Employee Churn Rate: 10 Strategies to Lower Yours (2022)
- September 26, 2022
A lot of time, money, and energy go into recruiting and training new employees, and losing them takes a toll on the overall productivity of an organization. As such, companies need to measure the efficiency of their recruitment efforts with metrics like employee attrition, employee turnover, and employee churn.
Let’s understand these metrics and look at a few ways to prevent employee departure in your organization.
What Is Employee Churn Rate?
A company’s churn rate, or employee churn rate, refers to the number of employees leaving the organization during a specified time period. It’s often represented by a percentage. It is important to monitor your company’s employee churn rate because it impacts productivity, business performance, and growth.
What's the Formula for Calculating Employee Churn?
The churn rate formula =
(Lost employees/Total employees at the start of the time period) x 100.
For example, if your business had 250 employees at the beginning of the month and lost 10 by the end, the churn rate would be 4%.
What Is The Difference Between Employee Attrition, Turnover, and Churn?
Employee attrition
An employee’s departure is considered attrition if it meets the following criteria:
- The departure is voluntary.
- The company is not rehiring or re-filling the position.
An example of employee attrition may be an employee who retired from their job or quit because they’re moving to another location.
Employee attrition rate formula =
(Average number of departures in a given period/ Average number of employees in that period) * 100
For example, if you started the quarter with 100 people and ended it with 90, that quarter’s employee attrition rate is 10%.
Employee turnover
Employee turnover is directly related to job satisfaction. For an employee’s departure to be considered turnover, it should meet the following criteria:
- The departure can be both voluntary or involuntary, meaning the employee is leaving for a better offer with another company or the employee is being terminated.
- The position(s) that vacate are subsequently refilled.
Turnover can be described as the rate at which an organization replaces departing employees over any given time period.
An example of involuntary employee turnover could be eliminating a department to outsource the work. On the other hand, voluntary turnover could be employees leaving because of unhappiness with a job, pay, peers or managers.
Employee turnover formula =
(Year, quarter, or month employee departures/ average headcount) * 100
For example, if you averaged 100 employees over a one-year period and 25 employees left, your annual employee turnover rate is 25%.
Employee churn
Employee churn refers to the combined numbers of an organization’s employee attrition and turnover rate. Similar to employee turnover, employee churn also comprises both voluntary and involuntary departures.
Employee churn formula =
(Number of employees left/ total number of employees remaining during a year, quarter, or month) * 100.
For example, if four employees quit the organization, and there are a total of 100 remaining, their monthly churn rate is 4%.
How Does a High Churn Rate Affect an Organization?
Here are some of the ways employee churn affects the organization.
1. Lost productivity
In some cases, the loss of a valuable employee– especially one with hard-to-replace skills– leads to a significant loss of productivity in the team, as all of their tasks may grind to a halt until a suitable replacement is found.
Even if there are other people with similar skills available in the team, taking on the workload of another employee in addition to their own leads to delays in deliverables.
2. Knowledge loss
While working in an organization, employees gain unique experience and knowledge by experimenting, making mistakes, and learning. When an employee decides to walk out of an organization, it takes a lot of time and effort to rebuild the lost valuable institutional knowledge.
3. High recruiting costs
Employee churn affects an organization financially because of the high costs involved in recruiting, hiring, and training.
According to SHRM, the cost to replace a worker is six to nine months of the annual salary for their position. This means the cost of replacing an employee earning a $35,000 yearly salary could be anywhere from $17,500 to $26,250.
4. Damaged company reputation
A high churn rate can damage a company’s reputation, which can dissuade customers and investors. It also becomes a challenge for the talent acquisition teams to hire top talent for a company with a high churn rate.
5. Negative workplace culture
A high employee churn rate can create a hostile workplace culture that impacts both productivity and worker health. Employees who are insecure about their position in the company are likely to engage in reckless or questionable behaviors, which contributes to disengaged and frustrated employees.
How To Lower Employee Churn Rate In Your Organization?
Here are a few tips to help you lower your organization’s employee churn rate.
1. Invest in employee development
Employee development is no longer an optional perk reserved only for certain positions or projects. With so many complex applications being adopted by organizations, learning and development are expected to be an ongoing activity by today’s talent.
Training facilitates self-growth and enables the resources to contribute better. It also sends a message that the employer values its people and is willing to invest in their success.
Providing a clearly laid-out employee development plan for advancement and upskilling is an excellent strategy for reducing employee churn. However, when daily tasks bog down your staff, they can’t spare time for training. And traditional methods like instructor-led classroom training make it more difficult for employees to participate as they are time-consuming and can overwhelm learners with too much information.
So how can organizations enable continuous training for their employees?
The solution is self-paced learning. Self-paced learning enables employees to access learning materials and go through training at their convenience and at a pace that works best for them.
A digital adoption platform like Whatfix enables self-paced learning for your employees. Create interactive walkthroughs and videos to train your employees on any enterprise application. Whatfix’s self-paced and interactive on-the-job training solution augments training by helping employees learn while doing within the business application.
2. Allocate the right resource to the right job
If managers allocate a resource to a task that does not align with their skills, it can negatively impact productivity.
