Turnover, or employee renewal, is very important data for companies. This rate makes it possible to analyze different aspects of an organization, both its attractiveness and the well-being of its employees. How to calculate turnover? How to analyze your company’s turnover? What are the tips for reducing turnover? We answer your questions!
Definition: turnover, what is it?
Turnover is a term borrowed from English, which means rotation. Associated with the business world, turnover corresponds to the renewal of the workforce in a company. So this concerns hiring and departures, whether layoffs or otherwise.
So, when we say that a company has a high turnover, this means that there are many departures and arrivals within the workforce. Turnover reflects in particular the atmosphere that reigns in a company: when it is low, it means that employees tend to stay. It is therefore important to know how to calculate it.
Calculate and interpret the turnover rate
How to calculate the turnover of a company?
Employee turnover is a normal phenomenon and is an integral part of the evolution of a company. However, turnover is an essential tool. In particular, it allows human resources to analyze certain facets of the company, such as its attractiveness or the well-being of its employees.
Turnover is calculated over a given period, most of the time over a calendar year, i.e. from January 1 to December 31. To calculate it, three pieces of data are necessary: the number of departures, the number of arrivals as well as the total number of employees in the company. Once this data is obtained, the calculation is relatively simple:
Turnover = ({number of departures during year N + number of arrivals during year N}/2) / total number of employees at the start of year N. In order to obtain the turnover rate turnover, or workforce renewal rate, simply multiply the turnover by 100.
Interpreting the turnover of a company
Calculating turnover gives a percentage which allows us to analyze the dynamics of the company.
When the result is less than 5%, turnover is estimated to be low. This can in particular reflect a good working atmosphere, since there are few departures. However, such a rate may also reflect some problems. A rate below 5% means that arrivals are not numerous, which calls into question the attractiveness of the company or an inability to renew its offer.
Conversely, a rate above 10 or 15% is an important figure and can be indicative of certain problems in a company. A renewal rate that is too high is a sign of numerous departures and arrivals; the reasons for these turnovers can be numerous. This may be linked to a bad atmosphere within the company, in which case employees do not develop an attachment to the company, to the point of wanting to change establishment. Working conditions, salary and stress can strongly push employees to leave, contributing to an increase in the turnover rate. Poor management of employee development, whether through salary increases or promotions, can encourage employees to change companies.
These renewal rates should be taken with a pinch of salt. In fact, turnover is more or less significant depending on the sector of activity. Several professions are currently under pressure, particularly in the digital and IT sector. Thus, web developers are highly sought after by companies, which increases turnover in this sector.
The consequences of turnover
Too much employee turnover can have many consequences for the company. We can distinguish two types of costs: visible costs, often financial, as well as hidden costs, which are however just as impactful for society.
The departure of an employee has multiple consequences. First of all financial, since departures are often accompanied by an all-account balance check and sometimes compensation. Recruiting their replacement also generates costs, particularly if they seek to negotiate their salary. Some companies also provide training for new arrivals, which may incur costs if they use external organizations. Administrative procedures as well as recruitment management (adverts, communication, interviews) take a lot of time, mobilize numerous teams and represent a significant workload.
Other, less noticeable, consequences affect the company. When a new employee arrives, he is initially less efficient than his predecessor, taking the time to familiarize himself with the company, its tools and the missions he must take on. A departure can also affect team morale. Indeed, this can have an impact on the atmosphere and cohesion between employees, but also on the individual morale of employees, if the ex-employee has left in search of better working conditions.
Reduce turnover in business
Although certain professions are under pressure, turnover is a parameter that can be controlled. Several methods can help reduce it. The objective is to try to understand and analyze the social climate of the company. For this, communication, particularly with human resources teams, plays an important role.
Interviews: the tool for detecting problems in the company
Interviews are a very good tool for measuring the atmosphere in a company. It is a special moment between employees and human resources, and sometimes even management, which allows information to be quickly relayed and certain problems to be effectively resolved. Annual interviews allow you to take stock with employees, discuss your well-being within the company and your career aspirations. They can reveal problems that need to be corrected and, in all cases, make employees understand that they matter within the company.
However, an employee may be cautious during an annual review, fearing retaliation if he or she brings up the negative aspects of the company. Establishing exit interviews can then prove useful in reducing turnover in the company. The objective of such an interview is not to retain an employee but to understand why they wanted to leave, whether for missions, remuneration or for a better quality of life at work. Clearly discussing the positive and negative aspects of the company will help define certain areas for improvement.
Improve the well-being of its employees to reduce turnover
As mentioned, employee well-being can be one of the causes of high turnover. Management and human resources can play on different aspects to improve it.
Balance between work and personal life is increasingly important for employees. Arranging working time, for example by offering more teleworking or more flexible hours, can allow certain employees to flourish more. However, we must remain cautious and be careful not to eliminate too many moments of sharing (meetings, after-work lunches), which could affect team spirit. Improving working conditions within the company itself is also effective. It is important to provide them with the necessary equipment (computers, headsets, goodies) as well as the services they need (coffee machine, relaxation area, snack bar).
Creating links between employees is also essential so that employees work in a friendly atmosphere. This is built in particular through sharing team moments: physical meetings, afterworks and seminars.
Finally, employees need to feel valued. The remuneration policy is an important element for the development of employees, it is therefore necessary to ensure a remuneration policy that is fair between genders and positions. Employee development, whether in terms of salary or responsibilities, is a tool for retaining the best people in your company.
