Employee turnover is described as the number or percentage of employees who leave a company each year to be replaced by other people. Zero employee turnover would mean that you have the same employees at the end of the year as you had at the start of the year.  If however, half your employees had been replaced by other employees over the course of a year, that would mean that your turnover was fifty percent, and no, it’s not them honey… it’s you!

The ultimate responsibility for this lies with the business owners and management. Your behaviour and decisions on how you engage and manage your employees will largely determine your employee turnover and staff retention. Given that it can cost up to four times someone’s annual salary to replace employees, it’s in the interest of every business owner to make sure they’re on top of this.

What is the cost of employee turnover?

The exact cost to a business of staff turnover is difficult to accurately measure, but let’s have a look at a few variables.  Lowered productivity, lost knowledge and overworked remaining employees, as noted here, will all have an impact on productivity, morale, engagement and ultimately the profitability, and possibly the viability, of your company.

The hiring process has costs and time implications associated with it and at the end of it all, your new employee may not make it past the first week in the job!  The time taken can range from weeks to months and someone needs to invest their time in managing this hiring process.

Your new kid on the block will then have to go through a bedding in and training program in order for them to get up to speed and be effective and efficient in their new role for your company.

Some figures estimate that “losing” a staff member and replacing them depends on their level, and could cost anywhere from 40% of their annual salary up to 400%.  So having to replace someone on a €75k salary could cost you €300k to replace them. Have a think about what that’s doing to your bottom line.


When is employee turnover a good thing?

New team members can serve to introduce new perspectives, ideas and energy into an organization and can be helpful in bettering the workplace dynamic when you get someone who’s a good fit for your culture.  So zero staff turnover can result in your business going somewhat stale! However at the end of the day it is still key to focus on optimising staff retention overall.

When does the right amount become too much?

So you’ve decided that 5% annual employee turnover is ideal for your company, but it’s presently at 25% (i.e. one in every four staff are replaced annually).  The two things you may be asking yourself are: “What is that doing to your bottom line?” and “How can you address this staff retention problem?”

What makes people want to stay in a job?

Well, when it doesn’t feel like a “job” is the long and the short of it.  When employees are playing to their strengths and having their workplace needs met, they’ll go to the ends of the earth for you.  Knowing what’s important to them in the first place is key to this, and no, it’s not all about the wage package!

These survey results from 1946 Foremans Facts indicate other things that are important to employees in order of priority from their sample population.  So pay them enough to get money off the table i.e. to meet their reasonable financial needs, and then look at what else you can do to engage your employees.

  1. Full appreciation for work done
  2. Feeling “in” on things
  3. Sympathetic help on personal problems
  4. Job security
  5. Good wages
  6. Interesting work
  7. Promotion/growth opportunities
  8. Personal loyalty to workers
  9. Good working conditions
  10. Tactful discipline

What can I do next in my business?

Take your suspicions and emotions out of it, gather the evidence on what’s really happening on the ground in your business and then act upon it.

Properly designed team questionnaires can be used to glean important insights and gather evidence for you to act upon.

Employee engagement surveys, team-building using psychometric assessments such as DISC, MBTI and Gallup StrengthsFinder for depth of understanding, and leadership development based around emotional capital all result in better individual employees.

As world rugby champions, the New Zealand All Blacks know that better player character makes a better team.   The resulting personal and interpersonal understanding, improved communications, positive work culture and greater employee engagement goes a long way to addressing any employee turnover issues.  This is what will make the difference to your company’s profits and to your success in business.

Feel free to share your thoughts in the comments section below on your own experience or suggestions in your business.