What is Turnover Rate?? Why is this indicator necessary in the quarterly and annual HR reports? What should the Turnover Rate be limited to and how can it be improved?
What is Turnover Rate?
Turnover Rate is a term that refers to the rate of change in personnel of an enterprise over a measured time period. Turnover Rate is the ratio of the number of employees leaving the job calculated on the average number of employees in a month, quarter or many years. This concept can be understood as the turnover rate or turnover rate of the enterprise's personnel.
This is an important indicator in the human resource report of enterprises. It shows the company's ability to retain talent and satisfy employee requirements. Some businesses divide turnover rate according to two criteria. One is the rate of voluntary job hopping, which originates from the personal and psychological desires of employees. The second is the rate of involuntary severance, for example due to moving house, retirement, illness, etc.
Instructions on how to calculate the job hopping rate
First, collect inputs such as: the number of employees working at the beginning (B) and the end of the period (E) you want to calculate; number of employees leaving (L) during that period.
Next, calculate the average (Avg) number of employees during the above period: Avg = [E+B]/2
Calculation formula job hopping rate as follows:
Turnover Rate = (L/Avg) x 100
Example of how to calculate Turnover Rate
At the beginning of the first quarter, the enterprise had 100 employees. At the end of the first quarter, the enterprise had 105 employees. But in the quarter, 4 employees quit. Turnover rate your will be: 5/ [(100 + 105)/2] x 100 = 4.9%
Normally, businesses will calculate the rate turnover rate quarterly and annually. Because the longer the time period, the more metrics there will be to measure. And the easier it is for you to make comparisons between times.
Here is the recipe for Turnover rate annual:
So, if you had 45 employees at the beginning of the year and 55 employees at the end of the year and 5 employees left that year, your annual turnover rate would be:
You can also calculate your employee retention rate by taking the turnover rate and subtracting 100 to get the result.
What should the turnover rate be?
Not just an index for comparison. Employee leave ratec high or low will reflect the status of personnel at the enterprise. Dr. John Sullivan - an in-depth consultant on Talent Management believes that if Turnover Rate:
| Under 3% | Your business seems to be fine. Maybe it's the boss's fault. Re-examine your manager's behavior, communication, or leadership style. |
| 3 – 5% | Not much to worry about. However, enterprises should consider the salary system and remuneration policy. Perhaps it is not enough to satisfy the aspirations of the employees. Besides, the boss's problem is still worth considering. |
| 5 – 8% | There's a bit of a problem here. In addition to the boss and salary, your company may not have many opportunities for growth. This makes it difficult for employees to determine their work goals at the enterprise. Investing in promotion and training, giving them challenging jobs is a good way to improve this |
| 8 – 10% | Business is on alert. Dr John Sullivan said that in addition to the above problems, if you are at this level, there is probably a gap in the corporate culture. Consider implementing internal activities to increase engagement |
| Over 10% | In addition to the above factors, consider external influences such as industry environment, competitors, etc. |
In fact, the above statements are for reference only, not for all. Therefore, administrators still need to consider all aspects. To make sure to find the right problem and not miss any weak link.
What is the reason for increasing Turnover Rate?
There are many reasons that affect an employee's job-hopping mentality. Sometimes 2 or 3 reasons at the same time. Most of them are by:
- HR can't find inspiration and motivation
- Did not see the possibility of growth
- Employees feel unrecognized
- There is no harmony with the surrounding personnel
- Work is too stressful, stressful
HR can't find inspiration and motivation
Most people are most excited about their job for the first two months. While they are still learning to get used to the new environment and work. Once familiar with the work flow, employees become even more depressed. Especially when one day they just do the same things over and over again.
Therefore, managers need to find ways to give more difficult challenges to encourage them to become active. Also, open up to them more. You should be the leader, not just the assignee. Most employees stay with the company longer because the boss is inspired to work for them.
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Did not see the possibility of growth
This is also the main reason why employees leave the organization. This reason is becoming common, especially among Gen Y. Job hopping is happening more and more because they are ambitious and they know they have the qualities to achieve better. If the business or the administrator cannot show them the next step on the career path. Or they simply cannot learn any more. Leaving is inevitable.
At this time, businesses need to create specific and public promotion routes. For example, how many years of experience, achievements, and skills does a salesperson need to be appointed to the head of the department. And then there's the sales manager. In addition, organize training courses or sponsor them to study outside to give employees the opportunity to improve.
Employees feel unrecognized
Everyone who goes to work wants to be recognized for their efforts. First by the manager, then by the entire organization. They can't work more than 8 hours an hour, try their best, get the job done on time and get nothing in return. In some cases, that recognition may not be worthy of the employee's dedication. It's also what makes them leave.
First of all, make sure the compensation and compensation policies satisfy their aspirations. The labor market is very competitive. Employees are willing to switch jobs if someone pays more. Investigate your competitors and the market to determine the most suitable salary.
Next, frequently show acknowledgment with small gestures. Congratulations when they successfully close the order. Cheer with praise when they complete a difficult task. This is a very simple way to boost employee morale. Even if they don't do as well as expected, a "Good job. Keep it up” will also motivate them a lot.
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There is no harmony with the surrounding personnel
If you notice too many employees leaving when working with the same boss. Maybe it's time to consider the boss's leadership abilities. In addition, an uncoordinated working environment is also what makes employees feel alone.
