Employee Turnover: Meaning and Calculation of Departures
It is generally seen in a negative light – yet employee turnover initially has a completely neutral meaning: it refers to the fact that employees leave the company. Various causes are possible: some may retire, others choose a new job and therefore resign from their current employer. A fixed-term contract that is not renewed also results in turnover. Moreover, the term turnover is also used when employees change jobs within the company. All of these different scenarios together form what is known as the company’s employee turnover rate. There are various formulas for calculating it; a common one is the so-called BDA formula: the number of leavers is divided by the average number of employees and then multiplied by 100. Particularly important for companies is the proportion of so-called external employee turnover – meaning the cases where employees resign voluntarily. This development should be closely monitored, and action may be necessary.
Employee Turnover: Pros and Cons
As mentioned, turnover also has positive effects: a healthy, regular change can boost creativity, and new employees bring motivation, fresh perspectives, knowledge, and skills that may not previously have existed within the company. Nevertheless, a low employee turnover rate is generally desirable – for several reasons: frequent departures mean the constant need to recruit new staff – a challenge, given how resource-intensive recruitment is known to be. The departure of qualified employees can also lead to a real loss of know-how, and onboarding new staff absorbs many resources. Finally, the potential insecurity among remaining employees caused by continual departures should not be underestimated. To avoid this situation, a turnover analysis is recommended in the case of a higher rate – in order to identify the main causes and implement countermeasures. An exit interview is regarded as a key instrument for qualitative analysis, used to explore the reasons behind the decision to leave. Ideally, the company can then begin to address and improve on the identified issues.
Maintaining a Stable Workforce: Combating Turnover
Satisfied employees are less likely to leave the company – this rule of thumb should be the foundation of any changes a company makes to reduce turnover. To foster employee retention, benefits can be offered, and flexible working hours or remote work options are considered very attractive in many sectors. Opportunities for professional development and training are also compelling arguments for many employees. In addition to these short-term, individual measures, a broader rethinking is strongly recommended: an established positive company culture is regarded as the most important reason why employees value a company and remain loyal to it for the long term.