How to Identify a High Turnover Rate - And What to Do About It

by Ali Gordon

Prior to 2020, researchers forecast that 1 in every 3 employees would turnover. The cost to businesses -- especially small businesses -- can be astronomical when teammates have to be replaced. Studies indicate the expense can be as high as 20% of an employee’s income even up to 2x the total salary of the position. 

Staff resignations have skyrocketed across industries this year in what journalists are calling a “turnover tsunami.” For small businesses that have already been hit hard by the economic fallout of the past year and a half, it is especially important to understand how to identify and prevent high turnover rates. Despite all the challenges facing small business founders, companies can protect themselves and their teams. 

What's the Formula to Calculate the Turnover Rate?

Small business founders have a plethora of decisions to make from accounting to brand positioning to staffing, and many entrepreneurs are self-taught across these areas of company development. While a testament to small business resilience, this can also mean short-staffed employers end up guessing on issues like employee turnover rates. How does a company know if its turnover is too high?

Guessing can leave blindspots and gaps that cause unexpected damage to a company if too many employees are transitioning too quickly. At the same time, companies need enough staffing flexibility to ensure employees who aren’t a good fit can leave the company without disrupting customer service and brand performance. 

Employers can protect themselves from devastating financial and personnel hemorrhaging by understanding how to calculate the rate of employee turnover. Talent acquisition technology company, TalentLyfters offers three key metrics businesses should use monthly or annually, depending on their type of staffing needs like seasonal or permanent teams, to calculate employee turnover rates:

  1. The number of employees who left (voluntary and involuntary) the company in a certain period of time
  2. The number of employees the company was employing at the beginning of a certain period.
  3. The number of employees the company was employing at the end of a certain period.


Source: TalentLyft

The average turnover rate in the United States tends to hover at about 10% and can differ industry by industry. 

However, Achievers’ Employee Engagement and Retention Report projects that over 50% of the workforce will be looking for new opportunities this year. It’s likely most companies will have high turnover this year, so employers must make hiring and onboarding a priority to protect their brands as they recover financially or grow their brands. 

Employee Satisfaction Is Essential

Most staff transitions are independently and voluntarily initiated by employees. This suggests that businesses need to more deeply understand employee satisfaction and what it will take to keep their teams in place. In fact, employee retention ought to be as highly prioritized as aspects of business development that seem to more overtly drive profit. 

In addition to a high turnover rate as indicated by numerical calculations, employers can also gauge -- and get ahead of -- high turnover in their key industry by qualitatively assessing employee satisfaction. Human resources and hiring teams can use a variety of tools from personal conversations to company-wide surveys to collect information about what can be changed to increase employee satisfaction. These metrics can contribute to high turnover:

Burnout and Unmet Mental Health Needs

Burnout and mental health challenges can occur within teams for a variety of reasons -- but all of them contribute to unhappy employees. Sometimes a company can create burnout in its teams by understaffing and placing too much, or uneven, responsibilities on staff members. 

Toxic work environments, personnel conflict, highly politicized internal cultures, or negligent leadership that fails to support teams skillfully can also lead to burnout. Companies should ensure they are listening to their employees equitably across positions, team hierarchies if applicable, and diverse employee identities (like gender or race). 

Leadership can also consider broader environmental pressures beyond internal culture and adapt its policies to protect employee health when needed. For example, in times of external crisis like natural disasters, social unrest, disease outbreak, political upheaval, or personal traumas, companies can recognize the holistic needs of their employees and put measures in place to protect them and boost productivity.

 More flexible work environments, extended time off options or paid leave, and new mental health resources are all investments in employees that prevent burnout and increase turnover. Attentive, empathetic, and responsive leadership that puts its team first can usually mitigate burnout before it happens. 

Benefits Packages That Aren't Competitive

For employers to remain attractive to their teams, they need to offer more than a fair and livable wage. Turnover can happen when employees aren’t actually able to use what a company has advertised as benefits. 

For example, if mental or physical health care plans aren’t usable to employees for any reason, this can motivate turnover. In other instances, employers' efforts at creative perks--like in-office snacks or happy hour nights--may not actually serve the true needs of employees. Perhaps instead employees actually need paid parental leave, a different health insurance offering, or access to transportation. 

Businesses of all sizes have found innovative ways to meet employee needs and offer real value to the teams making them money.  Employers should collaboratively assess alongside their employees what kinds of benefits packages may attract and retain them at a company. 

Poor Fit or Poor Onboarding Processes

Sometimes employee dissatisfaction can occur simply because a team member is not a fit for the company or the role. A strong background check process can support a company in identifying the right fit. In other cases, the onboarding process may simply be insufficient for success in the role. Offering career advancement and internal promotion opportunities can also serve to increase employee satisfaction. Team leads and human resource departments should regularly review these processes and placements to evolve with the growth of teams and the company overall. 

Satisfied, protected employees become some of the strongest brand representatives for a company. When employers place the same high priority on employee satisfaction that they do customer satisfaction, the company will save money, benefit the brand and bottom line, and decrease turnover.

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