Employee turnover: a well-established challenge
Turnover definition
Turnover is defined as the rotation of employees within a company, meaning the number of employees joining compared to those leaving. It is a valuable indicator that easily reflects the atmosphere within the company. An excessively high staff turnover rate is often synonymous with a complex professional environment caused by difficult working conditions, a poor social climate, a lack of career development opportunities, or a lack of company attractiveness compared to its competitors.
HR risk
In 2020, the sectors most affected by turnover were retail, IT professionals (Information Technology), and telemarketing.
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On average, the voluntary departure of an employee costs the company between half and three times their annual salary, depending on their added value to the company.
Additionally, the morale of current employees can be affected, and they must rebuild a climate of trust with new hires. Beware also of the snowball effect linked to departures.
Turnover rate analysis
It is recommended to analyze turnover through monthly or quarterly reporting. This allows for greater agility in implementing actions and projects to improve employee engagement. It is a human resources management indicator commonly found in HR dashboards. Its calculation is simple, but its analysis must be handled with caution as it needs to factor in industry specifics, job roles, and company strategy.
Turnover rate: the ideal figure is the one built within the company.
How to calculate turnover?
Generally expressed as a percentage, turnover is calculated from the ratio between the number of employees recruited and those who left the company during a defined period, as well as the total number of people present in the company at the beginning of that period.
The percentage ranges from 0 to 100%. 0% means there are no departures or hires during the period, while 100% indicates a complete renewal of staff across all positions.
Indicator calculation
= [(Number of departures in Year N + Number of arrivals in Year N) /2] / headcount on January 1st of Year N*100
Knowing how to calculate the turnover rate is a first step, but the most important part is interpreting this staff renewal rate. Several factors must be considered when interpreting the turnover rate.
Caution is needed when analyzing an HR management figure; one must take into account the different professions and the type of company. Jobs with precarious contracts and low salaries experience higher turnover rates. The same applies to sectors where skills are in highest demand. Other various factors should be considered: the company’s industry sector, involuntary departures, company growth, the labor market situation, and the company’s historical turnover rate.
How to correctly analyze the turnover rate?
3 levels of interpretation are possible:
- Low (less than 15%): the company’s social situation is good.
- Zero (0%): the company risks lacking internal dynamism and may miss out on talent, but it is healthy.
- High (more than 15%): it is advisable to investigate the origin and causes.
Warning! A high turnover is not necessarily a bad sign. Any company may need to refresh its teams; otherwise, it would not show signs of good vitality. It is only when it becomes too high that it can destabilize staff and cause a loss of productivity.
According to INSEE, the average turnover rate in 2021 was 15%, across all industry sectors.
How to reduce the turnover rate?
Empower and involve your teams
By empowering employees, they will feel recognized at their true value and feel that they matter within the company.
Improve employee well-being
It is necessary to take care of employees’ comfort and prove to them that their well-being matters. Ensuring their fulfillment is a real challenge and has a direct impact on their level of effectiveness and retention.
Communicate about career development opportunities
It is important to anticipate employees’ professional expectations and provide them with visibility. Giving new responsibilities and offering internal career advancements are effective retention levers. Implementing training programs is essential for skills development.
Focus on communication
Establishing a climate of trust conducive to discussion is imperative for retaining employees. This helps take their needs and desires into consideration, and discussions can prevent potential departures, whether voluntary or resignations. Between half and three times their annual salary depending on their added value to the company.
On average, the voluntary departure of an employee costs the company between half and three times their annual salary, depending on their added value to the company.
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HOW TO CALCULATE YOUR COMPANY’S TURNOVER?
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EXPERT OPINION
Véronique BLUY-VILLARD, HR Director at Boost’RH
“According to our expert, employees have not hesitated to leave their jobs when something did not suit them. Turnover is more or less high depending on the company’s strategy: its positioning in terms of compensation, the identification and anticipation of positions or skills that are difficult to recruit, as well as the difficulty in managing career development opportunities.
The real risk of turnover lies in skills management and particularly the loss of knowledge for specialized roles. Very often, companies do not detect risks upstream.
Beyond this, there are also financial losses. This is why companies facing high turnover must conduct an inventory of essential skills, the ones that are “most expensive” to recruit.
To effectively reduce turnover, it is essential to identify how to acquire and maintain skills, anticipate renewal, and train new employees. Finally, it is necessary for the HR function to know employees’ expectations in advance to avoid it as much as possible.”
In Summary
In 3 Questions
1
Turnover indicator calculation: how to proceed?
It is calculated by dividing the average of employee departures and arrivals by the headcount at the beginning of the period. It is generally calculated on an annual basis and provides an idea of the scale of staff turnover.
2
How to reduce turnover?
Several areas of reflection should be explored, such as empowering teams, improving the work environment, and implementing actions aligned with employees’ expectations. The goal is to improve their well-being at work, establish a positive work atmosphere, reduce the absenteeism rate while retaining employees.
3
What is the ideal turnover rate?
There is no ideal turnover rate because it depends on certain factors and can be higher in some sectors than others. It should be noted that available figures are only indicators. Nevertheless, it should be monitored to assess the company’s attractiveness.
