Retention vs. Turnover: Difference Between

You know how hard it is to handle an incomplete team. You have to put in extra effort to support overworked employees, and you might also have to deal with low morale and low productivity.

On top of all this, you need to find a competent new employee to support the team. You face the challenges of managing employee retention and turnover at this time.

Even though retention and turnover are terms you’ve likely heard, you may need to comprehend them fully. 

A few calculations are relevant to HR but not to you as a manager. But managers have a significant impact on employee retention rates.

Not only that, but they suffer the most direct consequences when someone leaves their team. So, let’s talk about retention and turnover.

How Does Employee Turnover Work?

An organization’s turnover rate is the percentage of employees who leave and are replaced by new hires in a given period.

Attrition is when an employee leaves but isn’t replaced. Decay happens when people retire, roles are abolished, or a manager or company decides not to hire a replacement.

Voluntary and involuntary turnover

When the organization decides to end the working relationship with an employee, employee turnover can be either involuntary or voluntary.

Poor performance, aggressive or inappropriate employee behavior, a breach of contract, or some other valid reason may lead to employee turnover.

On the other hand, employee turnover occurs when employees decide to leave the organization of their own volition.

Several factors contribute to employee turnover, including the misalignment of values, the availability of more enticing career opportunities, or a lack of development opportunities.

In some cases, voluntary departures are unavoidable and have nothing to do with the organization.

For example, an employee whose spouse has moved or a colleague caring for a sick relative. Voluntary turnover can often be avoided, but it’s vital to monitor it closely by calculating it quarterly or monthly.

What is employee retention?

Employee retention, sometimes directed to a company’s stability index, is the number of employees staying in a company for a given period. 

To keep employees happy and engaged, companies must employ strategies to ensure that they remain with them. Understanding and improving the employee experience within the organization is the first step.

The higher the employee retention rate, the more valued the employees are. Think about your job. Have you been with the same employer for some time? If so, why?

People stay with an organization because of growth opportunities, a good benefits package, a competitive annual salary, and an excellent work-life balance.

Turnover Vs. Employee Retention

In addition to employee engagement and loyalty, which are ultimately linked to employee engagement and productivity, turnover and retention are good indicators of an organization’s health. 

When these measurements are combined, they indicate the stability of a company’s workforce.

Since new employees haven’t really ‘stayed’ with the company, retention isn’t affected by turnover. However, if new hires decide to leave, that’s worth looking into.

Calculating employee turnover and retention

You can minimize turnover’s negative impact by tracking these numbers and consider investing in employee retention strategies. While they may appear to be opposite concepts at first glance, that’s not the case. It is important to note that turnover and retention only add up to 100% when combining the two rates.

Divide the number of terminations by the average number of employees in a given timeframe, and multiply this by 100.

Divide the number of employees who worked a whole period by the number of active employees at the beginning of that period, and multiply that number by 100 to calculate employee retention.

Example:

Here’s an illustration: Be Happy Corporation has a 103% employee retention rate and a 23% turnover rate. How come? Let’s examine the computations.

Be Happy calculated that they had an 80% retention rate in 2020. Only 80 of the 100 employees hired for the year completed the full twelve months. Only those employees who worked throughout the entire year were taken into consideration. 

On the other hand, Be Happy experienced a 23% turnover rate, with an average of 105 people every month due to 24 less-than-happy employees leaving during this time.

Retaining Employees And Reducing Turnover

Here are some strategies to help managers combat turnover and increase team retention.

Conduct exit interviews

You can use these interviews to get honest feedback about an employee’s departure after they have decided to leave. 

You will likely have to change their mind, but you can take advantage of the opportunity. A successful exit interview should provide insight into how you improve employee satisfaction and engagement.

Managerial intervention

Managers can help reduce their team turnover by actively listening to their members. Simple modifications and solutions based on their feedback can drastically improve the employee experience. 

