What is Employee Churn? Employee churn is the overall turnover in an organization's staff as existing employees leave and new ones are hired. So what exactly is a churn rate or turnover? It is when employees leave a company and have to be replaced and although a certain amount of turnover is unavoidable too high of a churn rate can ruin a company.
Types: There are two general types of turnover, voluntary and involuntary. Voluntary turnover is when the employee chooses to leave while involuntary turnover is caused when the decision for an employee to leave is made by the company on behalf of the employee.
How to Calculate Employee Turnover by Month:
According to Alex De’Angelo, author of “How to Calculate Employee Churn”
He states that, “monthly turnover calculation can be used to learn more when employees leave in their first year.”
To calculate monthly employee turnover rates, divide the number of employee separations in one month by the average number of active employees at the worksite during the same period. We’ll say we have one site of operations.
For example, let’s say we lose four employees out of 200.
That gives us an employee turnover rate of two percent.
How to Calculate Employee Turnover Rates within the First Year:
First-year employee turnover can be calculated by dividing the total number of employees who leave in less than one year by the total number of employees who leave in the same period.
Here’s what the formula looks like:
Now to pull numbers into our formula for first-year employee turnover:
26.7% = 31 employees in the first year of employment / 116 Employee turnover in a time period
What are the costs associated to employee churn?
According to the Globoforce Employee Recognition Report, “Employee retention/turnover is the number one challenge facing most businesses today. Forty percent of the organizations surveyed cited this issue as the most important challenge facing their businesses; twenty-nine percent even admitted to being stressed about finding replacement talent.” There are many reasons why a high churn rate will cost your company, here are a few:
Finding the new recruit – Including hiring a recruitment company, spending money on setting applications, etc.
Severance – In certain instances, the organization might be required to pay severance to the employee.
Losses in productivity – While the organization is looking for a replacement, it might suffer from decreased productivity.
Lost opportunities – The employee might have been highly talented and this can be a financial lost opportunity, for instance.
Training the new recruit – Whether the organization transfers someone to the new role within the company or hires someone new, the training process will add extra costs.
Top 3 strategies for combating churn:
While some candidates may possess the required skills your company desires, they may not necessarily be the best fit for your company culture. To ensure a good fit who is also well trained and ready for the position, consider implementing succession planning.
Succession planning acknowledges that staff will not be with an organization indefinitely, and it provides a plan and process for addressing the changes that will occur when employees leave. A succession plan ensures that there are qualified and motivated employees (or a means of recruiting them) who are able to assume responsibilities when the executive director or other key personnel leave an organization. Succession planning also develops internal employees to be competitive candidates when senior leadership leaves.
When you create a succession plan that showcases growth opportunities and challenges your employees to do more, they have a more positive outlook on their future at your company. As a result, they’re more likely to stick around long-term.
Employee benefits are forms of non-cash compensation that companies provide to workers and the U.S. Small Business Administration reports that, “Employees at firms that offer benefits are about 26 % less likely to quit in a given year than employees who don't receive benefits.” Better benefits equal reduced employee turnover. With this being said, offer an attractive, comprehensive and competitive benefits package.
Compare your benefits to your competition’s. Are they up to par? If not, try opening up the lines of communication between the company and your employees. Ask them what they value the most and what it will take to make them stay at your company. This will show that you are listening and care about them as employees.
Dealing with employee retention is never a simple task but by realizing the need to develop competitive benefits offerings for your employees as well as valuing their input and suggestions, you will be well on your way to increasing your retention.
Keep Morale and Company Culture High:
Keep a watchful eye on overall employee morale as it is the best litmus test of trouble within a company. Making these adjustments to fix culture and morale is more cost-effective than dealing with the costs that come with employee turnover.
Actively listen to your employees. Use their ideas, open up lines of communication, ask them if they have any questions or concerns, have an open door policy. There are many ways to show your employees that you are willing to listen. One of these methods is to show them you are paying attention.
Offer performance feedback and praise good efforts and results to reduce employee turnover. Your recognition of employee contributions is your most powerful form of employee reinforcement and retention. People want to know that their work is being noticed and that they are contributing to the bigger picture. The occasional pizza party to celebrate successes won’t hurt either!
Lastly, Create a culture in which employees have the work-life balance they desire. Allow flexible starting times, core business hours and flexible ending times. It’s only natural that people want to enjoy their work especially if they are spending half of their lives there. So make work engaging and keep morale high! The better the atmosphere the more productive your employees will be. Engage and employ the special talents of each individual.
Employee turnover could be costing you more than you realize. While there are heavy financial costs, the effects of high turnover on remaining your remaining employees add up to significant losses for your company. Losses such as low morale, less collaboration, motivation, and productivity, are all things that can bring down any business. With the help of these tips, you will be well on your way to lowering your churn rate!