(10-12 minute read)
*Note: the newest BLS turnover reports will be issued on September 11. See https://www.bls.gov/jlt/ for additional information.
The current low unemployment rate and strong economic growth is causing many employees to wonder whether the grass is greener at another company. After all, it’s a seller’s market, meaning employees have the advantage. Companies that need additional staff don’t have people lining up for their opportunities like they did when unemployment was higher. As a result, the competition for workers is at an all-time high. And your employees probably know it.
If it seems like people in your company are quitting more often than normal, what can you do? How much turnover is normal in your industry? More specifically, how much turnover is normal for your company? To answer these questions, you need to know your turnover rate.
Essentially, your turnover rate is the percentage of employees who leave your business for any reason during a given period. It’s usually measured monthly, but you can also calculate it quarterly and annually.
According to the Society for Human Resource Management, the formula for calculating turnover is as follows: “The formula for calculating turnover on a monthly basis is figured by taking the number of separations during a month divided by the average number of employees on the payroll. Multiply the result by 100 and the resulting figure is the monthly turnover rate.”
This number is critical to track, but how do you know if your rate is normal, low, or high?
Every quarter the Bureau of Labor Statistics prepares a PDF news release called Job Openings and Labor Turnover—which covers the national labor market statistics for the previous three months. You can easily access the latest report.
To compare your turnover rate, skip down to Table 3, which is page 9 of the current PDF. This table shows total turnover by industry—using headcount to the left, and percentages to the right.
Look for your industry and see how your rate compares. If you’re lower than average in your industry, congratulations! You’re probably compensating your employees well, offering them good benefits, and managing them with a team of leaders that’s well-liked.
If your rate is higher than average, do some analysis to find out why. Perhaps it’s seasonal, or perhaps your company is not competitive enough to retain employees. Remember, turnover costs money. It may be less expensive to increase wages and/or benefits than to repeatedly take on the cost of recruiting and training new people to fill the vacancies.
If you’re interested in delving deeper, Table 4 specifically shows the turnover by industry from resignations (“quits”) only, Table 5 shows layoffs and discharges, and Table 6 shows “Other Separations.” You can breakdown your own calculations to see how they compare. In addition, at the bottom of each of these tables (including Table 3) you’ll find turnover by region of the United States.
It’s a great idea to compile your monthly turnover rates for at least a few years looking back so you can see any consistent patterns or monthly fluctuations. August is typically higher because summer employees return to college. Maybe June can be lower because of new graduates. Charting your past turnover history will help you understand the peaks and valleys that may be unique to your business.
Every industry has its own challenges when it comes to managing turnover. Did you know that small businesses which partner with a co-employment provider have 10-14% lower turnover rates, on average? To learn more about addressing this problem, or to find out about reducing overall employment costs, contact us today and consider attending our upcoming webinar on the nuts and bolts of co-employment: REGISTER NOW.
September 6, 2018
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