Employee Turnover Within The Company
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By Laurus Nobilis
Every company is run by the people. It is said that the people are the most valuable asset of the company. It is no wander that this statement is very known, because the performance of the company directly depend of the people. Only one wrong decision can make tremendous damage to the company. On the other hand, ideas, planning, performance, loyalty and value adding to the processes can bring significant contribution to the company.
But people within the company are not something that does not fluctuate. People comes and and goes from the company. The leaving from the company is tracked by human resources of the company, in order to track the rate of leaving. The Employee Turnover is defined as the number of permanent employees who leaves the company within the specific period, versus the total number of active permanent employees..
The number of leavers, that are included in calculation, only includes natural turnover caused by resignations, termination, retirement etc. Calculation does not take into account any redundancies, since they are reported separately.
The formula for Employee Turnover is:
Turnover % = No of Permanent Leavers x 100 / No of Permanent Employees
Organization with no turnover create environment where processes and activities can become too routine, without innovation and improvement. On the other hand, an organization with very high turnover rate can have too inexperienced people, which can reflect to the stability and performance of business processes.
Regretted Employee Turnover is another indicator that reflect the fluctuation of the people within the company. It is calculated as the number of permanent high potential employees leaving the company within the specific period, versus the number of actual permanent high potential employees.
The number of leavers, that are included in Regretted Employee Turnover, also includes only natural turnover, without considering redundancies.
High potential is an employee that meets and exceeds job requirements and employee who fully owns the job with high performance rating.
Turnover % = No of High Potential Permanent Leavers x 100 / No of Permanent High Potential Employees
There are many reasons for employee turnover. Those reasons are related to different factors like working conditions, job description, salary, organizational culture, local economy, workload, duration on current position, personality… Frequent reasons for leaving of position is the local economy and ratio of demand for employees and number of employees that are looking for a job. If there are more jobs available, than the employee turnover rate is higher, since people are trying to get the better job. The Maslow’s Hierarchy of Needs explains the structure of human needs. If they are not fulfilled, the employee will look for the environment that will satisfy his/her needs.
Healthy Employee Turnover is the measure of desirable rate of change within the headcount. The measure of healthy employee turnover depends from the company organization and business objectives. Usually, the turnover up to 5% on annual level is considered acceptable. Too high employee turnover may cause organizational problems, while to low or no turnover is causing lack of idea generation and resistance to changes.
The certain employee turnover is desirable, since the new employees are more motivated and open to demands of their job. Old employees gives experience, but at same time they tend to be more resistant to change and new requirement.
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