Turnover (employment)

In human resources context, turnover is the act of replacing an employee with a new employee. Partings between organizations and employees may consist of termination, retirement, death, interagency transfers, and resignations. An organization’s turnover is measured as a percentage rate, which is referred to as its turnover rate. Turnover rate is the percentage of employees in a workforce that leave during a certain period of time. Organizations and industries as a whole measure their turnover rate during a fiscal or calendar year.

If an employer is said to have a high turnover rate relative to its competitors, it means that employees of that company have a shorter average tenure than those of other companies in the same industry. High turnover may be harmful to a company's productivity if skilled workers are often leaving and the worker population contains a high percentage of novices. Companies will often track turnover internally across departments, divisions, or other demographic groups, such as turnover of women versus men. Most companies allow managers to terminate employees at any time, for any reason, or for no reason at all, even if the employee is in good standing. Additionally, companies track voluntary turnover more accurately by presenting parting employees with surveys, thus identifying specific reasons as to why they may be choosing to resign. Many organizations have discovered that turnover is reduced significantly when issues affecting employees are addressed immediately and professionally. Companies try to reduce employee turnover rates by offering benefits such as paid sick days, paid holidays and flexible schedules. In the United States, the average total of non-farm seasonally adjusted monthly turnover was 3.3% for the period from December, 2000 to November, 2008. However, rates vary widely when compared over different periods of time and with different job sectors. For example, during the 2001-2006 period, the annual turnover rate for all industry sectors averaged 39.6% prior to seasonal adjustments, while the Leisure and Hospitality sector experienced an average annual rate of 74.6% during this same period.

There are four types of turnovers: Voluntary is the first type of turnover, which occurs when an employee voluntarily chooses to resign from the organization. Voluntary turnover could be the result of a more appealing job offer, staff conflict, or lack of advancement opportunities.

The second type of turnover is involuntary, which occurs when the employer makes the decision to discharge an employee and the employee unwillingly leaves his or her position. Involuntary turnover could be a result of poor performance, staff conflict, the at-will employment clause, etc.

The third type of turnover is functional, which occurs when a low-performing employee leaves the organization. Functional turnover reduces the amount of paperwork that a company must file in order to rid itself of a low-performing employee. Rather than having to go through the potentially difficult process of proving that an employee is inadequate, the company simply respects his or her own decision to leave.

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