Attracting and retaining quality talent is important for a growing organization. You will lose some employees over time for a wide variety of reasons. Tracking key business metrics such as your company’s employee turnover rate is a key performance indicator of leadership.
An important part of evaluating business metrics is to have a healthy target rate for your business.
Healthy Employee Turnover Rate
Employee Turnover Rate: This is the percentage of employees who leave your organization during a 12 month period. Example: If 50 employees start the year and only 42 remain at the end of the 12 month period, then 8 employees have been turned over out of the original 50 giving a 16% annual turnover rate.
What is a healthy employee turnover rate? 2-3% is too low and can indicate an unhealthy retention rate. 25% is definitely too high indicating leadership and morale issues. A high employee turnover rate could indicate wages that are not competitive or poor working conditions.
Generally 10-15% is considered “healthy”. Most HR professionals will target 10% for larger organizations. This will vary slightly by industry and by skilled versus unskilled positions. Typically employee turnover is higher with unskilled positions.
Turnover comes with a cost. This would include productivity losses during training, recruiting and lost work while a position is vacant. A CBS News report places the cost of replacing the typical employee at 20% of their annual wage. A 50K employee would cost $10,000 to replace.
Business metrics such as employee turnover rate should be used as an indicator of a problem. You certainly need to evaluate who is leaving and why.