The time, resources, and money required to hire and train new employees is no small investment. So why wouldn’t you want to do everything you can to ensure employee retention is high at your organization? There are a number of ways to ensure your employees have the best job they could ask for, feel fulfilled enough to stay longer, and want to work harder so they can develop both personally and professionally within their existing role.
In this post, we’ll help you calculate your current employee turnover rate, uncover the cost of losing an employee, and provide actionable tips for increasing your employee retention numbers. Let’s get started!
How to calculate employee turnover rate
What is employee attrition? Your employee attrition rate (also called employee turnover rate) is the percentage of employees who leave your company compared to the total number of team members the company employs.
Finding this number is simple and an important step to tracking the effectiveness of your employee retention efforts. To calculate your employee turnover rate use the following formula:
(number of people who have left the company / average number of employees) X 100 = employee turnover rate
Let’s say you want to calculate your team’s attrition rate over the last quarter.
We’ll start with the total number of people who left the company last quarter. For this example, we’ll say 20 people have left the company. So we’ll add this number to the beginning of our formula:
(20 / average number of employees) X 100 = employee turnover rate
Your average number of employees can be found by adding the number of employees you had at the beginning of your time frame to the number of employees you had at the end of your time frame and dividing it by 2.
For this exercise, we’ll pretend you had 30 employees at the beginning of the quarter. 20 employees left this quarter bringing the total down to 10, but you’ve also hired 25 new employees leaving you with 35 employees at the end of the quarter. (30+35)/2 = 32.5. We’ll add this number to the equation in the “average number of employees” section.
(20 / 35.5) X 100 = employee turnover rate
Now, put it all together. Your employee turnover rate is 61.53%.
What is the cost of employee turnover?
Now that you know your employee turnover rate and have a baseline to compare against as you make improvements, it’s time to figure out exactly how much your company is paying to lose those employees. By knowing how much losing employees costs your organization, you can make a case for an increased budget to go towards retention efforts like employee development.
Employee Benefits Network reported that it can cost up to 33% of an employee’s annual salary to replace them. For an employee who has an annual base salary of $50,000, that can amount to a $16,500 cost for the employer to hire a backfill for that one position.
In addition to the sunk cost of finding and hiring a new employee, the organization also loses the historical knowledge that the departing employee held, as well as productive hours as the replacement hire spends time onboarding and training.
How to reduce your employee turnover rate
In exit interviews, the top reasons survey respondents gave for leaving their jobs were career development (22%), work-life balance (12%), managers’ behavior (11%), compensation and benefits (9%) and well-being (9%).
Luckily, with the right learning and development software and programs, many of these issues can be addressed. Here’s how:
1. Invest in your team’s leadership development
According to one study, offering career training and development would keep 86% of millennials from leaving their current position. When employees feel like their organization is making an effort to develop them not only professionally, but also personally with soft skills, career, and leadership development, they have a greater stake in the company and more to gain from staying in their role.
Consider implementing an L&D solution like Verb that allows people to learn in the flow of work with short bursts of content and also encourages continual reinforcement and application opportunities for new leadership skills. Contact a learning expert to learn more.
2. Promote work-life balance
Promoting work-life balance doesn’t just mean making sure your team is working a reasonable number of hours each week. It also means allowing them to bring their whole self to work and acknowledging that there are things that go on outside of work that are hard to check at the door when we come to the office.
Practicing empathy, emotional intelligence, and mindfulness while training your team to do the same can go a long way when it comes to a healthy balance of work-self and personal-self. Check out some of Verb’s tips on practicing emotional intelligence and see how EQ can impact your understanding of other’s actions in the workplace.
3. Train your bad bosses to be Leaders for Good
When 65% of people say they would forgo a raise to see their boss fired, there’s no question there’s some work to be done in the leadership department.
Think about the worst boss you’ve ever had. The best? Likely the characteristics that set them apart have nothing to do with how good they were at sales, or engineering, or retail work. Likely, your best-boss-ever had the soft skills needed to help you feel empowered and supported at work.
But how do you train Leaders for Good? The key is to focus on both mindset and skillset within the workplace and to train for the soft skills like emotional intelligence, feedback and communication, and mindfulness that can take you from bad boss to Leader for Good.
Need help training Good Leaders? Learn more about how Verb can help.
4. Help your employees help themselves
Self-care has been a popular term thrown around the past several years. However, self-care isn’t just about bubble baths and face masks. Self-care is taking care of your mind and mental wellbeing.
Self-care, as it relates to work, might include practicing mindfulness exercises to expel self-doubt and fear of failure, or learning to set and clarify realistic expectations that create a comfortable and anxiety-free workplace. To encourage this among your employees, lead by example, make a point to discuss these topics openly at company meetings, and consider investing in a development strategy that teaches these ways of being alongside more traditional management skills that focus on doing.
By first assessing your employee retention rate, you can establish a baseline standard to measure the effectiveness of your employee retention efforts.
By then assessing the cost of lost talent, you can begin to recognize the loss incurred by your organization as a result of not retaining its top talent (and make a case to invest in improving in these areas).
With this loss in mind, it becomes a lot easier to see how investing in your employees’ development can actually benefit the bottom line for your organization as a whole, as well as the happiness and wellbeing of your team and culture.