Turnover (employment)

Act of replacing an employee with a new one

In human resources, turnover refers to employees who leave an organization. The turnover rate is the percentage of the total workforce who leave over a certain period. Organizations and wider industries may measure their turnover rate during a fiscal or calendar year. Factors external to the organization, such as employees seeking to meet financial needs, work family balances, economic crises, etc. may also contribute. Turnover rates may vary due to time and industry. If an employer has a high turnover rate relative to its competitors, this means that employees of that company have a shorter average tenure than those of other companies in the same industry. High turnover may be particularly harmful to a company's productivity if it cannot easily retain or replace skilled workers. Companies may track turnover internally across departments, divisions, or demographic groups such as turnover of women versus men. Companies may seek to better understand voluntary turnover by surveying leavers on their motivations. Many organizations have discovered that turnover is reduced significantly when issues affecting employees are addressed immediately and professionally. Companies may try to reduce employee turnover rates by offering benefits such as paid sick days, paid holidays and flexible schedules.

Employee attrition, employee turnover, and employee churn all refer to an employee quitting the job, and are often used as synonyms. For the first two terms, the difference is due to the context, i. e., the reasons for the employee leaving. While attrition is usually voluntary or natural like retirement or resignation, turnover refers to both voluntary and involuntary departures. While turnover includes employees who leave of their own volition, it also refers to employees who are involuntarily terminated or laid off. In the case of turnover, HR's role is to replace employees, while positions vacated through attrition may remain unfilled. Employee churn refers to the total number of attrition and turnover cases combined.

There are five categories into which turnover can be classified. Voluntary vs Involuntary turnover: voluntary turnover occurs when an employee voluntarily chooses to resign from the organization. Voluntary turnover could be the result of a more appealing job offer, staff conflict, or lack of advancement opportunities. Avoidable vs Unavoidable turnover: avoidable turnover occurs in avoidable circumstances that the organization can change to make employees change their minds and not quit, such as lower pay and rewards or poor working conditions. Unavoidable turnover occurs under unavoidable circumstances, such as a family move, serious illness, or death. Skilled vs Unskilled turnover: uneducated and unskilled employees often have a high turnover rate, and they can generally be replaced without the organization or company suffering a loss of performance. The fact that these workers can be easily replaced provides little incentive for employers to offer generous labor contracts; conversely, contracts can greatly benefit the employer and lead to increased turnover as workers seek and eventually find more favorable employment. On the other hand, skilled and educated positions can pose a risk to the company if they leave, thereby leading to replacement costs as well as competitive disadvantages for the company. Possible causes include desire to work for companies with better work policies (i. e. work life balance, autonomy, smart working), the desire to have a more satisfying job and career advancement opportunities, and safety concerns related to the COVID 19 pandemic. Attrition trends over the past 9 years. On the x axis are shown the years, and on the y axis the annual quits (%). Source: U. S. Bureau of Labor Statistics

When accounting for the costs (both real costs, such as time taken to select and recruit a replacement, and also opportunity costs, such as lost productivity), some estimates on the cost of employee turnover in for profit organizations range from 30% to 200% of the employees' salary. There are both direct and indirect costs. Direct costs relate to the leaving costs, replacement costs, and transitions costs. Indirect costs relate to the loss of production, reduced performance levels, defective products, unnecessary overtime, and low morale. In healthcare, staff turnover has been associated with worse patient outcomes. The true cost of turnover may depend on a range of variables including ease or difficulty in filling the position and the nature of the job itself. Estimating the costs of turnover within an organization can be a worthwhile exercise, especially since such costs are unlikely to appear in an organization’s balance sheets: some of the direct costs can be readily calculated, while the indirect costs can often be more difficult to determine and may require “educated guesses” (though not necessarily, e. g., one study traced defective electronics to the staffing levels at the time and location of their production

Like recruitment, turnover can be classified as "internal" or "external". Internal turnover involves employees leaving their current positions and taking new positions within the same organization. Both positive (such as increased morale from the change of task and supervisor) and negative (such as project/relational disruption, or the Peter Principle) effects of internal turnover exist, and therefore, it may be equally important to monitor this form of turnover as it is to monitor its external counterpart. Internal turnover might be moderated and controlled by typical HR mechanisms, such as an internal recruitment policy or formal succession planning. Internal turnover, called internal transfers, is generally considered an opportunity to help employees in their career growth while minimizing the more costly external turnover. A large amount of internal transfers leaving a particular department or division may signal problems in that area unless the position is a designated stepping stone position.

