Staff turnover is a common phenomenon in the world of work and can have a significant impact on a company’s success. In this article, we explore how to calculate the turnover rate, the associated costs and how to reduce pathological turnover through human resources management and the implementation of employee retention strategies.

What is employee turnover?

Staff turnover refers to the process of replacing employees in an organisation through a continuous flow of hirings, dismissals, resignations or retirements. 

In other words, it is the rate at which employees leave a company and are replaced with new workers. Turnover can be influenced by various factors such as:

• working conditions;
• employee satisfaction;
• remuneration;
• opportunities for advancement;
• human resources management.

A certain level of turnover is normal and inevitable in any organisation. However, a high turnover rate may have a negative impact on productivity, recruitment costs, training and corporate culture. 

Conversely, too low turnover may indicate a lack of new ideas and stagnation in the organisation’s growth. Therefore, it is important for companies to monitor and manage staff turnover to ensure a healthy balance between stability and renewal.

Differences between physiological and pathological turnover

Staff turnover can be divided into two categories: physiological and pathological.

Both types of turnover can have an impact on the organisation but it is important to understand the differences and act accordingly to effectively manage employee turnover.

Physiological turnover

Physiological turnover is that which occurs naturally within an organisation and is considered normal and healthy. 

It is the result of events such as retirements, voluntary resignations for personal reasons or to seek new career opportunities, and changes in the organisation’s structure. Physiological turnover can benefit the company, such as the arrival of new talent, innovation and renewal of skills. 

It is important to monitor the physiological turnover rate and ensure that it remains within reasonable limits to avoid productivity and HR management problems.

Pathological turnover

Pathological turnover, on the other hand, occurs when the staff turnover rate becomes excessively high and indicates problems within the organisation. This type of turnover is often the result of persistent problems such as poor management, unsatisfactory working conditions, uncompetitive salaries, lack of opportunities for professional growth or a negative corporate culture. 

Pathological turnover can have a negative impact on productivity, recruitment and training costs, corporate knowledge and the organisation’s reputation.

To manage staff turnover effectively, it is crucial to understand the difference between physiological and pathological turnover and to closely monitor the turnover rate within the organisation. 

If pathological turnover is identified, it is important to take action to address the underlying causes and create a healthier and more satisfying working environment for employees.

Why prevent pathological turnover?

Preventing pathological turnover is important for several reasons, as it can have a negative impact on the organisation at various levels. Here we have analysed the 5 most common reasons why employees change jobs.

Here, we leave you with some of the main reasons why every company should address and prevent pathological turnover.

• Hiring and training costs: high staff turnover leads to significant costs related to hiring and training new employees. These costs include the search, selection, introduction and training of new workers, which can be a burden on the company’s budget.

• Loss of knowledge and experience: when experienced employees leave the organisation, they take with them the knowledge, skills and experience they have acquired over the years. This loss can reduce the company’s competitiveness and negatively affect the quality of the products or services offered.

• Reduced productivity: pathological turnover can cause a decrease in productivity, as new employees take time to become fully efficient and productive. In addition, the additional workload and stress on remaining employees may further reduce overall productivity.

• Impact on corporate culture: high staff turnover can create an unstable working environment and negatively affect corporate culture. Employees may feel insecure about their position and the future of the company, which may lead to a decrease in morale and commitment.

• Damage to reputation: pathological turnover can damage a company’s reputation both internally and externally. Current and potential employees may perceive the company as an unstable and unsatisfactory place to work, which can make it difficult to attract and retain quality talent.

For these reasons, it is crucial to identify and address the causes of pathological turnover. Implementing policies and practices aimed at improving employee satisfaction, promoting professional growth and creating a positive work environment can help reduce pathological turnover and ensure the organisation’s long-term success.

How to calculate the turnover rate

The turnover rate is an important metric for measuring staff turnover within an organisation. Here is how to calculate the turnover rate in a simple way.

• Choose a time period for which you wish to calculate the turnover rate. It can be monthly, quarterly, half-yearly or yearly, depending on the needs of your organisation.
• Calculate the average number of employees: add up the number of employees at the beginning and end of the chosen time period and divide the result by two. This will give you the average number of employees during that period. Average number of employees = (Number of employees at the beginning + Number of employees at the end) / 2
• Determine the total number of departures. Count the total number of employees who left the organisation during the chosen time period. This includes resignations, dismissals, retirements and other forms of separation.

Divide the total number of departures by the average number of employees and multiply the result by 100 to obtain the turnover rate as a percentage.

Turnover rate = (Total number of departures / Average number of employees) × 100

Here is a practical example to illustrate the process: suppose a company started the year with 100 employees and ended the year with 110 employees. During the year, 25 employees left the organisation.

Average number of employees: (100 + 110) / 2 = 105

Turnover rate: (25 / 105) × 100 = 23.81%.

In this example, the annual turnover rate of the company is 23.81%.

Monitoring the turnover rate can help companies assess their ability to retain employees and identify any problems that might affect staff stability. 

If the turnover rate is high, it may be necessary to examine the causes and implement strategies to improve employee satisfaction and reduce turnover.

What are the costs of staff turnover?

Staff turnover entails a number of direct and indirect costs for a company. Direct costs include the costs of training new employees and training on specific tasks. Indirect costs, on the other hand, include increased workload for existing employees, stress, reduced productivity and the possible loss of accumulated knowledge and experience.

How to reduce staff turnover?

An HR professional plays a crucial role in reducing staff turnover. On the other hand, the candidate also has a responsibility when looking for a new job. Here we have collected the 6 most common mistakes that jobseekers make when looking for a new job. 

Through effective human resources management, the company can identify the causes of turnover and implement strategies to prevent it or keep it within acceptable limits. An important tool to counter the turnover phenomenon is employee retention.

Employee Retention

Employee retention refers to policies and practices designed to keep employees satisfied and motivated within the organisation, thereby reducing the likelihood that they will seek opportunities elsewhere. 

This can include competitive remuneration policies, career development opportunities, a positive work environment and a work-life balance. 

By implementing employee retention strategies, companies can counteract staff turnover and ensure continuity of skills within the organisation. Discover our tips for retaining real talent for a long time. 

Managing employee turnover is critical to the health and success of an organisation. A holistic approach that takes into account employee needs and employee retention strategies can help create a perfect match between company and new talent. To learn more and find out how our company can support your business in managing employee turnover, contact us.