What is Employee Turnover, Why it Matters & What Causes It?

Employee turnover. By definition, employee turnover rate is the percentage of staff turnover over the average number of employees.

Annual Turnover Rate

While employee turnover rate describes the  behaviours of employees, in reality the employee turnover rate is more an indicator of a companies working condition than of the people.

When working conditions are sub par, be it due to pay that is below market rates, little career development opportunities, employees not being taken cared for, or due to poor company culture, it will most likely be reflected in the staff turnover rate, as good talent opt to leave the company.

A low employee turnover rate on the other hand is a good indicator of a strong company. Generally speaking across Asia Pacific, the highest expected turnover rate is around 46%, according to an article by Human Resources Director.

This number may be higher for millennial, at around 50%, 40% for generation X’ers, and as low as 10% among baby boomers. So when looking at your company staff turnover rate, it’s important to take into consideration the context such as the demographic, age group,  market and industry of which you’re looking at.

 

Why it Matters to Know Your Staff Turnover Rate

For companies, there are quantifiable costs that comes with a high turnover rate. One of the more evident costs are the ones tied with the hiring process. The hiring expenses for the replacement of an experienced employee will most likely be higher as it usually take longer to find a match.

According to the Missouri Business Net, it costs on average a third of the new hire’s annual salary to replace an employee. This is taking into account the cost for recruitment ads, time dedicated to the hiring process, and labour involved in training

Hidden Cost of High Employee Turnover

Beyond the more obvious costs tied to a high staff turnover are the costs that are commonly overlooked. This includes long term impacts to the company’s well being, including a lowered workplace morale, products and services suffering from lowered quality, and decreased productivity.

Low workplace morale

With the departure of employees in an environment where there is high staff turnover, the weight of certain tasks will undoubtedly fall on people who are still working in the company. As such it can become a point of stress, causing frustration and low morale that of which new employees are not immune to.

High employee turnover can also have a social impact. Seeing other leave can have a negative influence on those who are still with the company. Thanks to herding behaviours, high turnover rate can lead to the departure of staff who were originally on the fence, or at least of lowered motivation to work given the shaky nature of the workplace.

Suffer in quality

For roles that deals heavily with other people there may be a greater impact on the departure of an employee, especially in the case where client relations is involved.

A high employee turnover rate may mean clients are constantly being served by different people with no key point of contact which can be a point of frustration for clients. The inconsistent point of contact also means the company loses out on the opportunity to build trust with it’s clients.

Disruption in productivity

This may be more evident in the loss of senior and experienced employees. A high staff turnover means a loss of deeply rooted company knowledge and insight. Not only is there a loss during the replacement process. However, the problem actually doesn’t resolve after a replacement is secured as there is time involved for them to get familiar with the work.

When People Matter

High staff turnover can be due to many reasons and may not be for a lack of trying. What’s true however, is that when organisations actively think for their people, it’s evident and the results show it.

My philosophy has always been, if you can put staff first, your customer second and shareholders third, effectively, in the end, the shareholders do well, the customers do better, and yourself are happy.

Richard Branson, Founder of the Virgin Group

 

What Causes High Employee Turnover?

Across Asia Pacific, Singapore employees have the highest expected turnover rate according to Workday, with 46% likely to leave their jobs within a year.

Looking at data across APAC, 73% of employees are likely to switch jobs, 43% of which plans to to leave their company within the next 12 months. Of the respondents, the key contributors to leaving included a lack of career prospects, lower than market pay as well as not enjoying the work they do. An increasing number of of people also stated that the lack of work life balance as a reason for switching jobs.

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Your staff matters
As much as people like saying that clients come first, it is important to remember to also take care of your staff as they are what makes up the organisation. By having the top people and serving them right, will your business prosper in the long run.

Know the cost
As a leader, when you have a lot on your hands, it may be easier to set aside the employee turnover rate as a percentage and just go on with your work. However a high staff turnover rate is not small matter and it would be unwise to dismiss it without properly weighing the cost and impact it has on the business.

Invest in HR
When it comes to turnover, HR can be your best bet to dealing with the problem. Invest in HR, think about employee engagement, invest on training programmes, and incentive schemes and recognise people's efforts through rewards. All these are great ways to combating a high employee turnover rate.

Do you have a turnover problem? Let us help you. Links is an award winning recruitment first with over 20 years of recruitment in Asia. Get in touch with one of our representatives today and build your winning team.

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Links International is an industry leader in innovative HR outsourcing with services such as payroll outsourcingvisa applicationEmployer of Record (EOR), recruitment and more! Contact us for more information on how we can help leverage your HR function.

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Links International

Links International

Links International is an award-winning industry leader in innovative human resources outsourcing in Asia. Links was established in 1999 and has offices in Hong Kong, Singapore, Shanghai, Zhuhai, Macau, Malaysia, Taiwan, Vietnam and Australia.

 

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