![]() ![]() How to Calculate Employee Retention & Turnover Rates When comparing top quartile and bottom quartile engagement business units and teams, Gallup found a differential of 23% in profitability and 10% in customer loyalty. And employee engagement is linked to organizational outcomes, with a very important effect being that companies with lower turnover are more profitable and have more loyal customers. Companies with higher levels of employee engagement have lower turnover rates - as much as 43% lower for companies that have less than 40% annualized turnover, according to a study of more than 112,000 business units by analytics firm Gallup. Turnover and retention are closely linked to employee engagement. High turnover and low retention rates signal problems with aspects of the organization’s culture and employee experience. ![]() This includes whether it is paying competitive salaries, providing training and opportunities for advancement and offering a good work/life balance for employees, as well as how effective management is. And if it can’t attract more people with new and specialized skills, it can’t innovate or execute on growth plans.Įmployee turnover and retention rates provide strong indicators about how well the business is taking care of its people. If a business doesn’t have the right people with the right skills, it can’t deliver its products and services. Why Measuring Employee Retention & Turnover Matters Monthly turnover rates are added together to calculate and compare annual turnover rates. This provides a more accurate and actionable view of departures that are the result of, for instance, seasonal layoffs and give more accurate long-term insights into that rate. Turnover rates provide important snapshots of employee movement and are, for that reason, calculated and viewed by month or quarter. Given that it’s a measure of the company’s stability, retention rates are most often calculated over a longer period of time, typically annually.Involuntary turnovers are departures that result because of an employer’s decision when the employee is still capable of and willing to perform his or her job duties and includes terminations that are the result of performance, behavioral issues, seasonal layoffs and reductions in force (RIFs). Some businesses exclude involuntary turnover from the retention rate calculation, but that’s not a hard-and-fast rule.Turnover rate calculations, on the other hand, include people hired during the time period for which the rate is being calculated. It accounts only for people already employed during the period for which the rate is being calculated. Retention rate does not include new hires. ![]() The major differences between retention and turnover are: Employee turnover as a metric refers to people leaving the company, either on their own accord (voluntary turnover) or because of a decision made by the employer (involuntary turnover). However, taken together, they give a holistic view of staffing stability and movement within the company.Įmployee retention refers to both the rate at which people stay with a given company over a period of time and the strategies employed to keep them there. There are important differences in how the two are calculated and what each indicates. Retention isn’t simply the inverse of turnover. The question is, should they really be worrying about retention? ![]() While competition for talent will be most intense in high-demand industries like healthcare, minimizing turnover is a goal for most businesses. Bureau of Labor Statistics projects that over the next decade the economy will add 6 million jobs. East, Nordics and Other Regions (opens in new tab) ![]()
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