How to calculate staff turnover and analyze turnover?

The staff turnover rate enables a company to know how it is renewing its workforce. This indicator reveals to the HR manager the quality of its human resources management. Our article gives you the formula for calculating your organization' s turnover rate .

But this rate alone cannot explain the frequency of employee departures or the arrival of new employees. The labor market differs from one sector to another. Follow our advice to analyze your turnover rate and reduce it. We'll also show you the tools you can use to improve your HR data management.

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Definition of turnover

Turnover is a term widely used in the workplace to refer to the turnover of employees.

Although turnover is a widely-used term in everyday language, human resources managers actually calculate the rate of staff turnover in a company over the course of a year.

This turnover rate is a strategic indicator for the company, as it reflects the state of health of your organization.

You need to know how to interpret this indicator in a precise context, and according to identified factors.

A company's turnover may depend on :

• the number of employee departures,
• the number of new recruits arriving,
• staff transfers,
• the abundance or shortage of manpower,
• working conditions,
• HR policy,
• social climate,
• company growth,
• business sector,
• economic context,
• environmental context,
• political and legislative context,
• the disappearance of professions,
• the emergence of new professions.

The formula for calculating staff turnover

Here's how to calculate the staff turnover rate for a given year, in stages:

• Step 1: add up the number of departures and arrivals over the course of the year, to obtain a result A ;
• Step 2: divide this number A by two, to obtain a result B;
• Step 3: divide this number B by the number of employees on January 1 of the year, to obtain a result C;
• Step 4: multiply this number C by 100, to obtain the turnover rate expressed as a percentage.

The formula for calculating turnover for a given year is :

[[(number of departures + number of arrivals)/2]/number of employees on January 1st of the year] X 100

= staff turnover rate in %.

Let's apply the turnovercalculation formula to an example:

Dupond has 600 employees on January 1, 2018.

During 2018, 70 employees were hired and 50 employees left the company.

Calculation of Dupond's turnover rate for 2018

= [[(70 + 50)/2]/600] X 100 = [[120/2]/600] X 100

= [60/600] X 100

= 0,1 X 100

= 10 %

Dupond's staff turnover rate is therefore 10%.

This means that the company has renewed 10% of its staff.

Another simplified method of calculation:

staff turnover = number of departures in the year/average headcount

This method of calculating turnover is used in some HR dashboards.

It is applied when each departing employee is replaced by a new entrant.

Turnover analysis: stop the myths!

Beware of preconceived ideas and pitfalls in interpreting your data. Staff turnover is an important indicator for human resources management.

However, it should not be considered in isolation. If you do, your reasoning will be flawed.

In most cases, a low turnover rate reflects a good HR policy. A high staff turnover rate can be interpreted in two ways: one positive, the other worrying.

But what is an acceptable turnover rate? Here are some valuable tips for analyzing your company's turnover.

A low turnover rate: yes, but not too low!

It's customary to set a low turnover rate of up to 5%. A low turnover rate indicates good human resources management.

If employees stay with the company, it's because they feel good there. They are satisfied with working conditions and pay.

This phenomenon also reflects a positive social climate, where the corporate culture is shared. A good atmosphere reigns, like a fairy tale.

Beware of deceptive appearances. The shop window may be perfect, but the back room may hold some nasty surprises.

A low staff turnover rate can lead to breathlessness, stifle creativity and prevent the emergence of innovative ideas: when you're like a rooster, why change such a comfortable situation?

Zero staff turnover can also prevent you from recruiting outside talent: they may perceive a skewed image of the company, where nothing moves, which can be synonymous with routine and boredom. They may even think that you have to have a very long seniority before you can get promoted.

On the other hand, some administrations have a very low turnover rate due to the fact that civil servants are hired for life.

A high turnover rate can be normal

A company with a turnover rate of 15% or more is considered to have a high turnover rate. A high turnover rate is normal in sectors that hire low-skilled labor or qualified employees on fixed-term contracts to fill an order for a specific period.

This is also the case for call centers. The employment of temporary staff can correspond to an increase in activity, which is quite positive for the company.

