All organisations need some HR benchmarks so they know if any processes can improve. Measuring the levels and costs of employee turnover is a key HR metric we should all gather.
Turnover means the proportion of employees who leave an organisation over a set period - often on a year-on-year basis - expressed as a percentage of total employees, or headcount. Retention means the extent to which an employer keeps its employees, and can be measured as the proportion of employees with a specified length of service (typically one year or more) expressed as a percentage of overall workforce numbers.
The median turnover rate has recently increased in the UK, after a period of steady decline since 2005. Turnover rates vary widely between occupations and industries. The national employee turnover median is 10 per cent, the upper quartile 15.5 per cent and the mean 13 per cent. This includes all grades and industries. A survey by Charity Rewards gives a national figure of 16 per cent for 2015 and 17 per cent in London.
The highest levels are found in retail, care staff and call centres, and where unemployment is lowest and there is desirable alternative work. The total figure is for all leavers, including those who retire or are dismissed or made redundant. Some turnover benefits organisations, but higher than average turnover pushes up churn, disruption and costs.
The costs of employee turnover related to resignations rather than redundancies can be budgeted for by calculating the average cost of replacing each leaver with a new starter in each major employment category. For example, managers are more expensive to recruit than front-line workers. This figure is then multiplied by the relevant turnover rate for that staff group to calculate the total annual cost of turnover. The major costs are: administration of the resignation; recruitment and selection costs, including administration; cover while there is a vacancy; and induction training for new employees.
Employees resign for many different reasons. Sometimes it is the attraction of a new job or the prospect of a period outside the workforce that pulls someone. On other occasions they are pushed by job dissatisfaction, lack of training, development and career opportunities, or a poor relationship with their line manager. The move might be prompted by a combination of pull and push factors.
Accurate data on why people are leaving can be hard to get or assess. Sometimes people will give you a reason they think you will find acceptable because they don't want to rock the boat. Others might be tempted to enjoy putting the boot in when there will be few consequences. Another approach to collecting exit data might be a confidential attitude survey. If you are concerned about your turnover and retention rate, the first steps when developing an employee retention strategy are to establish why staff are leaving and the impact that turnover has on the organisation.
Improving pay is the most common way to improve retention - 50 per cent of employers use this tactic. Other popular methods include improving learning and development opportunities, improving managers' people skills, increasing staff benefits and improving employees' work-life balance.
Gill Taylor is a sector HR consultant