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5 Ways Employee Turnover Can Impact Your Small Business

Employee turnover is the percentage of employees who leave your company and are replaced by new employees during a specified time period.

You wish you could just hire the best employees, who would then stay with your company for their entire career. But, it doesn’t work that way, unfortunately. Some turnover is unavoidable.

But, knowing what your turnover is can help you figure out what’s causing it, so you can decrease it.

How to Calculate Turnover

To calculate employee turnover, divide the number of employees who left your company by the number of employees you had at the beginning of the period.

For example, let’s say you started your quarter with 10 employees. During the quarter 2 people quit or were fired. Your employee turnover for the quarter would be 2/10 or 20%.

Types of Employee Turnover

There are two types of employee turnover – voluntary and involuntary.

Voluntary Turnover

Voluntary turnover is when an employee quits or resigns.

You can help reduce voluntary turnover by conducting exit interviews to find out why employees are leaving. You can also conduct stay interviews to check in with your current employees and find out what they like and dislike about working for your small business.

Involuntary Turnover

Involuntary turnover is when an employee is fired or laid off.

You can help reduce involuntary turnover by taking your time during the hiring process to hire people who are a cultural fit and will be able to meet and exceed their goals.

Ways Employee Turnover Impacts Your Small Business

Employee turnover isn’t necessarily a bad thing – an employee who wasn’t a cultural fit but decided to leave on their own lets you fill their position with someone who will fit into your company better. Or, you might have to fire someone who isn’t as productive as they needed to be.

But, any employee turnover will impact your small business in some way.

1. It costs you a lot of money

When someone leaves your small business, it could cost you between 90% and 200% of their salary to replace them.

You might have to continue to pay their benefits for a little while, or you might have to pay them some severance. You’ll also have to spend money on job ads to hire their replacement.

2. It affects employee morale

If a lot of your employees start to leave your company, morale is already pretty low. But, the turnover will cause your remaining employees’ morale to drop even lower, causing them to eventually quit. It can be a vicious cycle.

3. It causes a loss of productivity and performance

When an employee leaves, they’re taking their skills, knowledge, and customer and supplier relationships with them. Your new hire will need some time to be as productive as your previous employee was.

Your company will also lose productivity while you’re looking for a replacement because your remaining employees will have to pick up some of your former employee’s tasks and responsibilities, in addition to their own.

4. It costs you time

When an employee leaves your company, it can cost you a lot of time because you have to

  • conduct an exit interview,
  • tell your staff,
  • write a new job ad,
  • post the job ad,
  • interview candidates,
  • make a job offer, and
  • onboard your new hire.

5. It changes the team dynamic

The personality of your new hire can drastically change how your small business team works together – it could be a bad change or a good change. Unfortunately, you won’t know for sure until your new hire starts working.

Want to reduce your employee turnover?