Surveys and conversations can be effective tactics for assessing what’s functioning well and any struggles that may be present.

Officevibe allows them to utilize regular pulse surveys with easily understood reports, get instant employee feedback, and host successful one-on-ones, all within its platform.

Retention Vs. Turnover Differences

Businesses use retention and turnover as related metrics to determine how engaged and satisfied their employees are with the company.

Businesses often combine retention and turnover but differ significantly in various ways. Here are some of the ways they differ:

The Time frame

The period used by businesses to calculate retention and turnover is a crucial distinction between them.

Retention is often a long-term metric that companies calculate annually. It is common for companies to track turnover more frequently, frequently every month, though they may also figure it out annually.

Concentration

Although turnover and retention are closely related, they emphasize different staffing trends. The retention rate refers to the length of time employees stay with the company and includes strategies for retaining key employees.

The turnover rate measures the number and reasons behind the resignations of employees.

Providing solutions

Business leaders may need to implement different solutions depending on the causes of high turnover and low retention rates. 

High voluntary turnover and low retention rates often share the exact answers, such as better pay, more advancement opportunities, management changes, or a better work environment.

If turnover is voluntary, change hiring and HR personnel, improve the recruiting process, or enhance training and onboarding.

Critical Of Measuring Employee Retention And Turnover

A business needs to have the right people with the right skills to deliver its products and services, and if it can attract new and specialized skills, it can innovate or grow.

The turnover rate and retention rate of employees are essential indicators of the quality of the company’s human resources. It is also necessary to determine whether it offers employees a good work/life balance, provides training and advancement opportunities, and has effective management. 

As a result of high turnover and low retention rates, the organization’s culture and employee experience could be better.

Turnover and retention go hand in hand with employee engagement. A Gallup study of 112,000 business units showed that those with less than 40% annualized turnover rate experienced a 43% decrease in their turnover. 

Furthermore, heightened employee engagement affects organizational output, such as increased profitability (23%) and customer loyalty (10%) from the top quartile versus the bottom quartile business unit engagement.

Retention Strategies For Employees

You need a multi-pronged approach to build engagement and boost employee retention over time. Here are five ways to get started.

Hire the right people.

According to our research, there is a strong correlation between employee engagement and employee turnover.

Employees who are disengaged are 3.3 times more likely to leave their company within 90 days of the survey than those who are highly engaged.

In 180 days after the survey, disengaged employees were 2.6 times more likely to leave the company.

Cleared employees were 2.1 times better likely to leave their organizations a year after the survey.

That’s a massive investment in time and money in recruiting and training costs for just a few months of work. 

That’s why companies should invest in suitable hires from the beginning. Communicate your expectations clearly, and note any possible misalignments in experience and culture to avoid mismatches in skills and role responsibilities.

Optimize the onboarding process.

When you’ve discovered the right prospect for the job, it’s time to onboard and train them. But onboarding involves more than just signing a contract and showing the employee around the office.

According to SHRM, your onboarding process should last at least one year to ensure high retention.

Several goals should be addressed during the onboarding process:

• Establish a positive first impression.
• Establish clear expectations for their work and future at the company.
• The first week’s expectations should be communicated.
• Assist new hires in forming relationships with colleagues and coworkers.
• Offer structured opportunities for new hires to provide feedback on their jobs, company processes, and culture.
• Plan for their long-term future and development at the company.

Build a culture of recognition and feedback.

Creating a culture of feedback and employee recognition can go a long way toward helping employees feel seen and heard and less likely to seek validation elsewhere.

You can make praise and feedback into your organization’s culture in the following ways:

Utilize annual and pulse surveys to gather employee feedback.

Conduct regular one-on-ones with employees, reviewing their performance often, offering feedback (asking for it), and discussing their career development.

Build recognition into your culture through peer-to-peer recognition, public and private praise from managers, and company accolades.

Invest in your employees’ development.

