What is Turnover Rate?

Definition of Turnover Rate:

Turnover rate refers to the percentage of employees leaving a company within a certain period of time. High turnover can be costly to an organization because departing employees frequently need to be replaced. For employers or hiring managers, filling open positions can be a time-consuming activity, and leaving critical positions open for too long can have negative effects on an organization. For this reason, companies should strive to avoid high turnover rates.

Turnover rates can be minimized by analyzing why turnover occurs in the first place. Two main kinds of turnover are voluntary and involuntary turnover, and both can be reduced by making better hiring decisions. Voluntary turnover occurs when employees willingly choose to vacate their positions. Employees might choose to do this if they are dissatisfied with their position, have accepted a better job offer, or want a career change. One way to limit the risk of voluntary turnover is to administer personality tests to job applicants to see how likely they are to feel satisfied in their position. For instance, applicants who are non-aggressive and introverted may become dissatisfied in a sales position and ultimately choose to leave a company.

Alternatively, involuntary turnover occurs when an employee is terminated from a position. Employees may be let go for a wide range of reasons, including unsatisfactory job performance or inappropriate behavior, often called counterproductive work behavior (CWB). The likelihood that an employee won’t be able to fulfill his or her job duties can be minimized by administering aptitude or skills tests in the hiring process. Similarly, certain personality tests can be used to assess how likely an employee is to engage in counterproductive work behaviors that can negatively affect an organization.