Employee turnover rate: how to interpret and calculate it

The employee turnover rate is an indicator closely linked to job satisfaction and is a critical factor in the dynamics of talent retention and management in companies. Job satisfaction goes beyond a person’s own motivation, their individual situation, or the salary they receive and affects the very structure of the organization and the work environment.

Given the importance of the staff turnover rate in issues related to talent assessment, we want you to have no doubts about what it is, how it is calculated, and how it is interpreted.  

What is the employee turnover rate?

The employee turnover rate is an indicator that measures the ratio between workers who join and those who leave a company in a given period. 

Thanks to this employee turnover rate, you can analyze and understand whether your Human Resources – HR – strategy for retention, retention, retention, and retention of employees is working. HR – for the retention and management of talent is effective.  

It also allows you to compare with the average in your industry and see where you stand concerning the competition. 

What factors influence the employee turnover rate?

Three factor types influence this rate:

1. General factors. 
2. Internal factors of the company.
3. Factors linked to the individual. 

Let’s look at them in more detail to understand them better. 

General factors

The general factors refer to external situations, that is, independent of the company and the employees, such as the evolution of the markets or the attraction of large corporate structures with whose hiring conditions you cannot compete.

These kinds of factors are unavoidable and difficult to overcome. 

Internal company factors

Faced with this factor, you can take measures to mitigate its effect on the employee turnover rate since they are linked to the company’s internal strategies. 

We are talking about causes related to personnel policy, working conditions, the quality of the team leaders, the work environment, etc. 

Person-related factors

These factors are exclusively related to the personal performance level and to the employee’s family conditions. 

You can face two types of turnover in this case: 

1. Voluntary: it occurs when the employee leaves the company by his own decision because his level of satisfaction has decreased or because the company has not met his expectations. Or it may be due to health problems, family problems, etc., external to the professional level.
2. Involuntary: this occurs when the employee is dismissed against their will. 

Undoubtedly, concerning family causes or health problems, you can do little or nothing because this type of decision is quite definitive. The only solution would be to improve work-life balance policies if these were the focus of employee dissatisfaction.  

Having said that, analyze your value proposition to your employees and act where you see gaps to improve the employee experience. 

How to interpret the employee turnover rate?

Correctly interpreting the turnover rate requires an in-depth analysis since many agents are involved.

Remember that part of the turnover is positive for the company as long as it is associated with successful talent recruitment. This new blood brings new experiences and innovative ideas and perspectives that energize the teams. 

The problem arises with the turnover of profiles that the company wishes to retain since it generates a high cost because it will require a new recruitment process and a new training period with the economic impact that this entails.

If the turnover rate is high

If the result is very high, it may convey that your employees are not satisfied with the company or that your selection techniques are failing. 

Your shortcomings can be found in the salary policy, the lack of clear objectives, the stagnation of employees who cannot develop their professional career plan, the lack of family reconciliation measures, etc. 

If the turnover rate is low

A meager staff turnover rate may not be positive, as it may be an indicator that your human capital is stagnating or aging, something that, without a practical talent assessment can detract from the competitiveness of your project. 

In order to analyze the results in depth, it is essential that you define an optimal turnover rate to achieve maximum organizational efficiency in your company and that your business strategy is translated into concrete HR objectives and strategies.

How is the turnover rate calculated?

The staff turnover rate is calculated by establishing a relationship between the volume of incoming and outgoing employees concerning the number of people available in a given period. 

The formula to calculate it is as follows: 

Assessing and tracking team motivation can help you retain the talent you need to develop your projects. 

Tools such as surveys, recruitment interviews (including exit interviews to address problems), and 360° assessments, among others, provide you with crucial information about your teams and their expectations. 

Although it may seem complicated to implement all these measures, consider that you can opt for HR management software that automates many of the essential tasks in talent management. 

Our proctoring products can also help you create agile, respectful, secure and accessible environments for your assessments, training, selection processes, etc. 
Request your free demo, where we will share with you effective solutions tailored to your needs that you may not even have considered.