What Is Employee Turnover and Why Does It Matter?

There’s just no getting around it: if you’re running or managing a business that employs more than one person, you’re going to experience employee turnover. According to the Bureau of Labor Statistics, roughly three million U.S. workers leave their job every single month. Of course, that doesn’t mean you shouldn’t try and keep turnover as low as possible. In fact, there are many good reasons to strive for a low employee turnover rate.

So, exactly what is employee turnover? How much does employee turnover cost? And why is employee turnover a problem for a business? Keep reading to find the answers, plus discover some tactics to help you reduce turnover and keep your staff happy and productive.

Why is employee turnover a problem for a business?

Before we discuss why it’s problematic for businesses, let’s get clear on what employee turnover is. The most simple definition of employee turnover is the loss of your paid workforce over time. Employee turnover can happen for any number of reasons, including:

Sometimes, staff members leave an organization because they’re simply not happy. In fact, some of the top reasons employees give for quitting a job include:

  • Poor organizational fit
  • Poor management 
  • Lack of career advancement opportunities
  • Lack of support, training, or other resources 

When employee turnover is linked to one of these reasons, it can signal a much larger problem within the organization. If employees don’t feel valued or supported, or if there's a culture of negativity and poor management, then your company will continue to struggle to retain top talent and develop loyal, long-term employees. 

Of course, another major reason why employee turnover is a problem for businesses is because it’s costly. Let’s look a little more closely at just how much employee turnover can cost your organization.

How much does employee turnover cost?

One study showed that between recruiting, hiring, and onboarding, it costs employers roughly 20% of a position’s salary to fill that role. However, this cost doesn’t include the loss in productivity that companies face when dealing with high turnover rates. The disruption in workflow and increased burden on other teammates when an employee leaves can lead to project delays, missed milestones, and blown deadlines. 

High employee turnover rates impact more than just the bottom line, though. Particularly in industries and companies where some degree of stability is expected, excessive turnover is often a sign of a systemic cultural problem. In those cases, morale is already low among the workforce — and as turnover rates increase, morale tends to continue to drop in tandem. In fact, a study by the Northern Illinois University found that businesses with low turnover realize four times greater average profits than organizations with high turnover rates. 

How to calculate employee turnover in Excel

In order to get a good gauge on the attrition rate in your company, you need to know how to calculate employee turnover. Luckily, it’s a pretty simple formula, and you can even create a simple Excel spreadsheet to help you keep track of turnover. 

Calculating employee turnover is simply a matter of dividing the number of employees who left the company during a specified period by the average number of employees working for the company in the same period. To find the average number of employees, add the number of employees you had at the beginning of the period to the number of employees you have at the end of the period, and divide that number by two. 

What Is Employee Turnover and Why Does it Matter? 2

Using this formula, you can easily create an employee turnover tracker in any spreadsheet program, including Excel or Google Sheets. To do this, first label six columns across the top of the spreadsheet as follows:

  • The time period that you’re tracking (month, quarter, year, etc.)
  • Opening workforce balance (total number of employees at the beginning of the period)
  • Number of employees joined during the period
  • Number of employees lost during the period
  • Closing workforce balance
  • Turnover 

Next, you’ll input your data in the “opening balance,” “employees joined,” and “employees left” cells, followed by the formulas to determine the closing balance as well as the turnover rate. Once you’ve input the formulas for the closing balance and turnover rate into the first cells, you can simply copy and paste those formulas into the rest of the cells in that column. Now, anytime you add data to a new period, your sheet will automatically calculate the closing balance and the turnover rate for that period. 

How to reduce employee turnover

We’ve covered why excessive employee turnover is detrimental to an organization’s culture as well as its bottom line. Now, let’s look at some strategies to help reduce turnover as much as possible and retain talented, happy employees. 

  1. Be more discerning when hiring
    Your first line of employee turnover defense is to make sure that you’re hiring the right people in the first place. This begins with defining the role clearly and being upfront about the position’s responsibilities and expectations. Also, do everything you can to discern whether a candidate will fit with your company’s culture; having the candidate interview with department heads and team leads can help achieve this. 
  2. Provide new hires a proper onboarding experience
    Research has shown that employees who experience a structured onboarding process are 58% more likely to stick with an organization for three years or more. Proper onboarding not only increases new employee engagement, but it demonstrates that you are vested in their success and affirms that you will provide the resources and support needed to excel.  
  3. Offer competitive compensation and benefits
    Underpaying your employees is a surefire way to motivate them to do one thing: find a new job as fast as possible. It should go without saying, but offering competitive wages and benefits packages are a must if you want to improve your employee retention rate. 
  4. Recognize efforts and show your employees they're valued
    When hard work and effort isn’t recognized or appreciated, morale takes a nosedive. Make time to celebrate your employees successes and let them know they’re valued, and they’ll reward you with their loyalty. 
  5. Provide opportunities for career growth and development
    Another major impediment to employee retention is lack of career paths and opportunities for development and growth. Think about it: if employees can’t envision themselves progressing beyond their current role, they have nothing to strive for and no real motivation to work to their full potential. By showing them a clear career path and offering them opportunities to grow and develop their skills, you’ll make them feel more valued and vested in the organization.
  6. Listen to employee feedback and foster a positive work culture
    Finally, if your employees are coming to you to talk about what they perceive as a toxic culture or problems they see within the organization, listen to them! When complaints and concerns fall on deaf ears, employees tend to tune out, too.

Introducing Wrike’s onboarding template

One of the best ways to ensure your new hires experience a proper onboarding is with an onboarding template. Wrike’s onboarding template makes tracking this process a snap and ensures that nothing gets overlooked. With this template, you can easily:

  • Develop a custom onboarding form to get new employee data to the teams that need it
  • Create a new task with a checklist for day-one activities
  • Schedule 30/60/90 day reviews for the new hire and their manager to make sure expectations are being met

The employee onboarding template is just one of dozens of custom templates you’ll find in Wrike. Ready to see all the ways in which Wrike can help you streamline workflows and improve internal processes? Get started today with a free trial!

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