If the provided resources are underqualified, employees may feel frustrated or burned out, and deliverables may be delayed. On the other hand, if the resources are more experienced and skilled, they might feel their potential is not being recognized. In either case, the chances of employees looking for opportunities elsewhere are high. As such, allocating the right resource for the right job is essential to ensure employee satisfaction with their role.
3. Organize effective team-building activities
Facilitating strong bonds between colleagues enhances employee engagement and creates more productive teams. Moreover, if employees feel they have made meaningful and valuable relationships at the workplace, they are more likely to stick around.
Organizing team-building activities to promote a cohesive work culture is a great way to increase engagement. One example is the collaborative training program, which is where employees simultaneously share their knowledge and expertise, teaching and learning from one another. When people learn and work collaboratively, it creates a healthy work environment, builds a positive work culture, and creates greater employee satisfaction– ensuring long-term retention.
Other effective team-building activities include:
Monthly team lunches
Weekly informal meetings
Discussion groups
Charitable events
4. Share regular feedback
Sharing constructive feedback with employees helps them understand their performance from a manager’s perspective. Scheduling regular feedback sessions with employees enables managers to acknowledge their strengths and address areas of improvement. When employees know their leaders prioritize individual development, it boosts their motivation and ultimately increases retention.
It’s also important to ensure that feedback is a two-way street. While giving feedback is necessary to help your workforce grow, it’s also important to take feedback. Employee feedback in the form of anonymous surveys or one-on-one sessions helps them raise their concerns or expectations about their role or company. This makes the employees feel valued and helps HR and managers understand their concerns and provide appropriate solutions.
5. Focus on a positive work culture
An organization with a happy work culture is more likely to retain its employees for longer. It’s crucial to enforce a respectful and supportive work culture for your employees to feel welcomed, respected, and valued.
The focus of creating a positive work culture should be in:
- Establishing effective communication strategies between different departments and within a team.
- Providing enough support to employees, especially during challenging times.
- Ensuring that there is no discrimination or bullying within the organization.
- Valuing every employee’s efforts adequately.
6. Hire the right fit
Train your hiring staff to identify what a promising candidate looks like. You can significantly reduce your churn rate by focusing on recruitment efforts, making the interview process robust, and hiring the right people.
It’s important to clearly define the role and position you’re recruiting for. Don’t just focus on the required skill set but also on the kind of candidate that would excel in the role. Ensure the candidate fits the profile and that the company culture and vision match the candidate’s career goals.
7. Recognize and reward employees
Who doesn’t appreciate a little extra incentive as a reward for good performance? While a positive work culture can be a great start for keeping employees happy and satisfied, you must also ensure the role is financially satisfying. The rewards could be in the form of bonuses and different profit-sharing plans.
Besides financial rewards, recognition can also include benefits and non-cash perks. For example, health and welfare plans, adequate retirement plans, childcare plans, or different loyalty programs for travel or fitness schemes are prime benefits to offer employees.
8. Pay attention to engagement
Keeping employees engaged is critical to business success because when employees find their jobs challenging, engaging, and rewarding, they’re more likely to stick around and invest themselves in their work.
Employees who find passion and purpose at work are more than three times as likely to stay with their organizations as those who don’t.
However, employee engagement for many organizations is limited to the results of engagement surveys once a year, which is not enough to be impactful. HR teams need to take appropriate actions based on survey results and work to build a culture of engagement in the company throughout the year.
Some significant factors to consider for improved employee engagement include:
- Company culture
- Team communication
- Company reputation
- Career development opportunities
9. Revise your onboarding processes
The employee onboarding process is the first critical factor in building an engaged workforce committed to your company for the long haul. Therefore, review your current recruitment and onboarding process to ensure that it helps set the right expectations for new hires. A strong onboarding process increases employee engagement, invokes a sense of loyalty in new hires, promotes proper training and adoption of business processes, and helps improve long-term employee retention rates.
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10. Offer opportunities for employees to change roles or advance
Organizations need to focus on providing career development opportunities for their workforce. This means offering to help employees reskill themselves to be promoted or moved into a new role if they want to try something different. This helps employees stay motivated and engaged with their work, enables them to contribute more skills to the company, helps them stay competitive, showcases that the company is willing to invest in them for the long haul, and reduces voluntary employee separations.
11. Create robust documentation
In the event your employees do leave, you need to have a succession plan. The key to an effective succession plan is being prepared with stellar process documentation, specifically handover documentation that allows leaving employees to leave detailed guidance and tutorials on how to complete important responsibilities and tasks they’re leaving behind.
An organization is only as good as its employees. And employee churn, apart from affecting a business in terms of money, is detrimental to employee productivity, morale, and engagement.
That’s why every organization needs to work on minimizing employee churn by adopting employee retention strategies and hiring right from the get-go. Investing in your employees’ continuous development with modern employee training software such as the digital adoption platform can help engage and retain valued talent within your company, which is proven to be productive, profitable, and motivated.
Using digital adoption platforms as your training software helps deploy the most effective employee training and development programs within your organization. It empowers employees to upskill themselves on the latest tools, applications, or processes without disrupting their workflow and productivity. DAP provides real-time guidance in the form of step-by-step walkthroughs, pop-ups, and tooltips. It’s the best resource to make your employee development plans future-ready and valuable.
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