Just Add Value to Their Lives

By Dave Ramsey, Ramsey Solutions

Turnover rate is a vital measure of a company’s overall health

Turnover rate. It isn’t fun, it isn’t sexy, and it has absolutely nothing to do with delicious pastries. If you know anything about balancing the science of running a business and the art of having employees, you know it’s a vital measure of your company’s overall health and culture.

Employee turnover rate pertains to the percentage of your employees who leave your company over a specific amount of time. Think about all the people who quit voluntarily, are fired or choose to retire. That’s what you should factor in when calculating your company’s turnover rate. Why is it so important to keep that pulse? Because you need to know when and why employees “turn over,” not just wave goodbye and hope you can replace them quickly.

How to calculate turnover rate

As if employees leaving wasn’t painful enough, now we have to do math. Most companies want to know their employee turnover rate on a quarterly or annual basis. Why? It just takes that long for anything meaningful to show out of it.

Here’s how to calculate turnover rate:

                                                     Number of employees who left
Monthly turnover rate % =    ———————————————    x100
                                                     Average number of employees

                                                                    Number of employees who left                         
Annual turnover rate % =    —————————————————————    x100
                                                   (Beginning + ending number of employees) / 2

                                                 Sum of employees from all pay period reports                     
Average # of employees =   ————————————————————-
                                                                       Number of reports

What’s a high turnover rate?

The question every leader asks when it comes to turnover is: What is a high turnover rate? The answer is that it depends on the business. You’ve got to calculate it over time, combine that with what you know to be true about your specific business and industry, and factor in your understanding of your employees.

No one wants to be in a bad spot with employee turnover. It’s a huge, expensive pain that takes a ton of time and effort to fix. That said, a high turnover rate usually happens because of a combination of things: company culture, compensation, benefits, job market conditions, employee stress, and more.

If you want to compare your business’s turnover rate to national averages, the Bureau of Labor Statistics is a great place to start. Beyond that, the most effective way to reduce turnover rate is to take a long, hard look at how your employees experience working at your company.

Reducing turnover rate

Understanding where your employees are coming from and what they’re dealing with is like having a silver bullet to solve many of your company’s retention problems. It’s also vital to have a firm grasp on the competitive hiring landscape. What’s that mean? It means knowing where you stand in the marketplace, and not being behind the times—or your competitors—with what you’re offering employees.

While conventional benefits form a good base, today’s employees want and need more than just the basics. They need life-changing benefits to justify staying in one place for more than a few years. And your company stabilizing its turnover rate for the long-term depends on it.

Recruiting isn’t just about hiring new employees. You’ve got to continuously do things that build your culture, and make your employees want to stay with your company. That means your employee retention strategies—your culture, compensation and benefits—need to be unique and on point.

If your employee turnover rate is high, it doesn’t necessarily spell doom for your business. Having a healthy employee turnover rate is possible, and it doesn’t take a complex process to get there. It just comes down to adding more value to your employees’ lives!

* Leadership and small business expert Dave Ramsey is CEO of Ramsey Solutions. He has authored numerous best-selling books, including EntreLeadership. The Ramsey Show is heard by 18 million listeners each week on more than 600 radio stations and multiple digital platforms.

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