Small Business Service Control staff turnover

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When staff leave, this turnover can have a negative impact on your business. This is especially the case if those leaving either are key to its success and continuity or do so because they think you have treated them unfairly, which could result in tribunal claims.

Therefore, retaining staff and treating them fairly has benefits for your business. Continuity and stability become part of your business' culture, and staff feel they belong to the organisation and take pride in their work. Skills and competencies are maintained in key business areas and productivity is often increased.

Staff turnover is a business risk, but you can minimise the ways in which it affects your business through a structured staff management programme.

This guide will help you manage staff turnover by providing examples of what makes staff leave and a checklist of measures to help staff retention. There is also guidance on how to measure and benchmark turnover and how to improve the management of leavers.

Factors affecting staff turnover

Pay is rarely the only reason why people leave, although low pay levels are often a disincentive to stay. When you run a business, it is good to be aware of factors that commonly affect staff turnover rates, so that you can take steps to reduce them.

Consider how your business scores in the following areas.

Recruitment and induction

Making the right choice - are you getting the staff selection process right? Do you encourage staff to recommend friends and acquaintances for job vacancies?

Induction - how do you welcome and orientate new staff? How do you let them know where things are and what they and their colleagues are supposed to do? See our guide on getting new workers started.

Flexible working arrangements - do you recognise your employees' changing needs to achieve work-life balance? Use our interactive tool to investigate what kind of flexible working will best suit your employees and you.

Training and staff development

Motivation - how supportive and encouraging is your business?

Organisational culture - what are you doing to promote an inclusive culture in which staff are aware of and committed to the business' aims?

Matching jobs to people - are you making the best use of skills, experience and competencies, and helping staff fulfil their aspirations?

Staff training and development - are you investing in your staff by giving them time and opportunities to learn new skills?

Formal appraisals - how often do you give your staff the opportunity to discuss their performance?

Effective grievance procedure - do staff know how to register a grievance and are they making use of the procedure? 

Team working - do you encourage common goals and discourage unhealthy individual rivalries?

Contracts, pay and working environment

Contracts - do the terms and conditions of your contracts encourage staff loyalty?

Competitive pay rates and a fair, transparent pay system - are they in line with your industry?

Incentives and other staff benefits - are they relevant for your staff? Can staff choose the ones they need?

The office environment - is the physical office environment pleasant and well designed? Are noise, light and ventilation levels acceptable?

Monitoring staff turnover

Regular monitoring of staff turnover can show you why it is happening and enable you to control and forecast it.

Measuring and benchmarking turnover

You should measure your current staff turnover in percentage terms, following this simple two step process:

Add together the number of staff working at the beginning of the time period and the number of staff working at the end of the period and divide by two. This will give you your average number of staff working within this time period - you will need this number for the next stage.

Work out the number of leavers over the time period, multiply by 100 and then divide by the average number of people working in that same period.

This formula will give you a percentage for your business, known as the separation rate, that you can compare over time. You can also use this indicator to see how your business compares with averages in your industry. This is known as benchmarking.

To measure how experienced employees are being retained, you can calculate the stability index - number of workers with one year's service (or more), divided by number of workers one year ago, multiplied by 100 = Stability index percentage rate.

Patterns of employee turnover

The characteristic pattern of employee turnover is high for new starters, then decreasing. This pattern will vary in any single organisation and can be shown graphically. It is known as the 'survival curve' and can be extremely helpful in understanding the nature of employee turnover, but must always be used in conjunction with employee turnover rate.

To create the survival curve, you must plot the number of leavers against the period for which they were working.

Examining the causes of turnover

To make a meaningful assessment of your current business' position, try to identify the causes of turnover:

It is often effective to have consultations with individuals or groups of staff to root out any underlying problems and causes of dissatisfaction.

Exit interviews are carried out by many businesses and can reveal common reasons for people leaving, and highlight any emerging patterns. See our guide on when an employee resigns.

Surveys of all staff can often indicate general satisfaction levels, but remember to address any issues arising so that they know you take their views seriously.

Analyse your recruitment and selection procedures to see if you can identify expectations or potential problems earlier. Alternatively you may need to make the business' expectations clearer at the recruitment stage.

