What is Staff Turnover?

In the Office for National Statistics (ONS) report “Business insights and impact on the UK economy” of the 7 October 2021 it stated that:

• 4% of businesses reported staff turnover had increased, 16% for businesses with more than 10 employees.
• 3% of businesses reported staff turnover had decreased, 5% for businesses with more than 10 employees.
• 49% of businesses reported staff turnover had not been affected, 63% for businesses with more than 10 employees.

What is staff turnover?

Employees leave organisations for all sorts of reasons, some voluntary and some involuntary. These reasons can include resigning, retiring, being made redundant or being dismissed. The term staff turnover means measuring the changes in staffing and the numbers involved over a set period of time.

Calculating, monitoring, analysing and understanding staff turnover is an important part of the HR function. The data and information feeds into workforce planning and management including recruitment, employee retention strategies, employee reward, and employee and management development.

Turnover costs can have a significant negative impact on an organisation’s performance; however, staff turnover is not always a negative thing for organisations, as some types of employee turnover are desirable. At times it is an opportunity for organisations to bring in “fresh blood” with new ideas and perspectives to help develop and grow the organisation.

What is staff turnover rate?

The staff turnover rate is a measurement of how many employees are leaving an organisation and is the percentage of the total number of employees who have left an organisation within a certain period of time.

There are four main types of staff turnover that typically are accounted for in these calculations; these are:

• Voluntary turnover – This is when an employee leaves an organisation of their own choice, they hand in their notice and work their notice period before leaving.
• Involuntary turnover – This is when an organisation asks an employee to leave. This may be through redundancy or through dismissal.
• Retirement – This is characteristically a type of voluntary turnover that results from the employee leaving after working for an organisation for some time and deciding that they have reached an age where they want to stop working altogether.
• Internal turnover – This is staff turnover when an employee or employees move or are moved from one team, department, or division within an organisation to another within the same organisation.

The reasons why organisations collect and use this data can vary, but by doing so organisations can identify why it is happening and this enables them to forecast it and control it.

If an organisation is able to recognise patterns in their staff turnover data, they can start to put procedures and strategies in place, such as exit interviews, staff surveys and analysis of recruitment practices, to help to identify the causes of their staff turnover and make adjustments to their people strategies to help to improve the situation.

There are a number of costs associated with staff leaving employment. The obvious ones are time and money to replace staff and cover their workloads. It is calculated that it costs 50% of an employee’s salary to replace them. There is also the loss of experienced or skilled members of staff.

How do you calculate staff turnover?

The formula that organisations use to calculate their staff turnover is based upon the number of employees that leave the organisation, divided by the average number of active employees employed by the organisation in any given period of time, multiplied by 100 to give a percentage. Active employees are employees who are not on maternity, sabbatical or garden leave, or who are not on secondment to another organisation.

Most HR professionals will calculate these figures on both a monthly and an annual basis. The average number of active employees is calculated by taking the number of active employees at the beginning of a period of time, such as a month or a year, then adding the number of active employees at the end of that period of time and dividing that figure by 2.

Here are some examples:

To calculate the monthly staff turnover, the organisation started the month of April with 20 active employees and finished the month with 30 active employees.

During that period 10 employees left so the calculation would be:

20 + 30 ÷ 2 = 25 average active employees

10 ÷ 25 x 100 = 40%

So, the staff turnover rate for the month of April was 40%.

By adding together all the monthly staff turnover rates for the year and dividing that figure by 12, the organisation can calculate a monthly average staff turnover percentage rate.

To calculate the annual staff turnover, the organisation started the year (April to March) with 20 active employees and finished the year with 150 active employees.

During that period 15 employees left so the calculation would be:

20 + 150 ÷ 2 = 85

15 ÷ 85 x 100 = 17.65%

So, the staff turnover rate for the year April to March was 17.65%.

When calculating the overall staff turnover rate, you include all employees that have left the organisation irrespective of the reason; that is, those who have resigned, were dismissed (this includes redundancies, end of fixed contracts etc.) or have retired.

Many organisations drill into this information by calculating staff turnover by reason. For example, if an organisation wanted to establish the staff turnover rate for dismissed staff, then they would calculate this as follows:

The organisation started the month of April with 20 active employees and finished the month with 30 active employees.

