What is turnover rate? The significance of turnover rate in balancing employee turnover

What is turnover rate? The turnover rate reflects the current situation of human resources in the enterprise in terms of current stability, improvement, or deterioration. To better understand the turnover rate, you can refer to the following article by Viindoo.

What is Staff Turnover? What is Turnover Rate?

Staff Turnover is known as the number of employees who leave the company and need to be replaced by new people within a certain period of time. Turnover rate gives the ratio of the number of employees leaving to the average number of employees during a given period, by year, quarter or month. 

The turnover rate helps human resource managers understand the number of employees changing in the business. From there, managers will come up with strategies and plans to retain employees and talents to stay with the company.

Employee Turnover Rate

Employee Turnover Rate

How to calculate the standard Turnover rate

The turnover rate reflects the working environment as well as the employee's loyalty and attachment to the business. To calculate the turnover rate, you need to know the number of employees who worked and left during the time period you want to calculate. Below are some of the most common ways to calculate turnover rate.

Monthly

To calculate the monthly turnover rate, you need to know the total number of employees at the beginning of the month and the number of employees at the end of the month. Finally, determine the number of employees who left the company that month. The number of employees leaving the company is the number of employees who have left. From there you can get a way to calculate monthly turnover rate:

Turnover rate = Number of employees who left/ Average number of employees *100

How to calculate monthly Turnover Rate

How to calculate monthly Turnover Rate

Example: Company A has 150 employees as of August 27, 2022. During that month, the number of employees changed as follows:

  • The number of employees leaving: 20 people.
  • The number of new employees: 30 people.
  • The turnover rate will be calculated as follows:
    • The average number of employees = (150+180)/2=165.
    • Monthly turnover rate = 20/165 * 100 = 12%.

Quarterly

The quarterly turnover rate is calculated in the same way as the monthly turnover rate. The only difference is to replace monthly data with quarterly and calculated data. Take an example to illustrate this calculation.

Example: It is still company A as in the above example with personnel changes in the first quarter of 2022, specifically:

  • The number of employees leaving: 35 people.
  • The number of new employees: 50 people.
  • The turnover rate will be calculated as follows:
    • The average number of employees = (150+200)/2 = 175.
    • Quarterly turnover rate = 35/175 * 100 = 20%.
How to calculate the quarterly turnover rate

How to calculate the quarterly turnover rate?

By year

To calculate the turnover rate by year, you also have the same calculation as monthly and quarterly. Besides, you also need to have data on personnel changes of the business during the year.

Example: Suppose company X has a total of 70 employees leaving in 2022. The total number of employees in the first, second, and third quarters is 140 people. At the end of the year due to a lot of work, they often hire 15% more staff in the fourth quarter.

  • The total number of employees in the fourth quarter was 161 people.
  • The average personnel in 2022 is ((140*3) + 161)/4 = 145.25 people.
  • The annual turnover rate is (70/145.25)*100 = 48%.
How to calculate Turnover Rate by year

How to calculate Turnover Rate by year

What does the Turnover rate represent?

What is turnover rate? Turnover rate, also known as "talking numbers", reflects the current situation of human resources in businesses. Through the turnover rate, most can predict the situation in the company and business. Each turnover rate number carries a different meaning.

Rate
The situation of human resources at the enterprise
< 3%

The staffing situation at the company is stable. The number of employees leaving jobs mainly comes from objective factors. If considering the subjective factor, the manager should review the way of human resource management, from behavior to solving problems at work.

3-5%

The turnover rate is still under control and has not created much impact on the company. The reason why employees leave is due to the salary system and superiors.

5-8%

This rate reflects the company is having trouble in terms of personnel. In addition to the two problems mentioned above, the environment for employees to develop is not stable. Therefore, enterprises need to review their human resource development training system.

8-10%

This number is a warning to businesses that human resources are unstable. Not only is it a matter of superiors, working environment, salary or development opportunities, it is possible that the culture at the enterprise is not guaranteed to make employees dissatisfied, leading to leave.

>10%

Reaching this level proves that businesses need to consider the above issues as a whole as well as refer to the industry environment and understand the effects of external influences. From there, businesses draw up specific solutions.

According to statistics from experts, a stable turnover rate will be in the ideal range of 4-6% on average. However, according to the survey, many Vietnamese enterprises have a fluctuation rate of >10%, even up to several tens of percent. This causes difficulties for businesses, especially in finding human resources to fill vacancies. In addition, there are some industries whose turnover rate is always fluctuating at quite high numbers.

  • Retail
  • Sales
  • Hospitality
  • IT
Industries with high Turnover Rate

Industries with high Turnover Rate

The most common reasons for leaving work today and how to solve them

The turnover rate in Vietnam in particular and in the world in general always fluctuates by not small numbers. The causes for this condition often include both objective and subjective causes. Here are some common reasons for leaving job and how to solve them reasonably, bringing benefits to both parties.

Reason for leaving job
How to solve it?
Employees do not get the recognition they deserve
  • Praise and reward: Just a few compliments can have a huge impact on employee morale. This not only helps to encourage employees but also strengthens the relationship between employees and superiors.
  • Reasonable remuneration mechanism: Everyone who works also wants to receive remuneration commensurate with their efforts. Therefore, businesses need a salary survey to know if the current salary is reasonable or not.

Employees can't find a way to grow

  • Help and create opportunities for employees to learn and develop in many different ways. Pay attention to the goals of employees, from which together draw a plan and a path to help them grow more and more.
The work is too complicated, difficult, and stressful
  • Support employees with work-life balance: Observe and care for employees, thereby finding solutions to help employees balance life and work.
  • Pay attention to employees' health: Health is the premise of everything, so businesses should have health benefits for employees.
Not getting along with boss and co-workers
  • Monitor the work of the managers closely from the beginning. Collecting the opinions of management staff will help you have the most objective assessment, avoiding the situation of employees switching jobs.

How to balance employee turnover rate

Unstable human resources is something no business wants. To prevent frequent job hopping, which directly affects businesses, managers need to take certain measures. Here are some solutions to balance employee turnover rate.

  • Improve human resource management capabilities for leaders.
  • Conduct employee satisfaction surveys with the company.
  • Interview employees who have decided or intend to leave to understand the reasons.
  • Forecast the rate of absenteeism to have timely handling plans.
  • Introduce business culture to candidates for easy screening and selection.
Balancing employee turnover rate

Balancing employee turnover rate

The above article is the most general information about what is turnover rate and how to calculate turnover rate that Viindoo provides to readers. Hopefully, the above sharing will help businesses quickly find a suitable solution.

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What is turnover rate? The significance of turnover rate in balancing employee turnover
Viindoo Technology Joint Stock Company, Amber Nguyen December 2, 2022

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