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What Is Employee Turnover?

Updated on August 4, 2014

Human Resources

Due diligence during the hiring process can help prevent a high employee turnover rate.
Due diligence during the hiring process can help prevent a high employee turnover rate. | Source

The Definition of Employee Turnover

One of the Webster's Dictionary definitions of the word turnover is as follows: "the number of persons hired within a period to replace those leaving or dropped from a workforce; also: the ratio of this number to the number in the average force maintained"

This helps us appreciate what is meant by the term employee turnover. So if we are operating a business why should we be concerned with our rate of employee turnover?

There are at least three reasons:

  1. Cost of employee hiring
  2. Cost of employee training
  3. Employee morale

Let us consider each of these reasons one at a time.

Cost of Hiring

This effect of employee turnover could vary depending on the type of business. In some small businesses the process may be relatively inexpensive and a lot can be accomplished by means of free online ads.

For other companies it may be a lot more costly to come up with a hiring campaign. It can involve the use of a recruiting agency. It could also involve having to perform background checks on prospective employees.

The person doing the hiring can factor into the employee turnover cost as well. Do you have a manager who you pay to look after the hiring? Does the company have a Human Resource department that oversees hiring? There can be extra costs if these higher hour employees have to work extra hours to care for the hiring process.

Cost of Employee Training

This is one of the more obvious cost involved with employee turnover. Every time a company loses an employee not only do they have to hire a new one, but they have to train them as well.

Depending on the job this could take a number of months. The costs of training could depend upon the job wages as well. Obviously it would cost more to replace and train a managerial position.

Along with the direct cost of training there is also indirect but just as potentially costly factors as well. These relate to job performance and potential loss of customer.

While an employee is being trained they are more likely to make mistakes and they may lack efficiency. These factors can have a direct impact on customer satisfaction. An unhappy customer is bad for business.

Employee Turnover Cost

Employee Morale

An important part of operating a successful business is building a strong team mentality. One of the most negative effects of employee turnover is the impact that it could have on team building.

If your company is a revolving door, it will be hard for your employees to gel and to truly function as a team. Also when new employees are being trained it is your more experienced employees who have to take on a greater work load. If this is a prolonged development this could lead to frustration.

If long time employees become disgruntled it could have a direct bearing on their job performance. Their job performance can also have a direct impact on the service provided to your customers. You are also at risk of losing someone who was once a reliable employee. This can contribute to the ongoing cycle of employee turnover.

Employee Frustration

Frustrated employees can lead to lower morale and contribute to high turnover rate.
Frustrated employees can lead to lower morale and contribute to high turnover rate. | Source

Employee Turnover Poll

If you worked at company that had a high employee turnover rate would you be concerned?

See results

Understanding Employee Turnover is Important

Appreciating what is employee turnover and how it affects your business is truly essential. Having an understanding of employee turnover and its issues is the first step to being able to address them.

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    • Jeannieinabottle profile image

      Jeannie InABottle 2 years ago from Baltimore, MD

      There is always a reason when a company has a high turnover rate. I have worked at businesses with a high turnover rate when I had to, and the reasons always become very obvious. It is sad, because I personally feel you need to be at any job (even one that seems simple) for at least a year to fully grow into it and understand every aspect of it. That is why so many companies have such poor customer service now. Workers can't help customers if they never stay long enough to fully understand the job they are doing.

      Interesting hub and voted up!

    • ChrisJBaker profile image
      Author

      Chris Baker 2 years ago from Toronto, Ontario, Canada

      You make many good points Jeannie. That is another aspects of the high cost of turnover. Customer service suffers when employees don't stick around long enough to learn the job. Thanks for sharing your personal experience.

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