Understanding Employee Turnover – Challenges and Management Strategies

Every employee has the right to change their workplace, provided they do not violate the terms of their contract with the employer. Generational and social changes mean that employees are increasingly rotating between companies or positions. However, too frequent personnel changes can threaten the stability of a company and negatively impact its development. What is employee turnover? How to manage rotation in a company? 

 

What is Employee Turnover? Definition 

Employee turnover refers to the frequency with which employees change jobs or positions. It is worth emphasizing that this is a completely normal and common phenomenon observed in every company, regardless of the industry or size. This process can have both positive and negative effects on the organization. Calculating the employee turnover index can be a valuable support in managing the company’s personnel policy. 

 

Types of Employee Turnover 

Employee turnover can be divided into several types: 

• Avoidable Turnover 

This concerns departures resulting from employee dissatisfaction, such as lack of development prospects, non-competitive salaries, or a mismatch with the company’s organizational culture. This type of turnover can be controlled and prevented by improving working conditions, increasing salaries, or creating a development-friendly environment. 

• Unavoidable Turnover 

This concerns situations beyond the employer’s control, such as the death of an employee, illness of the employee or their family members, relocation, or reaching retirement age. In these cases, no pro-employee actions can improve the turnover rate, as these departures are independent of the employer’s actions. 

• Voluntary Turnover 

This concerns situations where the decision to end cooperation is initiated by the employee. Resignation can be caused by many factors, such as finding a better offer with a competitor or wanting to change careers. 

• Involuntary Turnover 

This type of turnover results from the employer’s decision. Employee dismissals can be caused by, for example, staff reductions due to company restructuring, financial problems of the organization, or changes in the company’s strategy. Employees are forced to leave their jobs, usually without the possibility of negotiation. To minimize the negative effects of involuntary turnover, investment in career change support programs, such as outplacement, can be made. 

• Functional Turnover 

Personnel changes are not always unfavorable for the employer. In certain situations, they can positively impact the company’s functioning. Functional turnover concerns employees who do not add value to the company – they do not show initiative and do not improve their skills. In this case, ending cooperation allows for hiring more engaged and efficient employees. 

• Dysfunctional Turnover 

 This type of turnover occurs when key employees with niche competencies or many years of experience leave the organization. Losing such individuals can negatively impact work efficiency and the company’s financial results. To prevent this, it is worth investing in pro-employee actions, such as employer branding activities. 

 

How to Measure Employee Turnover? 

To measure employee turnover, a special index is used, which is obtained by dividing the number of departures in a given period (e.g., a calendar year) by the average number of employees in the same period, and then multiplying by 100. 

Example 

Company X employs 130 employees. From January to December, 12 people left the company. 

The employee turnover index is: 12:130*100 = 9.2 

In theory, the lower the turnover index, the better. A company with low employee turnover is perceived as stable. In practice, however, much depends on the company’s condition. 

In a company that is constantly developing, a low turnover index will be a good signal. However, it will be different in a company that is in a phase of stagnation. In this case, a low turnover index may indicate, for example, certain competency gaps among employees or a mismatch in positions. 

What Influences Employee Turnover? 

The basic factors influencing employee turnover include: 

• Non-competitive salaries; 
• Poor atmosphere; 
• Lack of professional development opportunities; 
• Position elimination. 

 

Consequences of Excessive Employee Turnover 

While the phenomenon of employee turnover is natural and cannot be completely eliminated, excessive employee turnover can have negative consequences – both for the employees and the employer. 

High Costs 

Frequent employee changes necessitate replacing vacancies with new people, generating additional costs related to planning recruitment campaigns, candidate selection, and onboarding. 

Decrease in Efficiency 

New employees need time to adapt to the new work environment, understand the company’s processes, and gain the trust of team members and clients. As a result, their efficiency at the beginning of cooperation may be lower compared to more experienced individuals. 

Excessive Burden on Remaining Employees 

Due to excessive turnover, remaining employees may be forced to take over the duties of former colleagues, leading to overwork, decreased productivity, and, in the long term, even burnout. 

Reputation Crisis 

A high employee turnover rate can contribute to the deterioration of the company’s reputation as an employer, leading to image problems. Negative opinions can result in difficulties in attracting highly qualified employees in the future. 

Poor Atmosphere 

Frequent personnel changes negatively impact the team atmosphere. As a result, employees perform their duties with less engagement and are less likely to come up with their own initiatives. Conflicts occur more often than usual, as long-term employees may feel frustrated by the need to supervise new hires. Excessive turnover can lead to uncertainty and psychological destabilization among employees. 

Loss of Clients and Contractors 

Personnel problems can negatively affect the efficiency of individual departments. Production downtimes or delays in service delivery can result in a loss of trust in the brand and a wave of departures among both clients and contractors. 

Lack of Development Opportunities 

A company struggling with excessive employee turnover may not have sufficient resources to ensure regular training. This makes it difficult for employees to acquire new skills and maintain competitiveness in the job market. 

 

How to Prevent Employee Turnover? 

Every recruitment is an additional cost for the employer. Losing long-term employees with key competencies can impact the company’s condition. Therefore, it is worth taking care to reduce the turnover rate. How to do it? One of the basic motivators for representatives of every generation is salary. The salary should correspond to the type of work and the qualifications required to perform it. 

It is said that an employee comes to the company but leaves the boss. The atmosphere in the workplace has a huge impact on the employee turnover rate. Therefore, it is worth ensuring regular feedback and transparent communication. 

Another motivating factor is development. Employees who feel that there is no room in the company to implement their ideas and do not see opportunities to improve their qualifications within the organization are less engaged and more prone to burnout. Lack of prospects often results in parting with the employer. Employee turnover can be prevented by providing employees with access to tools enabling professional development, such as training, meetings with business coaches, or industry events. 

Well-planned employer branding activities can reduce the employee turnover rate to an acceptable level. One of the most effective tools for assessing employee satisfaction with working in the organization is satisfaction surveys. Due to increasing competition between companies for highly qualified employees, many companies decide to cooperate with HR consulting firms that conduct image surveys, identify Employer Value Proposition, and create individual brand management strategies based on this.