During that period 10 employees left, 5 of these employees were dismissed so the calculation would be:

20 + 30 ÷ 2 = 25 average active employees

5 ÷ 25 x 100 = 20%

So, the staff turnover rate for dismissed employees for the month of April was 20%.

Drilling down on the staff turnover rates is useful for HR and management to gauge information on such issues as performance management, effective recruitment and retention, and employee engagement.

Some larger organisations also do this drilling down of turnover figures on a department or location basis in order to compare different parts of their organisation; they may also collect separate data on staff turnover during probation periods and learn the lessons. When it comes to staff turnover, like other employee metrics, the more data you have, the more you learn.

What is a low staff turnover?

A zero per cent employee turnover rate is simply not realistic. So, what is a realistic turnover percentage, then? The answer to that depends on the sector industry. Statistics show that the overall average staff turnover rate in the UK is around 15%–17%, an XpertHR survey showed that voluntary staff turnover in 2020 averaged 12.4% (1 in 8) which was a one percentage point increase on 2019.

So low staff turnover on average might be a figure somewhere lower than between the 12.4% and 17% figures.

There are some sectors and roles that historically have low staff turnover figures (source XpertHR).

These include:

Even if the organisation’s overall staff turnover rates are lower than the industry average, the organisation’s turnover may not necessarily be healthy when who is leaving is considered.

If an organisation is losing a relatively small percentage of staff to voluntary turnover, but they are top-performing or senior staff, this may present serious issues in terms of the organisation’s overall performance and steps may need to be taken to stop this trend of losing valuable staff to competitors, for example.

What is a high staff turnover?

If we consider the XpertHR average staff turnover figures, then high staff turnover on average might be a figure somewhere higher than between the 12.4% and 17% figures.

There are some sectors and roles that historically have high staff turnover figures (source XpertHR).

These include:

The XpertHR survey did, however, highlight a notable gulf in the education sector between total staff turnover and voluntary turnover, where voluntary turnover stood at 8.7%, a low average, whereas total staff turnover stood at 15.5%, a slightly high average. COVID pandemic-related cost pressures have forced universities to make redundancies, the main component of the sample in this sector.

This affected both support and academic roles, and thus affected the average staff turnover figures.

High staff turnover is expensive for any organisation; however, if you have higher than average staff turnover but the staff leaving are low performers, this figure may not necessarily be something to be worried about. This could be an opportunity to recruit better performing staff.

What causes high staff turnover?

Some of the top reasons for high employee turnover include, but are not limited to:

• Lack of career opportunities and advancement.
• Poor management.
• Poor recruitment decisions.
• Salary.
• Working conditions and culture.
• Lack of flexibility.
• Feelings of being overworked and underappreciated.
• Bullying, harassment or discrimination.
• Poor performance.
• Organisational restructure.

According to a Gallup poll, 52% of voluntary resignations are avoidable. In other words, around half of people leave their jobs because of fixable issues.

What can you do to reduce staff turnover?

Rising staff turnover often develops into a vicious circle, as low morale causes more workers to leave, or consider leaving, which in turn reduces the morale of those who remain, and so on. There are practical steps an organisation can take to reduce staff turnover and to help avoid the costs associated with high staff turnover.

When an organisation analyses the data from their staff turnover statistics, they should be able to identify the causes for the high staff turnover. If there is a high rate of staff turnover amongst new recruits, that is, staff leaving voluntarily or involuntarily during their probation period or within the first 6 months or so of commencing employment.

This can be reduced by addressing the following:

• The recruitment and selection process.
  – Ensure that job adverts and job and person specs give an accurate description of the job role.
  – Use selection tests; these can help identify suitable applicants.
  – Don’t try to appoint overqualified staff as they are likely to become bored and leave.
  – Don’t panic recruit, that is being rushed into appointing anyone just to fill the role.
• Staff induction / on-boarding
  – Develop an induction programme that gives a well-rounded feeling for the organisation as a whole.
  – Ask staff members what they would find useful to know if they were new to the organisation and feed this into the induction programme.
  – Encourage staff from different areas of the organisation to participate in the induction programme; they can spend some time with new recruits explaining their team’s function within the business.
  – Invite questions from new recruits during their induction and let them know that if they have any concerns or something that they are unsure about they can go to a nominated person or any member of staff for help at any time.
• During probation
  – Establish a training schedule that gradually introduces the new recruit to various tasks their role will require; don’t overwhelm them with everything at once, but also be mindful to be flexible and schedule this at their pace – some people will learn quicker than others so don’t cause them to be bored.
  – Use a buddy system where a new recruit is partnered with an existing member of staff; this can be useful for on-the-job learning.
  – The line manager should monitor the new recruit’s progress, providing constructive feedback and be available to provide support and listen to any concerns.

