In Canada, turnover continues to be one of HR’s most persistent organizational issues. The median rate of employees who voluntarily left a company rose from 11.6% in 2020 to 15.9% in 2021. These numbers reflect all industries across the country. Turnover increases recruiting demands, and some respondents even admitted to leaving job postings up semi-permanently because a role had such high turnover rates. The revolving door of turnover also has damaging effects on the workforce overall, as employees need to continually adjust to new workloads, workflows, and teammates. In this article, we discuss strategies you can use to understand your organization’s turnover trends, calculate turnover rate, and make positive changes for better future retention.
What does employee turnover mean?
Turnover refers to employees leaving a company. A company’s turnover rate is the number of employees who leave your organization during a specific period, often represented as a percentage. Organizations typically calculate their turnover rate annually or quarterly to assess retention within their company and recruitment needs.
There are two types of turnover:
Voluntary turnover
This is when employees choose to leave an organization. They may decide to resign for any number of reasons, such as:
- Getting a new job somewhere else.
- Going back to school.
- Personal reasons (like moving or family matters).
Employers are most concerned with this type of turnover and can prevent it through employee retention programs.
Involuntary turnover
This happens when an employee’s time at a company ends because the employer decides it. Involuntary turnover includes:
- Termination. This is when an employee is fired.
- Layoffs. This is when employees lose their jobs because the company needs to cut costs or change its structure. Usually, it is not related to the employee’s performance.
Companies are interested in turnover rates because they are good indicators of how well a company is doing in a number of areas, including employee satisfaction, performance management, policy design, career development, and compensation and benefits.
How does turnover affect an organization?
Turnover is natural, but high turnover puts additional stressors on companies and their workers. Nearly two thirds (64%) of employers stated that turnover puts a heavy burden on current employees. Large employers (those with 100 or more employees) felt these burdens more than small businesses (those with fewer than 10 employees)—75% and 50%, respectively. Extra workloads, lack of support, and perceived job insecurity can cause low morale in employees of high-turnover organizations.
When there’s heavy employee turnover, existing employees often face:
- Extra workloads: They have to do more work to cover for missing staff.
- Lack of support: They feel like they don’t have enough help.
- Job insecurity: They might worry about their own job security.
These issues can lead to low morale in companies with high turnover.
Turnover also negatively affects:
- Company finances: Turnover is expensive. From recruitment costs to lost productivity, employers spend an average of over $41,000 each year on turnover, while 16% spend as much as $100,000 or more. Investing in employee retention pays off in the long run.
- Employee productivity: Staffing shortages, changes in workflows, and a lack of available knowledge and skills can result in poor quality work or decreased output.
- Company reputation: Employees who leave the company for negative reasons may share stories of their poor work experiences online through company review pages or social media. Job seekers may also recognize a company with high turnover by their frequent job postings.
- Future retention: Employee departures may influence others to leave the company, too.
Consequences of high turnover rates
To avoid these negative consequences, organizations aspire to have low turnover rates, but “low” differs across industries, job roles, company sizes, regions, and more. Insights from Saratoga revealed that the highest rates of voluntary turnover appear in the following sectors:
- Hospitals and health systems (19.8%);
- Professional services (19.5%);
- Technology (14.5%);
- Financial services (12.8%); and
- Manufacturing or engineering (11.8%).
According to another study done by Mercer, here are some of the voluntary turnover rates by employee group in Canada:
- Head of organizations and executives: 3.8%
- Management: 6.6%
- Sales professionals: 6.4%
- Non-sales professionals: 8.3%
- White collar professionals: 10.5%
- Blue collar professionals: 11.5%
In the same study, 42% of respondents reported difficulty hiring or retaining employees for specific roles. These roles are:
- Healthcare
- Insurance/reinsurance
- Banking and financial services
- Non-financial services
- Manufacturing
Knowing your organization’s turnover numbers is the first step to making significant positive changes that will help you keep more employees in the future. Calculating your turnover rate helps organizations understand what’s happening in the company.
How to calculate turnover rate
Step 1: Gather data
Before using the formulas in this section, you’ll need a few pieces of information. Define your given period (for example, January 1 to July 1), then collect the number of employees:
- At the beginning of the given period (“beginning employees”);
- At the end of the given period (“end employees”); and
- Who left the organization during the given period (“departed employees”).
Be sure you don’t include any temporary hires or the number of employees who went on temporary leave. This data will skew your results.
