If you’ve ever had to lead an understaffed team, you know how challenging it can be. You may have to deal with low morale and poor productivity in addition to having to put in extra effort to support overworked employees. All of this is on top of the pressure to find a qualified new hire to assist the team. You are now in the midst of the difficulties associated with controlling employee turnover.
Although you’ve probably heard the terms retention and turnover, you might not fully comprehend what they mean. Two numbers that seem important to human resources but not so much to you as a manager But managers have a big influence on employee retention rates. Additionally, when someone leaves their team, they are the ones who are directly affected. So let’s get down to business and discuss the specifics of turnover and retention.
What is turnover?
The number of employees leaving a company is known as turnover. Analysts typically measure turnover as a proportion of all employees who leave during a specific time period, usually a month or a year. Here are some types of turnover a company may experience:
What is retention?
Retention is a metric that shows businesses how long their employees stay with them on average. Companies typically track employee retention over a certain time frame, typically a year. Keeping employees on the payroll is frequently a goal of retention. Increased opportunities for advancement, pay increases, better working conditions, or team-building activities are some retention strategies.
Differences between retention vs. turnover
Businesses use retention and turnover as related metrics to determine how engaged and satisfied their employees are with the company. Although businesses frequently combine these two metrics, there are a number of significant differences between them. These are some ways retention and turnover differ:
Time frame
The period of time used by businesses to calculate retention and turnover is a crucial distinction between them. Retention is often a long-term metric that businesses calculate annually. Many businesses track turnover more frequently, frequently on a monthly basis, though they may also calculate it annually.
Focus
Retention and turnover are closely related, but they emphasize different staffing trends. Retention measures the length of time that employees stay with the company and includes tactics for retaining key personnel. Turnover counts the number of workers leaving the business and looks into the reasons behind their resignations.
Solutions
Depending on the causes of high turnover rates and low retention rates, business leaders may need to implement different solutions. However, high voluntary turnover and low retention frequently have the same solutions, such as better pay, more advancement opportunities, management changes, or improved work environments. Consider other options, such as changing hiring and human resources personnel, improving the recruiting process, or improving training and onboarding, if turnover is voluntary.
Why are retention and turnover important?
Companies can learn how their employees feel about working with them by analyzing retention and turnover. Business owners and managers may be able to tell that their hiring procedures are successful by looking at their high retention and low turnover rates. By ensuring low turnover, businesses can give their employees a stable work environment and enable staff to forge dependable working relationships. As it is frequently less expensive to retain employees than to hire and train new ones, keeping track of retention and turnover may also help businesses save money.
These two elements may also interfere with a company’s ability to carry out its primary objective. Businesses that hire qualified staff with the appropriate skill sets may deliver their goods and services more successfully and win the support and loyalty of their target market. A company’s ability to innovate and grow its operations can be aided by the recruitment of new employees.
How to calculate retention
Divide the total number of employees who stayed on staff for the entire year by the total number of employees on staff at the beginning of the year, and multiply the result by 100 to determine retention as a yearly rate. It might be useful to take new hires for the year out of your calculations in order to better understand the percentage of workers who left. This is the formula to calculate retention:
Employee count at the end of the year minus employee count at the start of the year, multiplied by 100, is the retention rate.
Here’s an illustration of how a business can determine its retention rate:
By the end of the year, a company with 120 employees had 105 employees instead of the initial 120. The business performs the calculations below to determine its retention rate:
Retention rate = (105 ÷ 120) x 100 = 87.5
The business calculates its retention rate to be 87 using the formula. 5%.
How to calculate turnover
Divide the number of workers who left in a month by the total number of workers, then multiply the result by 100 to determine the monthly rate of turnover. To understand how many employees left for avoidable reasons, some businesses adopt a more focused strategy and don’t include involuntary turnover, terminations, retirements, and transfers in their calculations. This is the formula for calculating turnover:
Turnover rate is calculated by multiplying the number of resignations by the total number of workers.
Heres an example of how to measure turnover rate:
Three employees—out of a total of 120—have left the company voluntarily in the past month. The company does the following calculations to measure turnover:
Turnover rate = (3 ÷ 120) x 100 = 2.5
The business finds out it has a monthly turnover rate of 2 after applying the formula. 5%.
Tips for improving retention and turnover
The following advice can help your company reduce turnover and increase customer retention:
Reexamine hiring and onboarding practices
To increase employee retention, it might be beneficial to review your hiring procedures. To make sure your business is hiring qualified candidates, you can refocus your recruiting strategies. Additionally, you could enhance hiring and onboarding by being open and honest with new hires regarding expectations for compensation and advancement.
Learn why employees leave
It may be helpful to comprehend how your employees view your company and the reasons they leave in order to improve retention and turnover rates at your company. To achieve this, you might establish channels of communication with staff members and make sure managers and human resources representatives are accessible for staff to discuss problems. Additionally, you can arrange exit interviews with departing employees to better understand their motivations for leaving and conduct anonymous surveys to gather feedback on employee engagement.
Develop retention strategies
There are numerous ways to encourage employees to stay once you understand the reasons why they leave. For instance, if staff members are dissatisfied with their pay, you might think about offering bonuses or raise opportunities. Employees occasionally feel they have few opportunities for advancement, so you could also create plans to reward deserving workers. Employees may benefit from company events by feeling more a part of the team.
Handling Turnover and Retention
FAQ
What is the difference between retention and turnover?
The difference between turnover and retention They’re almost opposite terms. Employee turnover is the percentage of your workforce that leaves over time (typically once a year). Retention is the proportion of employees who stay.
How do you calculate retention and turnover?
Retention isn’t simply the inverse of turnover. How the two are calculated and what each indicates differ significantly. But when considered collectively, they provide a comprehensive picture of staffing stability and movement within the business.
What is retention vs attrition?
- R (retention) = (6/8) X 100 = 75 percent.
- T (turnover) = (2/8) X 100 = 25 percent.