• Unless your employees see a future at your company, they’ll look elsewhere.
  
  
• The key to retaining top talent is employee development.
  
  
• When possible, prioritize internal promotions and hires
  
  
• Mentorship and coaching opportunities should be provided
  
  
• Discuss long-term goals and development with your employees regularly
  
  
• Please communicate with your employees to understand their goals and expectations for growth. Tell them about their opportunities, such as training, mentorship programs, and education support. 

Take action based on exit survey insights.

Some employees will inevitably leave your company. Whether you have an increased or decreased turnover rate, you can gain valuable insights from them.

Get direct feedback from your soon-to-be ex-employees about their reasons for leaving and suggestions for improving the company.

Improve Retention and Turnover With Software

Using software to improve employee retention and turnover can be a powerful tool for managers. Various types of software available can help you identify the root causes of turnover, track employee engagement, and measure the impact of retention strategies. Here are the advantages of using software to improve retention and turnover:

• Data-Driven Insights: Software provides data-driven insights into the factors affecting employee turnover and engagement. This can help managers to understand the drivers of retention and turnover and identify areas that need improvement.
  
  
• Employee Surveys: Many software programs offer employee surveys that can be used to gather feedback from employees. These surveys help managers understand their employees’ needs and implement strategies to improve engagement and reduce turnover.
  
  
• Real-Time Feedback: Software can provide real-time feedback to managers on employee engagement and turnover. This helps managers to track progress and make changes in real time.
  
  
• Automated Reporting: Software can automate generating reports on employee retention and turnover. This can save managers time and help them focus on taking action to improve retention.
  
  
• Improved Communication: Software can enhance communication between managers and employees. For example, by providing regular pulse surveys and allowing employees to provide real-time feedback, the software can help managers keep their finger on the pulse of employee engagement and satisfaction.

Using software to manage retention and turnover, managers can stay informed and make data-driven decisions to improve employee engagement and reduce turnover.

Difference Between Retention And Turnover

Parameter	Retention	Turnover
Definition	The ability of an organisation to retain its employees over a period of time.	The rate at which employees leave a company over a period of time.
Focus	Focuses on retaining employees by providing a positive work environment, competitive salary, benefits, and opportunities for growth and development.	Focuses on understanding the reasons why employees leave a company and taking steps to reduce the turnover rate.
Importance	High retention rates indicate that employees are satisfied with their jobs and are likely to stay with the company long-term.	High turnover rates indicate that there may be underlying issues within the company, such as poor management, lack of growth opportunities, or low job satisfaction.
Metrics	Retention rate, which measures the percentage of employees who stay with the company over a period of time.	Turnover rate, which measures the percentage of employees who leave the company over a period of time.
Benefits	High retention rates can lead to increased productivity, cost savings, and better employee morale.	Lower turnover rates can reduce recruitment costs, improve employee morale, and increase retention rates.
Challenges	Retaining employees can be challenging, especially in highly competitive industries.	Reducing turnover can be challenging, especially if there are deep-seated issues within the company culture or management structure.

Conclusion

In conclusion, employee retention and turnover are two important organizational metrics. Employee retention refers to the number of employees who stay with a company for a specified period. At the same time, turnover is the percentage of employees who leave and are replaced by new hires in a given period. 

These metrics are essential indicators of an organization’s health and employee engagement. To minimize turnover and increase retention, companies should conduct exit interviews, actively listen to employee feedback, and invest in employee retention strategies. 

Additionally, it is essential to note that retention and turnover only add up to 100% when combined. Companies can improve employee satisfaction, engagement, and productivity by tracking these metrics.

FAQs

More To Explore:

• Functional And Dysfunctional Turnover: Difference Between
• 35+ Highly Effective Employee Retention Strategies
• Attrition Vs Retention: Key Differences between
• 25+ Proven methods for boosting employee morale in Your Workplace
• Why Is Employee Reward And Recognition Important For Your Team?