Don't just make evaluations one-way, that is, only the leader evaluates employees. Let the staff participate in the opinion of senior management. In addition, regularly organize internal communication activities, teamwork or team building to give employees the opportunity to interact with other employees.
Work is too stressful, stressful
Some jobs have high demands on results. For example Business, Manufacturing or Banking. Putting too much emphasis on performance issues easily makes them bored and tired after working time. Instead, give them the opportunity to work-life balance.
Some businesses allow Sales Associates to work from anywhere, as long as they make sure the job gets done. Or some others allow working in the form of Hybrid, ie working day at work, working day at home. If you find that your employees are constantly stressed, give them a break and reduce their workload for a while.
Many businesses choose to invest in entertainment areas or support Gym packages for employees. They can totally take short breaks to release momentary tension. Or practice to improve health and reduce stress after a long day at work.
Effective ways to reduce absenteeism
Listen to HR more
Managers don't have to just assign work. They should be the leader. And if you want to lead well, you need to know how to listen. Motivate employees to share more about difficulties at work.
Usually, very few employees want to leave immediately. This thought needs to be formed within a certain period of time. Because they have to balance between the needs of daily life and their own development. Regular listening can sometimes help you spot problems sooner. Gives you the ability to work things out before the thought becomes ingrained in your work ethic.
Choose the right right from the recruitment stage
Not only in terms of skills and expertise, consider the corporate culture aspect as well. Is this candidate a good fit for the organization's culture? This is especially important for positions with high communication requirements. For example, Account, Sales staff, HR Administration, Communications.
When conducting the interview, share about the working culture at the company. Let the candidate automatically weigh the suitability first, then ask case questions to review the candidate's solution. This is an important goal for senior management positions. Because they directly affect the working spirit of the remaining members.
Hiring right not only helps businesses reduce turnover rate, but also save a lot of cost and time when recruiting new people.
Use CoffeeHR Recruitment software to make decisions
CoffeeHR software not only speeds up the recruitment process of businesses, but also helps make the right choice thanks to the candidate assessment feature.
After automatically collecting CVs from recruitment websites, CoffeeHR will classify them by categories such as years of experience, training system, position, etc. to help HR screen the most suitable candidates.
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The jury may score candidates during the recruitment process. The scoring coefficient will be established according to the enterprise's criteria. For example, expertise determines 60%, skill accounts for 30% and cultural relevance makes up 10%. Or build based on the rank of the jury. For example, the director occupies 60%, the head of the department occupies 40%. Direct scoring will bring the most objective and accurate assessments. Avoid forgetting when interviewing many candidates at the same time.
Moreover, CoffeeHR's promotion route builder will be a great tool for employers. Through Career Path, HR can orient candidates right from the interview round. Help them determine what working at the organization will bring. And self-assess the suitability with your own development desire. Saving both parties' time, reducing the turnover rate is the plus point of this feature.
The treatment is well deserved
As analyzed above, this is one of the main factors that cause employees to "give up". Let's build a transparent and public salary and bonus mechanism. And above all, it is necessary to recognize all the efforts of employees in the organization. You might consider holding a salary increase review at least every 6 months.
In addition to the KPI bonus mechanism, hot rewards when the results exceed expectations, many businesses create small prizes with encouraging meaning. For example, Employee of the Month, Employee with the highest revenue of the week, Hard worker… to show their recognition.
Post-retirement interview
Building a survey to hear from former employees is a good way to find the weak link. The departure of personnel will remove the previous psychological barriers. They are more willing to share honestly. Because sometimes the reason for leaving comes from the inside, from the boss or the colleagues around. These are all sensitive issues that are difficult to talk about while working at the organization.
The interviewer should be HR, instead of the former direct manager. Some questions to interview former employees are as follows:
- What do you think about your working process here?
- What in the working process makes you most satisfied?
- If you could change 3 things about your company, what would it be?
- Is there anything about the company that you wish you had known about sooner?
- How do you feel that your manager and colleagues around you treat you?
- Do you feel that your contributions are properly recognized? If not, where should we improve?
- Are there tools or training courses that could make you more productive?
In the event that the above responses all receive positive comments, HR may ask further questions to determine whether this is a voluntary or involuntary resignation:
- Can you share your reasons for leaving your job?
- Would you be willing to introduce your company to someone you know? If not, can you tell me the reason?
Using technology to predict the trend of quitting jobs
An employee usually takes at least 1 to 2 months to make a decision to quit. Managers can apply technology to screen employees with high probability of leaving.
With CoffeeHR Human Resource Management software, the assessment and survey feature is an effective tool for you. Usually, employees who intend to leave will have a decrease in job performance. Because they are no longer interested and are bored. Management can use this sign to talk to that employee. Instead of asking or forcing them to regain their performance. CoffeeHR allows parallel assessment of performance and capacity. In addition, the system can be integrated with other ERP or CRM software. Therefore, the assessment becomes accurate, multidimensional and intuitive.
Watch more videos on how to calculate Turnover Rate
In addition, HR can organize continuous surveys on employee satisfaction. Clearly divided by each item such as salary, bonus; culture; amount of work; training needs, etc. Through these surveys, enterprises soon find problems that increase What is Turnover Rate?. At the same time, know which employees are most likely to leave so that they can have appropriate accompanying plans.
Ending
The layoff of employees is unavoidable in every business. Through this index analysis, businesses can easily identify where the problem is. The above document of CoffeeHR will help managers and HR better understand What is Turnover Rate?. As well as identify ways that you can reduce the turnover rate.
Contact
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One Response
Great article