Employee Turnover: What it is & How You Can Optimize It

What is Employee Turnover?

Employee turnover is the percentage of employees who leave a company over a certain period of time. Some companies and industries calculate turnover on a monthly basis, while others calculate this information on an annual basis. There are a number of reasons why employee turnover may occur, but in general, these reasons can generally be broken down into two categories – voluntary and involuntary. 

Voluntary Turnover

Voluntary turnover is what happens when an employee chooses to leave a company or organization on their own accord. Examples may include routine retirements, or, in some cases, more negative examples such as employees quitting their jobs for various reasons. 

Involuntary Turnover

Involuntary turnover is just the opposite of voluntary turnover – that is when an employee is forced to leave their job. If an employee is promoted to a higher position or transferred to another department within the organization, this might be viewed as a positive example of involuntary turnover. However, if the employee is underperforming and is fired from their position, this is a less desirable example of involuntary employee turnover. 

What Causes Employee Turnover?

There are a variety of individual instances that might cause voluntary employee turnover within an organization. Below are a few common examples:

• Leaving a bad or toxic boss
• Career progression 
• Looking for opportunities outside the company
• Seeking better benefits
• Offered a higher salary 
• Internal transfer or promotion
• Family or life event

As we’ve discussed, employee turnover is not inherently a bad thing. However, if there seems to be an unusually high turnover rate in the company or in a certain department, it is important to discover the reason why and address it. Employee turnover can be expensive for companies, and costs from one-half to two times the salary of the employee being replaced. Knowing this, it is important to be sure that the turnover occurring within the organization is worth it to the business. 

Employee Turnover Rates

Turnover rates vary between industries. The average turnover rate in the US across all industries is 20%. However, in some industries such as hospitality and in restaurants, the turnover is higher. What might look like a high turnover rate in some companies may be on par with the average rate for others. 

Employee turnover rates also differ pretty significantly between generations. Younger Americans view work differently than older workers and are more likely to change jobs on a more regular basis to find work that they find meaningful and that fits their lifestyle. The median tenure for workers aged 55-64 is 9.9 years, while the median tenure for workers aged 25-34 is only 2.8 years. 

How to Prevent Negative Employee Turnover

There are a few ways that employers can prevent employee turnover that is negatively impactful to their organization. 

Communication

Good communication across the board is important for any company. Taking the time to engage with employees, ask them about their work and goals, and let them know about open positions within the organization are just a few examples of ways that communication can indicate an employee’s value and make them feel like an integral part of the business. 

Benefits

Does your company offer a comprehensive benefits package with perks that are competitive with those offered by other businesses in your industry? It may be time to review your benefits package to make it more attractive to talented employees. You can read more about that here.

Opportunity

Employees are less likely to stay with an organization where they feel like their opportunities are limited. If there is no room for growth, they may seek this growth and opportunity elsewhere. Communicating the chance for progression in your employees’ careers in your company is an effective way to help them see themselves there longer term. 

The Bottom Line

Employee turnover is a natural occurrence within the workforce, however, it is in an organization’s best interest to optimize turnover in a way that is beneficial to the overall performance of the company. It can be a good opportunity to promote employees and introduce new talent into the business. However, if the turnover rate is higher than the industry average, it may indicate a larger issue within the organization. Understanding a healthy turnover rate for your company can assist in retaining top talent and promoting a healthy work environment that is attractive to hard-working, reliable employees.