Employee Turnover
Employee turnover refers to the rate at which employees leave a company and are replaced by new hires over a specific period.
It is a crucial metric organisations use to measure the stability of their workforce and the effectiveness of their employee retention strategies.
High turnover can signal underlying issues such as dissatisfaction with working conditions, inadequate compensation, lack of growth opportunities, or poor management.
Conversely, low turnover generally indicates a content and engaged workforce.
Monitoring and understanding employee turnover enables businesses to make informed decisions to improve employee satisfaction, reduce recruitment costs, and sustain a productive work environment.
Different Types of Employee Turnover
To effectively manage turnover, it’s essential to understand its various types and their implications.
In this glossary definition, we’ll explore the different types of employee turnover and provide insights on how to address each one.
1. Voluntary Turnover
Voluntary turnover occurs when employees choose to leave a company of their own accord.
It can be triggered by various reasons, such as seeking better opportunities, career advancement, dissatisfaction with the current work environment, or personal reasons.
While some level of voluntary turnover is natural and can bring fresh perspectives to a company, high rates of voluntary turnover can be a red flag indicating potential issues with employee satisfaction, management practices, or company culture.
Managing Voluntary Turnover:
- Conduct regular employee engagement surveys to identify and address issues that may be contributing to dissatisfaction.
- Provide opportunities for professional growth and development within the company.
- Foster a positive work environment and open lines of communication between employees and management.
2. Involuntary Turnover
Involuntary turnover involves employees leaving a company due to reasons beyond their control, such as termination for poor performance, violations of company policies, or restructuring efforts.
While some level of involuntary turnover is necessary to maintain a high-performing workforce, excessive involuntary turnover can indicate problems with recruitment, onboarding, or management practices.
Managing Involuntary Turnover:
- Implement clear performance expectations and provide regular feedback to employees.
- Offer coaching and training to help struggling employees improve their performance.
- Ensure that terminations are carried out fairly and in accordance with company policies.
3. Functional Turnover
Functional turnover occurs when low-performing or dissatisfied employees leave the company, resulting in a positive impact on overall performance.
While this type of turnover can be beneficial, it’s crucial to ensure that high-performing employees are not inadvertently pushed to leave due to unfavourable conditions.
Managing Functional Turnover:
- Continuously monitor and address factors contributing to employee dissatisfaction.
- Recognise and reward high-performing employees to incentivise them to stay.
- Implement performance improvement plans for underperforming employees before considering termination.
4. Dysfunctional Turnover
Dysfunctional turnover involves the loss of high-performing, valuable employees due to preventable reasons such as poor management, lack of growth opportunities, or inadequate compensation. This type of turnover can be particularly damaging to a company’s bottom line and morale.
Managing Dysfunctional Turnover:
- Provide competitive compensation and benefits packages.
- Create a clear path for career advancement and skill development.
- Train managers to effectively lead and support their teams.
5. Avoidable Turnover
Avoidable turnover refers to employees leaving for reasons that could have been prevented, such as inadequate training, lack of work-life balance, or a toxic work environment.
This type of turnover underscores the importance of creating a positive and supportive workplace.
Managing Avoidable Turnover:
- Invest in comprehensive onboarding and training programs.
- Promote work-life balance and offer flexible work arrangements.
- Address workplace conflicts promptly and cultivate a respectful environment.
What’s the difference between Employee Turnover and Employee Attrition?
They might sound the same, but there is an important distinction between Employee Turnover and Employee Attrition.
- Employee Turnover refers to the number or percentage of workers who leave an organisation and are replaced by new employees during a defined period.
- Employee Attrition occurs when an employee retires or when the employer eliminates the position and it remains unfilled or the job role is eliminated.
How do you calculate Employee Turnover?
The good news is that calculating employee turnover is not that complicated!
To calculate employee turnover, follow the formula below:
Add the number of employees at the beginning of the period to the number at the end.
Divide by two to find the average number of employees, then divide the number of employees separated during the period by the average number of employees to find the employee turnover rate.
Here’s a visual example on how to calculate employee turnover:
If that all looks too hard, we’ve also got a calculator you can download below!
How do you calculate the cost of employee turnover?
For many businesses, the cost of employees is their most significant cost, so it’s a natural conclusion that when employees leave your business, it can be an expensive exercise to replace them.
But knowing the cost of your turnover can empower you with the ability to make informed decisions (and build a business case) about investing in activities or resources that can help you to reduce your staff turnover and deliver a positive return on your investment.
Once you’ve calculated your turnover rate (above), you then need to determine the cost of replacing a single employee.
The good news, we’ve built a staff turnover cost calculator to help!
It’s built in Excel and enables you to determine the cost to replace a single employee – and the cost can be quite confronting!
To download the staff turnover cost calculator, you need to be an ACXPA Subscriber or Member. Discover which membership is right for you >
What are the main causes of employee turnover?
Employee turnover can be caused by a variety of factors, including:
- Lack of career growth and advancement opportunities.
- Inadequate compensation and benefits.
- Poor management and leadership practices.
- Unhealthy work culture and lack of work-life balance.
- Insufficient training and development opportunities.
Specifically for the contact centre industry in Australia, the latest industry data in 2024 confirmed the leading cause of contact centre agents leaving are (in order:
- Pursue a different career (56%)
- Financial reasons (38%)
- Dissatisfaction with the work (23%)
- Lack of remote working/flexibility (13%)
- Only a short-term proposition (12%)
What’s the turnover rate for call centres in Australia?
The most recent industry data confirmed that the annual employee turnover rate for contact centres in Australia is 32%, which is lower than previous data that has typically hovered around the mid 40%.
Whilst there is some fluctuation each year, approximately 60% is external turnover (left the organisation) and 40% is internal turnover (moved to another internal department).
Is some turnover beneficial?
Yes, some employee turnover can be beneficial!
Voluntary turnover can bring in fresh perspectives and new talent, while functional turnover can help remove underperforming employees.
However, it’s crucial to strike a balance, as excessive turnover, especially of high-performing employees, can harm a company’s stability and success.
Conclusion
In conclusion, understanding the nuances of employee turnover is essential for any business aiming to create a thriving and sustainable workforce.
By addressing the root causes, implementing effective retention strategies, and cultivating a positive work environment, companies can not only reduce turnover, but also foster an engaged and motivated workforce poised for long-term success.
