What is employee turnover?
Simply put, employee turnover is the number of employees who leave and start working in a business within a given time. The most widely used calculation is for employee turnover in a year, but it can also be calculated monthly.
Employee retention can have a negative impact on businesses, but that is not always the case. Businesses with reasonable employee turnover can bring new personnel into the business which can boost productivity and performance. Employee turnover should be monitored as it helps to understand the health of the business and can be used to calculate trends. By monitoring, employers can understand seasonal variations – allowing them to plan better. They can also devise initiatives to help retain valuable staff members.
Before monitoring can commence, it’s important to calculate turnover rates. There are lots of websites that show how to work out staff turnover, but they seem to jump from calculation to calculation, so we’ve put together this easy-to-follow guide so you can get accurate figures for your business. It is pretty simple, you just need your staff numbers and a calculator!
Calculating staff turnover for a month.
We’re going to work figures out for monthly turnover. The same calculations work for annual stats, and we'll do that below.
Step 1. First, workout the average number of staff (A) you have in your business in the given month. You do this by adding the staff members at the beginning of month (B), to the staff members at the end of the month (E), then dividing the figure by 2.
Example: in March, the company had 320 staff at the beginning of the month, 312 at the end of the month
320 + 312 = 632
632/2 = 316
316 is the average number of employees (A) for the month of March.
Step 2. To calculate your staff turnover per month, you just need 2 figures. You need the number of net leavers (L) and your average number of employees (A).
Example: 320 at the beginning, 312 at the end means 8 net leavers (L)
8/316 (A) = 0.02531646, then multiply it by 100 to get the percentage rate
0.02531646 x 100 = 2.53% monthly staff turnover.
Calculating staff leavers and staff turnover for a year
Step 1. At the beginning of January 2021, the above company had 316 employees (B). Over the calendar year, 22 employees left (L). The company recruited 12 new employees (N) within the year and at the end of December 2021, the company had 306 employees (E).
First, we work out the average number of employees across the year:
316 (B) + 306 (E) = 622
622/2 = 311 (A)
311 is the average number of employees (A) for the year.
(This shows that the average number of employees was slightly lower across the calendar year than the average number of employees in March.)
There are 2 calculations that can now be done, using this average employee number. The company can work out their annual leavers rate and also their employee turnover rate.
Calculation 1. Annual leavers rate.
To calculate gross leavers, take the average employee number across the year and the number of leavers (only).
22 leavers over the whole year (L)
22/311 (A) = 0.07073, then multiply it by 100 to get the percentage rate
0.07073 x 100 = 7.07% of the workforce left the business in2021.
Calculation 2. Staff turnover rate
The turnover rate is slightly different as we’ll add back in the new hires, of which there were 12 in the example, giving us a net numberof 10 leavers.
10 net leavers over the year (L)
10/311 (A) = 0.32258, then multiply it by 100 to get the percentage rate
0.32258 x 100 = 3.2% annual staff turnover rate.
What does the staff turnover rate say about a business?
In the UK, the employee turnover rate is 15%, but there are significant variations by industry. Covid 19 has been a major disruptor to the HR landscape and statistics with furloughed staff and redundancies. Combine this with the end to Freedom of Movement for EU citizens in the UK, and it may take a couple of years before we see a return to turnover rates from pre pandemic.
Historically we have seen the highest levels of staff turnover in hospitality, health and social care. Post Brexit we have also seen a shortage of HGV drivers and manufacturing personnel. With the demand for skilled operatives in these roles high, this may lead to a higher turnover of employees as they hop from job to job, seeking better rates of pay which are being offered because of the resource shortage.
Generally, the highest turnover rates tend to be in areas and industries where unemployment is lowest, as it is easier for employees to find alternative employment.
Some businesses may have a high turnover rate, but this does not necessarily mean that there are problems within the business. Seasonal workers, for example, will increase annual turnover statistics. If the business is able to attain and train new employees to fill the positions, the business may be able to offer good levels of service without reputational or financial impact.
How to manage high employee turnover
The first thing an employer needs to do when they identify an increase in employee turnover or higher levels than the industry ‘norm,’ is to understand why employees are leaving. Employers can do this by conducting exit interviews so that they can understand if there are any trends within the business or specific reasons for employee dissatisfaction. Once an employer understands the reasons for employee attrition, they can put together an action plan to retain these valuable employees.
Employee retention is not just about pay and benefits, though these do play a big part in whether an employee is happy or not. Areas that the employer may need to address include:
- Adopting more flexible working practices – to include more home-working or flexi-time.
- Developing and implementing a plan for enhancing employee health and well-being.
- Supporting employees’ financial well-being by providing training in financial management and access to emergency funds in times of hardship.
- Adopting a more consultative approach to employees so they have a louder ‘voice’ within the business.
- Motivating staff and boosting performance through recognition and incentive programmes.
- Creating employee development programmes, so they have a clear view of their progression within the company.
How PayCaptain can help
Financial well-being is a well-known cause of stress in the workplace. Financial stress leads to increased absenteeism, lower productivity and higher staff turnover. PayCaptain partners with The Money Advice Service and has incorporated financial well-being features into the PayCaptain app to support employees. This means that employees have access to financial guidance when they need it.
PayCaptain also offers on-demand pay. This allows employees to access a portion of their accrued wages if they have a financial emergency that they have not budgeted for. Payroll and HR managers can see which employees have requested emergency access to funds and address the issue if there is a pattern, providing support to their employees through the innovative payroll solution.
PayCaptain also supports recognition and incentive schemes through bonus payments and bonus payment options. This allows employees to choose where and when they’d like to receive payments. The PayCaptain app allows employees to receive their bonus instantly or allocate it to savings or their pension.
In summary, PayCaptain provides innovative features to help employers support their employees. By implementing Cloud-based Payroll from PayCaptain, employers can demonstrate their commitment to employee well-being. This results in employees feeling more valued which positively impacts employee turnover within the business.
To learn more about how PayCaptain can support your business and your employees, please contact us. We’ll be delighted to demo PayCaptain for you!
PayCaptain Payroll Solutions Limited, www.paycaptain.com is an HR/FinTech company that delivers a fully automated cloud payroll service. The solution contains many unique and innovative features for employees, helping them totake control of their pay and increase their financial well-being. PayCaptain is a payroll solution that helps employers pay their workforce, regardless of income and personal circumstances. The solution also incorporates functionality that is specifically designed to positively impact financial resilience for people struggling with money, or vulnerable and low-income employees.
PayCaptain is the first payroll company to be B-Corporation certified in the world. To read more about B-Corporations, visit www.bcorporation.net