How to Calculate Your Organisation's Staff Turnover Rate

It's a two-step procedure to protect your firm against high levels of staff attrition. First and foremost, you must understand your company's staff turnover rate. Second, you must understand what measures may be made to reduce it to a bare minimum.

It is the goal of every employer to retain their employees. If your turnover rate is high, then you will regularly find yourself in need of new staff members and training exercises. This can be very costly and time-consuming.

Definition of the Employee Retention Rate

An employee retention rate is a measure that shows a company's ability to retain its employees over a certain period. It's similar to turnover, though it focuses on the number of employees who left during a given period.

Your retention rate can give you a good idea of how committed and valued your employees are. It can also help you gauge the level of training and recruitment costs.

A low rate would always give out a positive image of your firm, reflecting a work environment that has the core elements of loyalty, trust, productivity and commitment.

The Retention Rate Formula: How to Calculate It

Employee turnover is expressed as the percentage of staff members who quit a job with the business, they were employed in during a specific period which is usually a year, measured as a percentage of overall workforce strength.

The formula for calculating turnover:

(Number of Staff members leaving the organisation/ average number of staff members) x 100 = turnover percentage

Example: 5 Staff members decide to leave an organisation and the average number of staff working for the organisation is 250. Turnover percentage= (5/250) x100, i.e., rate of staff turnover is 2%.

The formula for calculating employee retention:

Most businesses compute retention rates yearly, thus the designated period is January 1 to December 31. You can, however, choose any period.

(number of workers at the last of the period /number of workers at the beginning of period) x 100 = retention rate.

Example: A company had employed an average of150 employees during 2019, towards the end of the year, it was found that 30 of the employees had quit their job throughout the year 2019

Retention rate = (120/150) x 100, i.e., 80% of the staff were retained

Why is Employee Retention so Important in Business?

Your retention rate is the foundation of any business' growth. It affects every area of your operation and can help you improve in every area of your business.

A high retention rate is very important for a company to retain its employees. This is because it shows that the people are valued and committed to working for the organization. People who feel valued are more inclined to be productive and go above and beyond.

Your most valuable asset is your workforce. If you can keep and retain great talent, your company will be in a far better position to develop and expand

The retention rate metric can help measure the success of any new initiatives or programs. It can also help identify areas where you might need to improve to retain the best talent.

Why is it Important for a Small Business to retain their Employees?

The retention rate formula is a must-have for any small business owner. It shows how long your new employee will stay with the company. This is because, as a small business, you don't have the time or resources to hire and retain the ideal people.

If you’re spending time and resources on hiring, integrating, and training new staff, then it should be ensured that they don't quit after a few weeks. They should stay and work as long as it takes you to retrieve your expense. Every time you fail to secure talent, your annual hiring costs rise.

If new hires leave your firm frequently, possibly there could be a problem with your hiring procedure. Instead of leaping to fill a space with the first acceptable applicant, perhaps more time should be spent in sourcing the appropriate individual. A little extra time and money invested in the recruitment process now might save you a lot of time and money afterwards.

Best Practices for Retaining Employees and for a low turnover rate

The recommended practices outlined below should assist you in increasing your retention rate and, as a result, lowering your staff turnover rate:

 

• Employee retention, turnover, and attrition rates should be measured and tracked.
• From the start, spend more time identifying the proper individual for the task.
• Regularly monitor and analyse the market to ensure that you are paying fair rates and providing incentive schemes that are as per industry standards.
• Regular assessment sessions and feedback questionnaires can help you learn more about your employees. Your employees will be more inclined to stay at your firm if they feel appreciated and heard.
• Create appropriate achievement goals and expectations for employees.
• Establish a pleasant working atmosphere built on trust and openness. Provide training and assistance to your staff as then they could comprehend and can carry out their responsibilities.
• Provide your staff with clear professional growth pathways.
• Employee efforts should be recognized and rewarded.