Employee Turnover (ETO)

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Employee turnover is a massive global phenomenon which is common to any organization. This has captured the attention of human resource experts. "Employee turnover" defines the number or the percentage of employees who leave an organization over a certain time period and are replaced by new employees(Holliday, 2021). This includes both voluntary and involuntary turnover. Turnover, mainly the voluntary type, impacts an organization’s ability to achieve objectives.

Measuring employee turnover is useful to employers that want to investigate the reasons for turnover or estimate the cost-to-hire. In human resource management, turnover or staff turnover or labor turnover is the rate at which an employer loses employees(Kangal, 2022). It depicts the time period employees tend to stay. While an organization usually measures the total number of employees who leave, turnover can also apply to subcategories within an organization like individual departments or demographic groups.

How to Calculate Employee Turnover?


                                    Image : Formula to calculate ETO (BambooHR, 2022).  

To calculate ETO; Divide the sum total of the number of employees that leave within a specific period of time (month, quarter, year) by the average number of employees working within the selected time period and multiply that number by 100.

For example, if you have an average of 200 employees working during a month’s time and 20 employees leave, your turnover rate would be around 10%

The equation would read as follows: (20/200)*100 = 10

This should not include temporary hires or employees on temporary leave. If these types of temporary shifts are incorporated, the obtained value for ETO will be higher than the absolute value(BambooHR, 2022).  

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Voluntary Turnover vs Involuntary Turnover

Voluntary turnover is any situation in which an employee actively chooses to leave the organization. This may cause as a result of better job opportunities, conflicts at workplace, disengagement etc...

Involuntary turnover is when an employer chooses to cease an employee or remove them permanently from the organization in question, mainly due to poor performance, toxic behavior and so on(Roder, 2019).

Turnover is a natural phenomenon for any organization. While low employee turnover is the goal for most organizations, what determines low vs. high turnover is how actual turnover compares to a typical or expected rate, which can change depending on type of industry, job type, organization size, region and that rate is very rarely zero. For example, an insurance company should not base their analysis of organizational turnover on the expected turnover rate of a restaurant.

Desirable vs. Undesirable Turnover

Those who are terminated from their positions, not including unavoidable layoffs, fall into the category of desirable turnover because newer, more diligent, and skilled employees can replace them. When it comes to voluntary turnover, the loss of people who left the company for new roles, not those who retired, is considered undesirable.

Many research of the causes of high voluntary turnover agree that more money and time off, better benefits, promotions and the prospect of a more supportive leaders are the Top 5 reasons good employees decamp to new positions(Pavlou, 2022). Some other main reasons for employ turnover are as follows.

  • ·         Rude behavior
  • ·         Work-life imbalance
  • ·         A mismatch between the job expectations
  • ·         Employee misalignment
  • ·         Feeling undervalued
  • ·         Coaching and feedback are lacking.
  • ·         Decision-making ability is lacking.
  • ·         People skills are inadequate.
  • ·         Organizational instability
  • ·         Raises and promotions were frozen.
  • ·         Faith and confidence shook.
  • ·         Growth opportunities not available

 

 Best practices for HR to prevent ETO

  • ·         Codify requirements for people managers
  • ·         Open communication within the organization
  • ·         Analyzing attrition data (Percentage of the employees who left an organization for any reason over a specific time period)

It is also shown by many studies that most turnover is preventable if an organization is willing to spend on overall compensation, open up career paths, focus on flexibility and be on the lookout for ineffective managers.

Understanding the causes of employee turnover can support  organizations make the required changes to maintain their workforce at the desired level. Because of the many variables affecting turnover, benchmarks for acceptable or ideal turnover differs(Kelly & Watts, 2022). It is important for organizations to take individual and industry-related factors into consideration as they pinpoint their target turnover rate, study the reasons behind their voluntary and involuntary turnover, and make changes to impact the employee turnover rate for their own workforce.




References

BambooHR, 2022. An HR Glossary for HR Terms. [Online]
Available at: https://www.bamboohr.com/hr-glossary/employee-turnover/
[Accessed 11 November 2022].

Holliday, M., 2021. What Is Employee Turnover & Why It Matters for Your Business, Oracle NetSuite. [Online]
Available at: https://www.netsuite.com/portal/resource/articles/human-resources/employee-turnover.shtml
[Accessed 10 November 2022].

Kangal, S., 2022. Employee Turnover: Definition, Types, Causes of Employee Turnover,iEduNote. [Online]
Available at: https://www.iedunote.com/employee-turnover
[Accessed 10 November 2022].

Kelly, S. & Watts, R., 2022. Employee Turnover Rate: Definition & Calculation, Forbes advisor. [Online]
Available at: https://www.forbes.com/advisor/business/employee-turnover-rate/
[Accessed 08 November 2022].

Pavlou, C., 2022. How to calculate employee turnover rate,Workable. [Online]
Available at: https://resources.workable.com/tutorial/calculate-employee-turnover-rate
[Accessed 09 November 2022].

Roder, N., 2019. What Is Employee Turnover (and Why It Matters),Workest Zenefits. [Online]
Available at: https://www.zenefits.com/workest/what-is-employee-turnover-and-why-it-matters/
[Accessed 10 November 2022].


Comments

  1. Nandun NarayanaNovember 30, 2022 at 7:57 AM

    Very insightful article. What are your thoughts on impact of employee turnover under present macro economic conditions in Sri Lanka?

    ReplyDelete
    Replies
    1. Dinusha WeerasingheDecember 2, 2022 at 11:49 AM

      According to my point of view, ETO during the current economic conditions can be seen less because employees are aware about the lack of new job opportunities during a critical situation like this and most of them tend to stay

      Delete
  2. Sanjana KarunarathnaDecember 2, 2022 at 6:08 AM

    Employee turnover is the loss of talent in the workforce over time. This includes any employee departure, including resignations, layoffs, terminations, retirements, location transfers, or even deaths. I think currently SL is experiencing the highest employee turnover in the recent history.

    ReplyDelete
    Replies
    1. Dinusha WeerasingheDecember 2, 2022 at 11:55 AM

      Thank you for sharing your thoughts. At the same time I believe that most employees are afraid of not being able to find new job opportunities in a crisis like this since most of the companies have frozen recruitment and hiring.

      Delete
  3. Manoj HewawasamDecember 2, 2022 at 6:37 AM

    Deeply analysed about ETO & like to know what are the strategies using in modern organization structures to reduce ETO

    ReplyDelete
    Replies
    1. Dinusha WeerasingheDecember 2, 2022 at 11:53 AM

      Keeping up with the market rate and offer competitive salaries and total compensation, Closely monitoring toxic employees, Rewarding and recognizing employees, Defining and developing corporate culture, offering flexible work culture are some strategies used in modern times to reduce ETO

      Delete
  4. Meshika DiddeniyaDecember 2, 2022 at 7:19 PM

    The gradual loss of talent in the workforce is known as employee turnover. This covers all forms of employee departure, such as terminations, layoffs, retirements, relocations, and even fatalities.

    ReplyDelete
  5. Udara DilshanDecember 2, 2022 at 7:36 PM

    Well organized article.What do you think which industries have the highest rate of turnover in srilanka?

    ReplyDelete
  6. MadushaDecember 4, 2022 at 10:12 AM

    Given that some industries, including hospitality and retail, have historically experienced higher than average employee churn, turnover rates must be considered in the proper context. An organization can and should compare its turnover rate to that of other companies in its sector to get a sense of how effectively it is keeping people.

    ReplyDelete

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