The success of your people strategy hinges on having the right people in the right places at the right time. But when people leave unexpectedly, creating a people strategy that supports business growth becomes a lot more challenging. That’s why tracking your employee churn rate is critical to helping your people — and the business — reach their full potential.
Learn more about what your employee churn rate is, why it matters, and how to keep it under control.
Employee churn accounts for employees lost to both attrition and turnover. Employee churn only includes employees who leave of their own accord, not those who have been let go or laid off. Your employee churn rate tracks the total number of employees who leave the business over a set timeframe.
Your employee churn rate combines attrition and turnover.
Attrition occurs when an employee leaves a job and the organization opts not to refill that role. In a tight economic climate, for instance, employers may implement a hiring freeze. During that time, employees lost to attrition aren’t replaced. That can put a strain on folks who remain behind and take on added responsibilities, which can drive higher turnover down the road.
Oftentimes, employees lost to attrition are planned exits (like a retirement) where a conscious decision is made not to refill the role.
Turnover occurs when an employee leaves and is replaced. It’s more common than attrition, and can take a heavier toll on your people strategy. High turnover can put your business into a reactive mode where you’re backfilling rather than acquiring talent. Reducing employee turnover is key to building a sustainable talent strategy.
Use this employee churn rate formula to calculate churn in your business.
First, ascertain how many employees you had at the beginning and end of the time period (for instance, Jan. 1 and Dec. 31). Divide that number by two to get your average number of employees. Then, divide the number of employees who have left the company by the average number of employees. Multiply the resulting number by 100 to get your percentage.
If you averaged 2,500 employees during a time frame, for example, and 50 employees depart, your churn rate would be 2%.
High employee churn has business consequences. You invest a lot of money into training and developing employees. When they leave, they take the institutional knowledge and organizational experience they’ve gained with them. If you suddenly lose several of your best employees in a department, that can be a very big loss of knowledge, morale, and competitive advantage.
And if you’re replacing lost employees, the cost of rehiring for those roles can be a significant percentage of that role’s salary.
Tracking your churn rate can help you act quickly to prevent significant losses before they happen. Take these steps to keep up with it and turn employee churn into a learning experience.
When it comes to employee churn, there’s no universal danger zone. Defining a high churn rate depends on industry, organization, and economic factors.
The hospitality, retail, and food services industries, for instance, tend to have high employee turnover rates. These industries rely on lower-skill roles and often employ workers who haven’t settled on a long-term career. Any organization with a lot of entry-level or lower-skill roles is likely to see high turnover, with many workers taking those roles while in school or on their way to something else.
The economy and job market can affect churn, too: In a tight economy, people are more likely to accept jobs in the short term while they wait for conditions to improve.
Take all of these factors into account to gain a clearer picture of employee churn in your organization — and when you need to be concerned.
Tracking your churn rate is key to improving employee retention. If you fail to notice a climb in the average number of employees leaving, you’ll jeopardize your business growth plans.
Record employee exits in your HR software. Keep a close eye on the number of employees leaving, as well as who they are, their role, and their department. Compare the ongoing rate of churn to historical turnover data. This can help you differentiate between normal, expected churn and turnover so high that it becomes concerning.
Employees leave for a variety of reasons, and not all of them are within your control. But once you know why folks are leaving, you’ll have the information to make a game plan for fixing the problem. Incorporate exit interviews into your human resources strategy. Ask standardized, open-ended questions to uncover people’s biggest reasons for leaving.
Employees often leave because they aren’t happy with workplace conditions (including compensation or management) or because they found a better opportunity elsewhere. But some workers may leave for personal reasons, such as lack of child care, needing to care for an aging parent, or changing career paths. While you can’t control every factor, this knowledge can help you discover what people need from you, such as dependent care benefits, flexible work arrangements, or better internal mobility.
Don’t wait for when your employee churn rate rises to take action. The most effective way to lower churn is to prevent it. Put your people first with these five ways to reduce and prevent employee churn.
Your biggest opportunity to engage and retain employees starts from the moment they join your organization. That’s why a strong onboarding program is a critical piece of the puzzle.
A positive onboarding experience provides a solid foundation for building long-term relationships with team members. Connect new hires with the people who matter most across their employee journey — especially their managers — so they feel confident about facing any challenges. Our recent research found that employees who feel connected are over four times more likely to be “very satisfied” with their jobs. These connected workers are 50% less likely to depart within the next 12 months.
Having that support network from the very beginning helps new hires acclimate and sets them up for greater success.
Pay and benefits are among the biggest factors in employee churn. People are more likely to leave an organization when they feel their compensation doesn’t match their contributions. And the allure of greater compensation elsewhere can draw people away.
Benefits are increasingly important as people weigh their career options. As costs rise for health care, child care, and education, people are looking to their employers for solutions.
Complex financial investments are often a balancing act. While there are limits to how much you can increase pay and benefits spending, keeping tabs on what’s most important to your workforce can help you prioritize your budget to have the biggest impact on retention.
Most people want to evolve and grow throughout their careers. But if they can’t see the opportunities for growth within your organization, they’ll start looking elsewhere.
Develop clear career paths so team members can see where they can move within the business. Match internal career paths to specific skill sets and learning opportunities. This way, workers can see where their skills will be most useful and what they need to develop.
Train managers to communicate these internal training and development opportunities to their direct reports. Use your HR workflow software to prepopulate messages that managers can share with their teams to help them see their opportunities for internal mobility.
Culture plays a huge role in reducing employee churn. For better or worse, the attitudes, norms, and behaviors that define your company have a big influence on the employee experience, and anyone who feels isolated or excluded from those norms is at a higher risk of disengagement. Similarly, people are more likely to disengage if they feel that your culture is at odds with their personal values or that it didn’t match what you promised during the hiring process.
Track engagement and the state of your culture is through regular surveys. Staying attuned to the workforce’s perspective on culture helps you get ahead of problems and proactively drive positive change. Make it a point to intentionally connect people across the workforce to strengthen what’s great about your culture. Use your employee experience software to establish workflows that foster connection and bring people together.
The increased awareness around mental health has driven conversations about what healthy boundaries look like between our work and personal lives. People who feel overworked and burned out are more likely to seek employment elsewhere or drop out of the workforce.
Train managers to help team members understand their capacity. Encourage honest conversations about what people can and can’t commit to, and how they work best.
Emphasize the importance of wellness. Your benefit offerings play a key role here, but many workers aren’t aware of what’s available. Develop a content campaign to raise awareness of your resources, help people understand their unique stressors, and overcome challenges related to burnout.
Managing employee churn sets the stage for a successful talent strategy. The steps you take to reduce churn will improve the employee experience, helping your people feel more valued and purposeful. Take the time to be thoughtful and intentional about workplace conditions, and really listen to what the workforce needs from you.
When you can address your workforce’s problems and challenges before they escalate, you can retain your best talent and create a better employee experience that’s full of moments that matter.
