is an issue or not.

Staff turnover vs. staff attrition

You may hear the terms staff turnover and staff attrition used interchangeably. They are actually two different things. Staff attrition occurs when you do not fill a position with a new employee. It also occurs naturally, when you lose employees due to personal health, retirement, resignation or eliminating a position, for example.

How do you calculate staff turnover?

For such a useful figure, the good news is that it’s fairly easy to calculate your staff turnover rate. Here’s how you can work it out by month or by year, with some examples.

Calculate staff turnover by month

Let’s use January as an example.

  1.   Add the number of staff you had at the beginning of January to the number of staff at the end of January
  2.   Divide that number by two. You now have the average number of employees in January
  3.   Divide the total number of leavers in January by the average number of employees in January
  4.   Multiply that number by 100. You now have your January staff turnover as a percentage

Now let’s say four of your 202 employees decided to leave in January.

  1.   Add 202 to 198 = 400
  2.   Divide 400 by 2 = 200
  3.   Divide 4 by 200 = 0.02
  4.   Multiply 0.02 by 100 = 2%
Calculate your staff turnover rate by month

Here’s a visual representation of the sum from brightHR.

Calculate staff turnover by year

The calculation for annual staff turnover is the same. Here’s 2018 as an example:

  1.   Add the number of staff you had at the beginning of 2018 to the number of staff at the end of 2018
  2.   Divide that number by two. This is your average number of employees in 2018
  3.   Divide the total number of leavers by the average number of employees
  4.   Multiply that number by 100. You now have your 2018 staff turnover as a percentage

Now let’s say five of your employees decided to leave in 2018. You had 45 employees at the beginning of 2018, and 55 at the end.

  1.   Add 45 to 55 = 100
  2.   Divide 100 by 2 = 50
  3.   Divide 5 by 50 = 0.1
  4.   Multiply 0.1 by 100 = 10%
Calculate your annual staff turnover rate

Here’s a visual representation of the sum from workable.

UK staff turnover rates by industry

Here are the 2018 average turnover rates in the UK by occupational group according to XpertHR:

What causes high staff turnover?

People leave jobs for all sorts of reasons, and it can be hard to find out why they really left.

Here are some of the most common reasons for high staff turnover. It might surprise you that higher pay isn’t one of the main reasons employees quit their jobs, although it is a factor.

1. Lack of personal development

We’re often at our happiest when we’re learning, when we feel that we’re developing. This is no less true at work than elsewhere. Opportunities for growth, progression and to make decisions at work are highly significant.

Indeed, a survey by docebo found that 59% of employees consider learning opportunities important to workplace happiness. The same survey highlighted that lack of development at a company is a reason to leave. 36% (and 48% of millennials) said they would quit a job due to a lack of learning and development opportunities.

Reduce staff turnover by encouraging personal development

Encouraging professional development helps to reduce staff turnover.

2. Too much work

There’s always too much to do in too little time. But being overworked is different, real – and dangerous for employees and employers alike.

Gallup recently surveyed 7,500 full-time employees and found that 23% reported very often or always feeling burned out at work. Nearly twice that number said they sometimes felt burned out.

What’s more, overwork is another reason for people to leave a company. The survey found that overworked employees were 2.6 times more likely to look for another job than their colleagues. They were also 63% more likely to take a sick day.

3. Lack of appreciation

Don’t underestimate the power of recognition and feedback. Everyone likes to know that their work has an impact and a purpose.

Simply saying thank you for a piece of work can go a long way. Offering rewards and praising good work are other simple solutions that can boost employee retention.

79% of people who quit their jobs cite ‘lack of appreciation’ as their reason for leaving.

4. The wrong role

Finding the right candidate can be difficult, especially when time is pressing and you need someone to start as soon as possible. But people do their best work when they’re happy. A new employee who only partly fits the role is unlikely to be content in their new position.

It’s worth taking the time to hire an employee who’s the right fit for the role. 80% of employee turnover is due to bad hiring decisions.

5. Company culture

Your company culture encompasses how you work, communicate, approve holidays, celebrate success and much more.

If you haven’t already, it’s worth considering what sort of culture you want your company to have. Are your working hours long or short? Are senior staff accessible or intimidating? Can your employees choose how or where they work?

Ultimately, your company culture is your call. It’s what helps to make your business unique, after all. But these are important questions to consider and the answers to them can affect your staff turnover. According to one 2018 survey, 61% of workers left or considered quitting a job because it lacked work flexibility options.

6. Bad bosses

Bosses provide a crucial role that involves inspiring, mentoring and training team members, rather than micromanaging them. It’s crucial because one of the most common reasons people leave a role is their relationship with their boss.

An impressive 93% of employees said they would be more likely to stay in a role if their bosses showed more empathy.

How to reduce staff turnover and retain staff

1. Refine your hiring process

Get things right from the start. That means putting in the time and effort to filter out unsuitable candidates and meet the ones worth your time.

Define the role clearly, along with the skills and attributes you want from the ideal candidate. Use appropriate tests or roleplays to gauge their competencies. Ask candidates that you do meet open questions, rather than ‘yes/no’ questions, to learn more about them.

2. Provide professional development

Investing in your employees is key to staff retention. Promoting professional development in your business will not only improve your existing workforce, but increase company loyalty and attract new talent. Don’t forget to provide managers with training. They play a crucial role in your company and influence many others too.

3. Offer rewards

Making an effort to recognise and reward your employees’ success can help to reduce staff turnover. Rewards don’t have to be monetary, but even a small amount goes a long way. Other prizes could include a food prize for high performers, or even half a day off.

4. Provide work-life balance

It’s important to understand what working life is like for your employees. People don’t do their best work when they are overwhelmed.

Take the time to ensure your employees’ workload is manageable. Encouraging staff to take their full lunch break is another way to help maintain a healthy balance.

5. Think about company culture

Small changes to your company culture can help to improve staff retention. Where appropriate, employees may appreciate flexible hours or opportunities for remote working, for example.

It’s also worth thinking about how you communicate information. Emailing announcements to line managers to pass on can be effective. But it can also lead to uneven spread of information and alienate more junior staff. Think about which approach best fits your business.

Here’s what Patty McCord, former chief talent officer at Netflix, had to say on building a company where people enjoy working:

 

Staff turnover is inevitable – and healthy, when you find the right balance. Being able to accurately track your staff turnover rate is the first step to finding that balance. It will also help you understand your employees’ experience of working for you.

If your staff turnover is higher than expected, don’t take it personally. Try to unpick why employees are leaving and spot any trends. As you’ll have seen above, small changes can make a big difference to your employees’ working lives. There are always myriad other issues to manage in a small business. Ultimately though, these small steps will add up and help you to improve staff retention.