Get guidance on staff turnover and absence on the Acas website - Opens in a new window.

The cost of staff turnover

There are a number of costs associated with staff leaving. The obvious ones are time and money, but there are also hidden costs.

The monetary and time costs of staff turnover

When a member of staff leaves, there may be costs associated with:

leaver administration tasks, eg exit interviews and payroll changes

covering a vacancy until it's filled, eg through the use of temporary staff or overtime payments

advertising for a replacement or using a recruitment agency

dealing with recruitment and selection tasks, eg checking applications, and organising and attending interviews

the induction and training of the successful applicant

The hidden costs of staff turnover

When a member of staff leaves, you may experience:

other staff expressing a wish to leave

higher levels of stress-related absence

interruptions to workflow and missed deadlines

a reduction in productivity or levels of customer service

a drop in staff morale, particularly if the leaver was popular and good at their job, and/or you need the remaining staff to take on the leaver's work

Rising employee turnover often develops into a 'vicious circle' as low morale causes more workers to leave, which in turn reduces the morale of those who remain, and so on.

Managing staff turnover

Reducing staff turnover helps to minimise the costs and negative impact of unwanted and unplanned resignations. You can help limit turnover via staff consultation, succession planning, performance management and staff incentivisation.

How to reduce staff turnover

A good recruitment and selection process can help reduce the turnover of new starters. But if your business suffers from the loss of long-term employees then you may need to look at wider issues such as organisational structure or management style. Factors that may contribute to higher turnover might include:

pay - is the rate fair or below your competitors

policies on equal opportunities, diversity and discrimination

Consulting staff and succession planning

You can be proactive about some things and prepared for others. Consider the following measures:

employee consultation - consult regularly with staff about general morale and how satisfied they are with their work and working conditions - see our guide on how toinform and consult your employees

succession planning - put together and regularly review your plans for covering and replacing leavers, and training and inducting new starters - see our guide ongetting new workers started

You can read about how to comply with the Information and Consultation of Employees (ICE) regulations on the Acas website - Opens in a new window.

Managing performance

People are likely to want to work for you if your business has a reputation for treating staff fairly and provides support, development and motivation. Ensure your staff receive regular feedback on their performance - see our guide on how to use appraisals to manage performance.

It is important that your management are fully trained to deal with their own job and all management issues, such as proper disciplinary and grievance procedures. Managers will also need support for their decision making.

You can read about front line managers on the Acas website - Opens in a new window.

Employees must have personal objectives that fit in with your business and understand the importance of their contribution. Any employee personal development plan should first be approved by management.

Incentivising key staff

You may want to consider different incentives for retaining those staff with the key skills and attributes important to your business. These may include:

individual or team productivity bonuses

performance-related pay

non-financial incentives, eg healthcare provision, flexible working

attractive pension arrangements

See our guide on how to implement staff incentive schemes.

You could provide a reliable and fast system that allows employees to offer ideas for improvement at work and management response. It may also be necessary to carry out a stress audit.

You can read about stress at work on the Acas website - Opens in a new window.

Developing and maintaining skills

There is a strong business case for developing your staff as it will help ensure that your business runs smoothly and with consistently good results. You should also be able to reduce staff turnover by training your leaders to motivate staff.

Training and development

Although helping staff develop their existing skills and learn new ones can cost your business time and money, training and development is crucial to improving your business' performance and can actually help prevent excessive turnover.

This is especially the case if your staff see that what they are learning is relevant to them and the business, and they can readily put their new knowledge into practice.

It's important that your training and development policy is fair and clearly understood by your staff as early as possible in their employment. If they know that you will spend time training and developing them, they are more likely to continue working for you. See our guide on how to set up employment policies for your business.

Training and development can be delivered by experienced workers through on-the-job training or from external sources such as training organisations or consultants. See our guide on how to fit the training to your needs.

Leadership and people management

The culture in your business can influence retention of staff, and is often defined through leadership. You can foster leadership skills in your staff that will promote a culture they want to belong to.

People who feel good about their development and contribution to the business are likely to reflect this in the way they help drive the business forward, and develop other workers.

