What you need to know about employee turnover

What you need to know about employee turnover

Cristina Pérez

February 11, 2021

March 10, 2021

One of the challenges of large companies is to ensure that the needs of the employee are covered. We can find job rotation among these concerns. In this post, we will explain how to know the losses generated by employee turnover in the company and how it affects employees.

Definition of employee turnover

An organization goes through many phases with its employees. We understand by turnover when the company lets employees go or replaces them from their job. This promotes the entry and exit of employees, making dismissals or resignations common. However, it can also be due to a change of roles, that is, the employee is still in the company but their function has changed.

The entry and exit of employees produces a cost to the company, so it is important that the human resources department considers good practices in recruitment, selection and also onboarding.

When talking about staff rotation, we refer to commitment, engagement and economic costs among others. For all of this, it is important to have a strategic plan to achieve an improvement in personnel management, and thus the management of rotations and also recruitment and onboarding of the right people.

How can we calculate employee turnover rate?

In order to know the cost that turnover generates in your company, you must know the number of dismissals and the average number of employees in the same period of time, and then apply the following formula:

Turnover rate = Number of dismissals / Average number of employees

To know if it is a good rate, the ideal thing would be to know the average rotation of the industry to which you belong. As well as knowing that 0% rotation is unlikely and would not be a good indicator.

Keep in mind that you have to choose a specific period, be it months or a year. This formula will help you to know the economic impact that generates a rotation or a new entry in your company. Bearing in mind that they are indirect costs and do not directly affect the employee. Even so, it is essential to deal with this in time, as it can affect the company negatively.

This is a calculation that can be done in a general way of the whole company or even by department to know the data more specifically.

How does it affect the workplace?

We have the example of Mexico, where the turnover rate in recent months has increased. This means that few jobs can be developed in an optimal way, since they can leave the project in half.

Another fact is that a lot of knowledge, new skills and talent are lost along the way, just by not taking care of employees.

Although it is true that having a low turnover indicates a very high innovation in the company, sometimes, it can be due to the opposite. Low employee commitment and habituation can also affect decision making.

As we have discussed, it is good to ensure economic harmony between employees entering and leaving the company and thus minimize the company's expenses and increase talent retention.