Fast food outlets and the retail sector regularly employ students in search of temporary and seasonal jobs, as well as temps to carry out inventories or rearrange store shelves.

In certain areas of the service sector, such as Parisian advertising agencies, the mercato is very lively.

On the other hand, when a company records several retirements in the same year, its turnover rate rises, which is not a negative sign, but simply a normal phase in an employee's life.

High turnover can be problematic

A high turnover rate can simply be explained by job cuts or a massive lay-off plan to cope with economic and financial difficulties.

In other cases, the company needs to ask itself what is causing the high number of resignations or redundancies.

Certain indicators can help you identify the causes of turnover:

• management not adapted to employment law,
• lack of organization,
• communication problems,
• a tense social climate,
• poor skills management,
• employee integration,
• work environment,
• renewal of a temporary contract,
• lack of recognition,
• lack of benefits,
• repetitive tasks,
• too little or too much responsibility,
• health problems,
• lack of professional training,
• lack of experience,
• competition offers better opportunities,
• the competition offers a higher salary, etc.

On the other hand, a social or economic factor beyond the control of management can explain high turnover :

• new European or global standards requiring the recruitment of experts,
• an increase in tax pressure reducing the possibility of hiring,
• the disappearance of professions and the emergence of new ones linked to electronics and digital technology.

In some cases, priority is also given to investment in equipment rather than people, in order to remain competitive.

Figures and feedback on job rotation

Times change, customs evolve, the job market changes. Here's some information to help you understand how the job market is evolving.

This will enable you to look at your turnover rate from other angles, and determine an acceptable turnover rate.

First element: the context.

According to INSEE, the staff turnover rate has almost multiplied by 5 in 30 years, and this increase is set to continue.

It is therefore mathematically logical that staff turnover is higher than in the 1990s.

Second element: the turnover rate by business sector.

Job turnover differs from sector to sector. So compare like with like: look at the figures for your sector to assess your turnover rate. Figures from other sectors will distort your judgment.

Find out more about turnover rates by sector from a major survey by the French Ministry of Labor: here.

Note: it may also be relevant to examine the figures for your sector in France and compare them with those from other countries, whether French-speaking or not, such as Canada, European countries, the USA, etc.

To find an effective employee and keep them, you have to start by finding them. Download our sample job interview grid in Excel format to help you make your selections:

Cost of turnover, processes and tools to reduce it

An abnormally high turnover rate can have serious consequences. The cost of turnover can take many forms.

Here are a few examples of what can go wrong, the steps you can take to reduce high turnover, and some essential tools to help you do the job.

Consequences and costs of turnover

Let's look at the consequences and cost of turnover from several angles:

• When an employee resigns to strike out on his own or go to a competitor, it can make other rare birds want to leave the nest. Watch out! Talent drain is possible in any organization;

• Repeated dismissals can give a bad image of the employer to potential talents and candidates. Supersonic talent will fly over your company without so much as a passing glance. Damage to sales;

• The loss of an employee often entails a loss of experience and operational skills specific to the company's processes: to fill the vacancy, you'll need to hire a new person and train him or her in work procedures, or even in the job and all its specifics. During the entire integration and training phase, you'll feel the loss of earnings;

• Training new recruits takes time. But who should be allocated this training and support time?

• You know what you're losing, but you don't know what you're gaining: will the replacement or successor do the job, or will he or she be incompetent? If the casting is unsuccessful, you'll lose some feathers. The company loses money;

• Repeated voluntary departures or job cuts create a bad social climate internally. Who's next? When you work with a sword of Damocles hanging over your head, you lose performance and productivity;

• Some departures prevent or delay the completion of strategic tasks for the company. A customer who waits too long for an order to be delivered may cancel the initial contract;

• The departure of a qualified, high-performance employee leads to a drop in quality. It may take some time for the quality to return to an acceptable level;

• Redundancy payments, the cost of sourcing new candidates and the recruitment process: you need to budget for what you want to achieve.

Staff loyalty and retention processes

To reduce staff turnover, you need to identify the causes of high turnover (see above), and then implement an action plan to improve your talent management.

