TRACKING TURNOVER
Why should you track your company turnover? Do you really care why someone left the company or are you just bothered by the fact that now you have to find a replacement? Tracking your turnover not only allows you to see the number of employees leaving, but depending on your tracking methods, it can show you why they are leaving and how much it will cost to replace them.
Generally, separated employees fall into one of two categories: voluntary separations (employees that quit of their own accord) and involuntary separations (employees that the company terminates). Your tracking should include both categories to provide better accounting of all types of separations. These statistics will show you how many employees are leaving on their own accord, plus terminations for other reasons. Collecting your company’s turnover data not only allows you to keep track of your terminations for internal use, but you will be able to make comparisons with industry and national averages.
CALCULATING TURNOVER RATES
Keep in mind that your calculations should not include employees that have left due to retirement, layoff, death, or who are temporary.
Follow the example below to calculate your turnover on a monthly basis.
| 1) Enter the number of employees on the first day of the month:
2) Enter the number of employees on the last day of the month: 3) Average the number of employees for the month: 4) Enter the number of terminations[1] from the first day through the last day of the month: 5) To figure your monthly turnover percentage, divide Step 4 by Step 3 and multiply by 100: |
120
114 1120 + 114 ÷ 2 = 117
6 6 ÷ 117 x 100 = 5.1 |
Your total turnover rate for the month is 5.1%.
[1] Enter the number of voluntary or involuntary terminations in this step to figure out the percentage in these types of turnovers.EAF members can use the Turnover Calculator located in the HR Metrics Toolkit available in the Toolkits tab of our members only homepage, as well as view results from our annual Job Absence & Turnover Survey located in the HR Metrics section of our Surveys tab.
TURNOVER COSTS
Termination Expense
If you are tracking your turnover rate, you should also track your turnover cost in order to understand how the termination process can affect a company’s bottom line. Terminating employees leads to having to hire new employees and both of these processes involve expenses.
Expenses for a termination can include:
- severance payments
- time for processing paperwork and exit interviews
- lost productivity
- benefits (401K, insurance, etc.)
- taxes (social security, workers’ compensation, unemployment compensation, etc.)
- possible hiring of temporary employees
- updating security access on building & computer systems
- time and money spent training the employee
- material and asset losses (employee fails to return company equipment, uniforms, safety equipment, policy & procedures manuals, etc.)
The list can grow depending on the particulars of your organization. If you performed a background check, drug screening, pre-employment testing, gave bonuses and/or awards, etc., your total expense for the terminating employee can be significant.
HIRING COSTS
Expenses do not stop with the leaving employee. Hiring a replacement continues to add to the cost of employee turnover. Costs can include:
- advertising and recruiting
- general hiring process (background screening, drug testing, pre-employment testing, etc.)
- time for processing paperwork and conducting interviews
- relocation expenses and signing bonuses, if offered
- insurance & other benefits
- training on company policies & practices
- updating security access on building & computer systems
- material and assets (company equipment, uniforms, safety equipment, expense spent on ID badges and policy & procedures manuals, etc.)
Running ads can be costly regardless of whether the ad is in print or online. If you use a recruiter (headhunter) service or online recruiting site such as Monster or CareerBuilder, the cost can go a lot higher. The whole hiring process starts to add up from there. It takes time to review all the applications that will result from the job placement ad, selecting which candidates have the skills you are looking for, and deciding which of those are qualified for interview. Interviewing potential applicants can take critical management time away from other responsibilities. This expense can rise depending on your hiring process. If you require applicants to interview several times, perform job tasks or take a pre-employment test, your hiring expense is going to grow.
Once you have selected a new employee, there is the cost of training ¾ there is always training involved with new employees. They need to learn your policies, fellow co-workers, operating procedures; they may have the skill to run a particular piece of equipment, but they will require training on your procedures and requirements for that equipment, along with any other specifics of your organization.
The bottom line is that tracking turnover allows you to see the total dollar cost to your organization when an employee leaves. To determine your total cost of turnover per employee, click to SHRM’s Cost of Turnover calculator.
EXIT INTERVIEWS
One of the best turnover tracking tools is the exit interview. Do you conduct an exit interview with employees that have decided to leave to find out why they are leaving? Do you simply accept their resignation with no questions asked? If you do not find out why employees are leaving, you are missing an opportunity to learn things about your organization that you may not have considered before. You may find easy or inexpensive issues that can be addressed in order to keep employees from leaving.
Most employers assume that when an employee leaves their company, it is for better pay or benefits. If you have a good turnover tracking program in place, you may see that this is not always the case. Employees leave their current employment for many reasons. Some do leave for financial and benefit reasons, and some leave simply for personal reasons, but you may be surprised at the number of employees that quit due to workplace conflicts, unfair practices, lack of training, and limited or no opportunity for advancement. By conducting exit interviews along with tracking your turnover, you discover these reasons and can look at your organization to see what you can do to decrease employee loss. Offering pay raises or adding more benefits may entice some employees to stay. However, what else can you do to convince employees that your organization is a great place to work?
When an employee decides to sever their employment, conduct an exit interview to find out why. Is it…
- Financial and/or benefits related – this may be a good time to go over your compensation and benefits package. Are you paying competitive wages and offering benefits that your employees want and can reasonably afford?
- Policies and/or practices – are you applying your policies and practices fairly? Employees expect equal treatment. If one employee seems to be getting preferential treatment, others will see this as favoritism and be resentful.
- Training and/or advancement – are you offering training and advancement opportunities? Someone may have taken a position on the assembly line thinking of it as a “foot-in-the-door” position with your company and thought there would be opportunities to advance into a position with more responsibilities or better hours. You may have the best future supervisor ever on your assembly line, but without training and advancement opportunities, you may never know and could lose that employee to your competitor.
- Employee relations related – do your employees work effectively with each other? If there is tension in the workplace, training or coaching may resolve the issue(s). Communication, diversity, harassment, and leadership are areas where training or coaching may help. If one of these methods does not resolve the issue(s), it may be time to consider another course of action.
Take this situation for example: Several employees leave your production line. Since you do not track turnover, you are not specifically aware of how many employees are leaving. Eventually you realize that employee loss is affecting overall production. Did they leave because the company across town pays their assembly workers more, or are there other issues that have nothing to do with pay? By tracking your turnover and conducting exit interviews, you might find that better pay is not the leading factor; instead, there are issues with the production supervisor. Conducting an exit interview with each departing employee is a good opportunity to see if other employees are having the same issues with the same supervisor. Perhaps the supervisor is not ready to be in a lead position, is too aggressive, insults or harasses, or is simply rude to subordinates. If you know from the exit interviews what the employee’s grievances are with the supervisor, you can resolve your turnover situation before it affects production. In this instance, perhaps requiring the supervisor to attend training classes to address the behavior in question may correct the underlying turnover issue.
Conducting exit interviews may be the key to easily resolving turnover issues and making sure your turnover rates stay at a minimum.
EAF’s training associates offer supervisory and leadership training at our training facility, at your location, or online. Training can be presented at a group level or one-on-one and can be modified to reflect your audience and fit your timeframe. Visit our training options at https://eafinc.org/training/onsite/, or our online workshop and webinar calendar at https://eafinc.org/events/month/, or contact us at 407.260.6556 or [email protected] and ask to speak with one of our training associates.