Staff turnover of longer-term employees may be down to wider issues in the organisation.

To help to reduce staff turnover, organisations may need to look at areas such as, but not limited to:

• Organisation culture.
• Organisational structure.
• Management style.
• Employee engagement.
• Salary and other rewards.

If there is a high rate of staff turnover amongst longer-term employees, that is staff leaving voluntarily or involuntarily after their probation period.

This can be reduced by addressing the following:

• Leadership and management support – Showing clear leadership so employees know what direction the organisation is going in and let staff know how they can contribute. Staff that are supported by management will feel valued and motivated within their job roles. Share control, empower staff to make some decisions themselves rather than imposing control and restrictions. This can also help build trust and staff engagement, as can thanking staff for a job well done to let them know they are valued and appreciated.
• Organisational structure – Assess how the structure of the organisation including reporting lines and accountability impacts staff.
• Management styles – Examining how individual management styles are impacting upon team(s) and individual performance and staff satisfaction.
• Job role diversity – Ensuring the tasks that staff carry out on a daily basis are not mundane and repetitive; introducing a variety of tasks can maintain staff interest and motivation.
• Performance management – Ensure that there is a link between employees’ personal objectives with overall organisational goals so that staff know how their role is important to the overall success of the organisation.
• Training and development opportunities – Giving employees control over their personal development and encouraging ways in which they can develop through training or experiencing other roles within the business can assist with employee engagement.
• Organisational culture – Look to develop a positive culture within the organisation that can help nurture a happy and productive workforce such as building trust, improving communication, valuing staff feedback and providing opportunities for staff development.
• Staff feedback – Establish an employee voice in the organisation, empowering them to highlight concerns or suggest improvements.
• Pay rates – Check that the organisation’s pay rates are fair and competitive; benchmark against similar organisations.
• Equality, diversity and inclusion – Make sure that opportunities for training, incentives and promotion are open to all staff. Encourage diversity in the organisation, as this can have a positive effect, highlighting that differences are embraced and welcomed and that no one is discriminated against.
• Communication – Having clear communication and consultation within the organisation engages staff, reassures them and prevents suspicion and rumours.
• Discipline and grievance – Organisations should have effective disciplinary and grievance procedures in place and should apply them fairly and consistently.
• Working conditions – Assess the employees’ working conditions such as work spaces, kitchen facilities, toilets, rest areas; are they suitable, can improvements be made?
• Working hours – Is there a need to reorganise working patterns, offer flexible or hybrid working, reduced hours, job sharing or working from home?
• Staff reward and incentives – Consider the different types of incentives for staff including individual or team productivity bonuses, performance-related pay, non-financial incentives, such as healthcare provision, flexible working, additional leave, attractive pension arrangements. Is the organisation’s reward package competitive with other employers in the sector?
• Staff opinions – Attitude surveys taken on a regular basis can help to identify what an organisation is getting right and also what may be an issue for staff. These should be confidential, so engaging an external provider who provides non-attributed data can encourage staff to participate and to be honest, which gives an organisation a true picture of how staff feel.
• Exit interviews – For the employee who is leaving, the information that they provide may be too late to make any improvements for them, although not always. Sometimes even at this late stage an exiting employee can be encouraged to stay if issues are addressed and changes are made. However, if the employee still decides to leave, their opinions and information can be valuable in highlighting the strengths and weaknesses of the organisation as an employer and provides an opportunity to build on the strengths and improve upon the weaknesses.

Final thoughts

Collecting, calculating and analysing staff turnover data should enable organisations to be able to answer the following questions:

• Who is leaving, from which roles, teams, departments, divisions?
• When are they leaving, is there a pattern, a particular time of year?
• Why are they leaving, voluntarily, involuntarily, retirement, transferring, what are the specific reasons and causes?

Understanding this staff turnover data in more detail can provide an organisation with opportunities to improve staff turnover rates to benefit the organisation. Staff turnover is inevitable and healthy, when an organisation finds the right balance. Being able to accurately track staff turnover rates is the first step to finding that balance.

It will also help the organisation to understand the employees’ experience of working for the organisation.