An internal survey can also raise previously unidentified issues. Loyalty and retention processes help you to reduce turnover: let's take a look at them.

Retaining employees is all about creating and providing the best working conditions for them to feel fulfilled within the company.

A number of factors have a positive effect on employee motivation, such as :

• an attractive remuneration package,
• comfortable offices,
• benefits in kind,
• flexible working hours,
• authorized telecommuting,
• bonuses and endowments subject to targets,
• free drinks and fresh fruit, etc.

Initiating a retention process means doing everything possible to keep an employee who wishes to leave the company. Dialogue is essential to identify the reasons for the employee's announced or "suspected" departure.

Some arguments retain talent more easily than others. Among the changes to be made, the employee may wish to :

• vary the tasks entrusted to them,
• benefit from a change of position,
• promotion,
• training,
• be paid more,
• telework more because of the long distance between home and work, etc.

HR tools to improve personnel management

Let's take a look at the technologies available to human resources managers. These tools can centralize and automate numerous tasks, making personnel management easier.

Let's take a closer look at the invaluable help they provide in reducing turnover and building sustainable talent management.

GrafiQ

GrafiQ by QuickMS is an HR solution in SaaS mode that helps VSEs, SMEs and ETIs manage their human resources. More than 1,000 indicators and dashboards make it easy to calculate HR performance, so you can get a clear overview and make the right decisions.

QuickMS

GrafiQ features and benefits:

• complete monitoring of employee turnover (general turnover rate, by status, by sector, by type of contract, etc.),
• rapid calculation of the exit rate, and monitoring of its evolution,
• QWL surveys and social barometers to assess well-being in the workplace,
• dynamic HR dashboards that can be customized with filters, by period or population type, for precise, real-time monitoring,
• the ability to comment on dashboards to provide analysis elements.

GrafiQ's regular turn-over monitoring and HR performance management tools enable you to quickly detect any tendency towards a deterioration in the social climate, so that you can take corrective action and avoid talent drain.

ServicesRHOnline

First of all, we'd like to introduce you to ServicesRHOnline, a tool that's just as suitable for small businesses as it is for much larger companies. ServicesRHOnline is an HRIS (Human Resources Management Information System) software package. It's modular: you can choose only the functionalities you need.

ServicesRHOnline features and benefits :

• integrated management of annual appraisals, staff appraisals and objectives,
• dedicated skills management tools such as skills maps and personalized training paths,
• an employee management module with individual social balance sheet and leave management,
• a module for analyzing employee performance by employee profile,
• tools for building succession or mobility plans.

The wide range of analysis functions and modules makes ServicesRHOnline a powerful tool for skills management, with comprehensive individual profiles.

Sirhéos

Sirhéos, the HRIS for SMEs, ETIs and large groups. You can choose to use the complete HRIS software or just specific tools. Sirhéos is also a modular software package.

Sirhéos features and benefits:

• a professional interview module that traces the employee's career path within the company, including appraisals and annual reviews,
• a skills map to compare an employee's wishes with the company's needs,
• a comprehensive talent management module to track employee performance and profile,
• a dedicated training module including needs identification and training planning,
• a customizable dashboard to monitor the desired indicators.

Through its functionalities, Sirhéos offers human resources managers the opportunity to enhance the company's human capital while taking into account employee performance.

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Good skills management reduces turnover

Talent drain equals brain drain. The company can find itself weakened and lose its competitive edge.

Losing sharp skills and know-how means "losing an arm", so to speak, and therefore agility.

The challenge for HR managers is to align employee skills with the company's development strategy.

To strike the right balance, they need to consider human capital as a whole: beyond skills, they need to be able to identify potential and anticipate sources of demotivation and attrition.

Good skills management becomes a key factor in reducing staff turnover. Regular reviews and exchanges enable indicators to be defined, so as to detect areas for improvement and positive elements.

All these indicators need to be brought together in a dashboard to give the HR director the best possible visibility.

With this in mind, HRIS software centralizes all the information gleaned from professional interviews.

Equipped with customizable dashboards, these tools become indispensable to the HR manager for identifying the risks of losing vital talent and reducing turnover.