Step 2: Calculate using a situational formula
Average turnover rate
Turnover rate percentage = Departed employees / [(beginning employees + end employees) / 2] x 100
Year-to-date turnover rate
Calculate the average turnover rate for each month of the year so far. Then, combine these rates. To calculate the year-to-date (YTD) turnover rate in March, you would calculate:
YTD turnover rate = January turnover rate + February turnover rate + March turnover rate
Voluntary vs. involuntary turnover rate
To calculate the company’s voluntary turnover rate specifically, collect only the number of employees who voluntarily left the organization in step one. You can do the same to calculate the company’s involuntary turnover rate.
Why do employees leave?
Demographics and age group
Think about the mix of people in your workforce. The people who make up your workforce may affect your turnover rates.
For instance, younger generations, particularly Millennials and Gen Z, tend to have higher job mobility. A 2022 survey by ADP Research Institute found that 49% of Gen Z and 46% of Millennials would likely look for a new job in the next year, compared to 36% of Gen X and 27% of Baby Boomers. This general trend suggests higher voluntary turnover among younger employees.
Additionally, Canada is experiencing a significant shift in its workforce demographics due to an aging population. According to Statistics Canada’s 2021 Census, a record high of 21.8% of the working-age population (ages 55 to 64) is nearing retirement.
This group, often referred to as the « baby boomers » reaching their later career stages, will naturally lead to higher turnover rates in companies as they leave the workforce through retirement.
Some reasons for high turnover
In general, employees aren’t staying at their jobs as long as they used to. But there are certain predictors for higher turnover.
Consider, for example, your workforce’s demographics. The people who make up your workforce may affect your turnover rates. Saratoga’s insights revealed that Millennial employees (those born between 1982 and 2000) had a voluntary separation rate that was 5.3% higher than the rate for all employees. On the other hand, Gen X employees (those born between 1961 and 1981) had a voluntary separation rate that was 5.4% lower than the rate for all employees.
Additionally, 21.8% people of working age in Canada are nearing retirement age (55 to 64 years old)—an all-time high. Companies with a workforce including individuals in this age group can expect higher rates of turnover due to retirement.
You may also experience higher rates of turnover if your employees are dissatisfied with:
- New workplace changes;
- Their compensation;
- Their management team;
- The company’s culture; or
- Career development opportunities (or lack thereof).
Turn over the tables by improving employee retention
Employers can change the trajectory of their workforce by investing in employee retention. Turnover is preventable, and understanding your organization’s turnover trends is the first step to making meaningful and positive organizational changes that improve future retention.
Analyse your company’s turnover data to find patterns. In your analysis, compare data over two or more periods to answer the following questions.
- Who is most likely to leave the company? Determine whether employees who have left are generally high or low performers, conduct certain job duties, or are members of an equity-deserving group.
- How long are employees with the company before they leave? The number of employees who left a company within their first year increased by 12% in 2021. Employees may also quiet quit because they are not immediately satisfied with their job, which may indicate that they expected something else and that job descriptions and interviewing practices should be revised.
Looking at numbers and employee data alone won’t give you the full picture, though. To determine why employees leave, conduct exit interviews with each employee who voluntarily leaves your company.
Turn analysis into action
Look closely at your company’s turnover data to find out what’s happening. Analysis won’t do much unless you put a retention plan in place. Reviewing turnover data regularly lets you quickly address sudden changes in turnover so you can prioritize retention. You can also find out what matters most to employees through stay interviews, including what each individual is willing to stay with the company for. Implement employee feedback as much as possible to improve employee engagement and satisfaction.
Ready to reduce turnover and drive success in your workforce?
Understanding and managing employee turnover is a big challenge, but it’s one you can overcome. Citation Canada is here to make it simpler, helping you build a stable, productive, and happy team.
We offer a full range of HR solutions that directly help with lowering turnover:
- Expert HR guidance: From creating solid attendance policies to setting up effective exit and stay interviews, our experts provide the advice you need to improve employee retention.
- Comprehensive training: Empower your managers with the skills to spot and address attendance issues fairly, which is key to keeping staff.
- Ready-to-use HR documents: Get immediate access to customizable policies, checklists, and survey templates, helping you build a strong foundation for retention without starting from scratch.
By partnering with Citation Canada, you get more than just tools; you get the confidence that your business is taking smart steps to keep your best people and create a workplace where everyone wants to stay and do their best.