What does Turnover stand for?

The Turnover, also known as staff turnover by AbbreviationFinder, is the movement in and out of employees in a company, demonstrated by a turnover ratio.

This personnel movement is calculated based on the number of dismissals divided by the total number of employees, resulting in a relevant percentage index to verify the quality of the organization.

How to calculate the turnover ?

The general way of calculating the turnover, is in consideration with the general turnover of the company, through the formula:

The Turnover calculation considers a period prior to the current one, when the turnover occurred, that is, the previous month or year, with the annual one being the most used. Medium and large companies (with more than 200 employees) may choose to observe this index month by month.

If the information regarding the reasons for dismissals is more accessible, it is possible to consider the departure of employees to be replaced. In this way, the turnover starts to consider only replaceable positions in the calculation, different from those that cease to exist within the company.

To verify the impact of new hires on turnover, it is recommended to divide the number of employees who left the company with less than one year, by the total number of employees terminated in the same period. If the rate is higher than the turnover, it is important to review the hiring and training practices of new employees.

Optimal Turnover Index

The index considered ideal is less than 10% per year, or about 1% per month. But it is necessary to observe the differences between the characteristics of each job market. Restaurants and call centers, for example, have high rates for hiring many young people with low education, a group among those who most disconnect from companies in the first year.

The ideal is to make internal comparisons, as well as to draw parallels with the market. The Ministry of Labor, trade associations and other bodies offer frequent studies with turnover rates.

High Turnover Reasons

A high turnover can be motivated by several causes. We highlight: wages and benefits below the competition; lack or problems in training; failures or lack of career plans; as well as management deficiencies (micro and macro).

Main problems of high turnover

  • Expenses with dismissals: Each dismissed employee represents an expense to the company with contractual termination, payment of benefits to be expired such as vacation, FGTS, among others.
  • Hiring expenses: It is necessary to take into account values ​​since the announcement of the vacancy, the time of the employees involved in the interviews, then the cost of training, the adaptation of the new employees and the total days without production.
  • Team stress: The constant exchange of colleagues can lead to dissatisfaction, lack of motivation and reinforces insecurity, resulting in a performance below expectations.
  • Relationship with customers: In the case of employees who deal directly with customers, the frequent exchange can have negative consequences in terms of the trust already established between the parties, which is reflected in the performance of tasks.
  • Lack of knowledge: Highly qualified employees, when dismissed, represent a great loss of know-how for the company. They dominate not only their role, but are knowledgeable about the operation as a whole, which the newly hired will not be able to easily reproduce.

How to improve the company’s turnover ?

It is necessary to look for the reasons why the index appears high. Review processes and profiles, observe the level of job satisfaction, compare wages and benefits with the competition, among other metrics that can be thought about the reality of the company.

Establishing transparent career plans can decrease turnover, encouraging internal growth. Relocating employees is also a good solution, since internal use saves expenses with labor issues, training time, among other factors.

Sometimes, dissatisfaction or lack of motivation is related to communication problems. Lack of clarity in both tasks and strategic issues, sudden changes in positioning, among other attitudes, confuse and harm employees, leading to layoffs.