Man escaping grasped handFor some the New Year is an opportunity to evaluate their lives and make decisions about new jobs and careers. This can create a peak in resignations in the first few months of a year, resulting in an increase in staff turnover for businesses. Whilst some turnover can be healthy – and indeed necessary — for a business, as it allows new staff to join with new ideas and fresh perspectives, employee turnover can becomes problematic when it starts to have a negative impact on an organisation’s performance. By understanding the reasons behind employee turnover, employers can devise recruitment and retention initiatives that reduce turnover and increase retention.

Before retention can be addressed employers need to be aware of employee turnover rates in their organisation, and understand how these affect its performance and achievement of strategic goals. Depending on the size of the business, an appreciation of the levels of turnover across groups of employees (ie, by team, job role or in groups of identified high performers) can be particularly useful to identify trends and spot any particular issues in different areas.

Measuring the levels and costs of employee turnover is vital in building the business case for effective recruitment and retention initiatives and there are different methods which can be used to calculate types of employee turnover. Employee turnover refers to the proportion of employees who leave an organisation over a set period (often on a year-on-year basis), expressed as a percentage of total workforce numbers. At its broadest, the term is used to encompass all leavers, both voluntary and involuntary, including those who resign, retire or are made redundant, in which case it may be described as ‘overall’ or ‘crude’ employee turnover. It’s also possible to calculate more specific breakdowns of turnover data, such as redundancy-related turnover or resignation levels, with the latter particularly useful for employers in assessing the effectiveness of people management in their organisations.

Turnover levels can vary widely between occupations and industries. The highest levels are typically found in retailing, hotels, catering and leisure, call centres and among other lower paid private sector services groups. Levels also vary from region to region. The highest turnover rates tend to be found where unemployment is lowest and where it is relatively easy for people to secure desirable alternative employment. Turnover is known to be much higher among young people than older age groups. Given the ageing population, this means that the overall turnover rate might reduce in the future.

The costs associated with employee turnover related to resignations rather than redundancies may be estimated by calculating the average cost of replacing each leaver with a new starter in each major employment category. This figure can then be multiplied by the relevant turnover rate for that staff group to calculate the total annual cost of turnover.

The major categories of costs are:

  • administration of the resignation
  • recruitment and selection costs, including administration
  • covering the post during the period in which there is a vacancy
  • induction training for the new employee

Employees resign for many different reasons. Sometimes it is the attraction of a new job or the prospect of a period outside the workforce that ‘pulls’ them. On other occasions they are ‘pushed’ (as a result of dissatisfaction in their present jobs, possibly because of a lack of training, development and career opportunities) to seek alternative employment. The move might also be prompted by a combination of both ‘pull’ and ‘push’ factors. A poor relationship with a line manager, leading to disengagement, can often be a ‘push’ factor behind an individual’s decision to leave the organisation.

Tools such as confidential exit surveys and staff attitude surveys can help managers understand why people leave the business, and enable appropriate action to be taken. Ensuring that new joiners have realistic expectations of their job and receive sufficient induction training will help to minimise the number of people leaving the organisation within the first six months of employment.

So, in summay, the first steps when developing an employee retention strategy are to establish:

  • levels of employee turnover and associated costs
  • the effect this has on the organisation
  • why employees are leaving

This data can be used to develop a costed retention strategy that focuses on the particular issues and causes of turnover specific to the organisation.

Byrne Jones HR works with organisation’s to look at ways of reducing employee turnover and improve retention and efficiency within the business. For further information please contact