Unskilled positions often have high turnover, and employees can generally be replaced without the organization or business incurring any loss of performance. The ease of replacing these employees provides little incentive to employers to offer generous employment contracts; conversely, contracts may strongly favour the employer and lead to increased turnover as employees seek, and eventually find, more favorable employment.

Practitioners can differentiate between instances of voluntary turnover, initiated at the choice of the employee, and involuntary turnover initiated by the employer due to poor performance or reduction in force (RIF). The US Bureau of Labor Statistics uses the term "Quits" to mean voluntary turnover and "Total Separations" for the combination of voluntary and involuntary turnover.

Turnover can vary significantly based on time and industry. For example, the US 2001 2006 annual turnover rate for all industry sectors averaged 39.6% prior to seasonal adjustments, while the leisure and hospitality sector experienced an average annual rate of 74.6% during this same period. The average total of non farm seasonally adjusted monthly turnover was 3.3% for the period from December 2000 to November 2008. High turnover often means that employees are dissatisfied with their jobs, especially when it is relatively easy to find a new one. It can also indicate unsafe or unhealthy conditions, or that too few employees give satisfactory performance (due to unrealistic expectations, inappropriate processes or tools, or poor candidate screening). The lack of career opportunities and challenges, dissatisfaction with the job scope or conflict with the management have been cited as predictors of high turnover. Each company has its own unique turnover drivers so companies must continually work to identify the issues that cause turnover in their company. Further the causes of attrition vary within a company such that causes for turnover in one department might be very different from the causes of turnover in another department. Companies can use exit interviews to find out why employees are leaving and the problems they encountered in the workplace. Low turnover indicates that none of the above is true: employees are satisfied, healthy and safe, and their performance is satisfactory to the employer. However, the predictors of low turnover may sometimes differ than those of high turnover. Aside from the fore mentioned career opportunities, salary, corporate culture, management's recognition, and a comfortable workplace seem to impact employees' decision to stay with their employer. Many psychological and management theories exist regarding the types of job content which is intrinsically satisfying to employees and which, in turn, should minimise external voluntary turnover. Examples include Herzberg's two factor theory, McClelland's theory of needs, and Hackman and Oldham's job characteristics model.

Evidence suggests that distress is the major cause of turnover in organizations.

A number of studies report a positive relationship between bullying, intention to leave and high turnover. In some cases, the number people who actually leave is a “tip of the iceberg”. Many more who remain have considered leaving. In O’Connell et al.’s (2007) Irish study, 60% of respondents considered leaving whilst 15% actually left the organisation. In a study of public sector union members, approximately one in five workers reported having considered leaving the workplace as a result of witnessing bullying taking place. Rayner explained these figures by pointing to the presence of a climate of fear in which employees considered reporting to be unsafe, where bullies had “got away with it” previously despite management knowing of the presence of bullying.

According to Thomas, there tends to be a higher level of stress with people who work or interact with a narcissist, which in turn increases absenteeism and staff turnover. Boddy finds the same dynamic where there is a corporate psychopath in the organisation.

Low turnover may indicate the presence of employee "investments" (also known "side bets") in their position: certain may be enjoyed while the employee remains employed with the organization, which would be lost upon resignation (e. g., health insurance, discounted home loans, redundancy packages). Such employees would be expected to demonstrate lower intent to leave than if such "side bets" were not present.

Research suggests that organizational justice plays a significant role in an employee’s intention to exit an organization. Perceptions of fairness are antecedents and determinants of turnover intention, especially in how employees are treated, outcomes are distributed fairly, and processes and procedures are consistently followed.

Direct costs of turnover: replacement and recruiting costs (advertising, interviewing, testing ), training time and costs ), leaving costs – payroll and HR administration, loss of productivity and performance Promoting a work environment that fosters personal and professional growth promotes harmony and encouragement on all levels, so the effects are felt company wide. Before the first day, it is important the interview and hiring process expose new hires to an explanation of the company, so individuals know whether the job is their best choice. Networking and strategizing within the company provides ongoing performance management and helps build relationships among co workers.