Types of employee turnover
Regardless of the business type, there are two main types of employee turnover: voluntary and involuntary. Within each of these categories, you will find various reasons for why a company might have employee turnover.
What is voluntary turnover?
Voluntary turnover is when an employee leaves a job, whether it’s because they got a new job somewhere else, took an internal transfer or retired. These types of turnover are typically more expensive to businesses because they often involve the loss of high-performing employees.
What is involuntary turnover?
Involuntary turnover includes layoffs or reductions in force and terminating poorly performing employees. Involuntary turnover is considered undesirable because it can reflect on the company’s management and financial operations.
Monitor employee turnover rates
The calculation of turnover is simple. You divide the number of employees who left the company for any reason by the total number of employees you started with. This number will represent the percentage of turnover. You can use this formula to calculate involuntary, voluntary, and total turnover.
Example: You start the year with 50 employees. Throughout the year, 2 employees quit, and 4 are laid off. The voluntary annual turnover rate for the year would be 2/50 or 4%. The involuntary turnover rate is 4/50 or 8%. Adding the two numbers together would give you a total turnover rate of 12%.
Positive types of employee turnover
Positive turnover occurs when the workforce experiences changes due to new employees bringing fresh ideas and perspectives to the company to replace workers who are terminated for poor performance. Infusing new talent in an organization can re-energize the workplace, catapult productivity and boost profitability. Replacing a stagnant workforce can be costly, however, employers ultimately realize the ROI in recruitment and selection processes for new and fully engaged employees.
Why can employee turnover be considered bad?
The downside to any turnover, regardless of the means of departure, is that replacing an employee is expensive. SHRM estimated that the average cost to replace a salaried employee is around 6-9 months of that employee’s salary.
3 ways to stop undesirable turnover of employees1. Assess your management
We’ve all heard the phrase, people don’t leave companies, they leave bad managers. If you notice a lot of attrition is occurring in a certain department, it’s important to evaluate your managers to see what’s going on.
It tends to be disheartening to work at a job when you don’t have the tools you need to be successful. Make sure all employees have the tools and mentors they need to get the job done.
If your salaries are lower than your competitors’ or they’re offering a great benefits package, it’s time to figure out where and what you’re lacking. Compare the adjustments in salaries or offering retention bonuses to the cost of losing your best employees to the competitor down the street and you might find that it actually costs less.
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