Finally, remember that good people management helps keep good staff. A poor relationship with a manager - who may be skilled in other areas - is one of the main reasons why workers decide to leave. Therefore, you may want to train your managers to coach and supervise other people.

Checklist: controlling staff turnover

Staff turnover can help introduce fresh ideas and skills into your business, but too high a level of turnover can damage its performance.

You will be better prepared for dealing with leavers if you understand why people leave, and if you structure a programme to manage staff effectively from the time they are recruited. Make sure you:

keep records of leavers

monitor your rate of turnover at regular intervals

benchmark your staff turnover

address issues facing new joiners and long-term workers

analyse your business culture

refine your recruitment and selection process

review and benchmark your pay and benefits policy

assess your training, development and promotion policy

refine your appraisal process and management of individual/team performance

review your work-life balance arrangements - are your workers able to manage both their home and work commitments?

assess the management style of your business

formulate contingency plans for coping with leavers

create and regularly review succession plans

examine your staff and your managers' leadership styles

A common way of discovering why employees leave or how current employees feel about your business is through exit interviews and attitude surveys.

Exit interviews and attitude surveys

When an employee leaves, use an exit interview to ask them their reasons for leaving and what they think the positive and negative things are about your business. It may be difficult for an employee to express their honest reasons or opinions, but you can help them to be open by using some simple strategies, such as:

interview away from work space

do not use the employee's direct manager

guarantee confidentiality

explain why the interview is needed

assure the employee answers will not affect future references

You should objectively review any information you gather from the interview and use it as a foundation for making improvements to your business. This could in turn strengthen your business' name, helping to retain existing staff and attracting others to your business.

For an attitude survey, you can include all employees or select a sample for more in-depth interviews. If you use a questionnaire, make sure it is well designed. Another method to consider is a confidential focus group supported by someone outside your business.

Make sure the survey is freely communicated to employees and acted on, otherwise it may well be counterproductive.

Here's how improving procedures helped us manage staff turnover

Sue Shuttleworth

Shuttleworth Veterinary Group - Opens in a new window


Sue's top tips:

"Monitor staff turnover, but don't panic every time someone leaves - a certain level of turnover is normal and healthy."

"Invest in a structured training and development programme."

"Involve everyone in your vision for the company."

Shuttleworth Veterinary Group has been established in Rossendale, Lancashire for over 20 years. Two years ago, practice owner Sue Shuttleworth piloted the Investors in People (IiP) Work-life Balance Model (WLB), resulting in overhauled procedures and a revised management style. One of the benefits has been improved motivation and retention among the practice's 20 employees.

What I did

See the big picture

"High staff turnover can be a feature of many veterinary practices and ours was no exception. There's no single thing that makes staff stay or go, you have to look at the bigger picture and go through the business from the top down. That's what IiP and WLB made us do.

"We started by involving the team in redefining the mission and vision for the business, which included a strong emphasis on improving work-life balance - a big issue in our profession, as the hours can be unsociable. We then evaluated our current procedures in areas like recruitment, exit interviews, training and team working."

Implement new procedures

"We recognised that although we were already doing many of the right things, procedures needed to be formalised and there were gaps to be filled. We began with a staff questionnaire, which we've continued to issue every six months. This helped us to identify areas where we could be doing more to retain staff.

"Among other measures taken, we introduced weekly staff meetings and a monthly newsletter, implemented a rolling training programme and began conducting formal exit interviews. We also refined our recruitment process to ensure a better 'fit' among candidates. After all, one of the keys to managing staff turnover is to employ the right people in the first place."

Involve staff

"Consulting and informing staff about new procedures has made them feel part of the business in a way they didn't before. We've also trained line managers to communicate policy and procedural changes so the right messages filter down from the top and everyone feels involved.

"Overall, there has been a change in the company culture, with greater emphasis on team working and a no-blame philosophy that's encouraged a more proactive approach to problem solving. We've found that trusting people and giving them control over their work can be a powerful motivator and reason to stay."

What I'd do differently

Seek input sooner

"We've spent a lot of time communicating our mission and values to staff at all levels, but I wish we'd sought their input right from the beginning."

Be patient

"We didn't realise how long it takes to truly change a company's culture and management style. It took around 18 months before we saw the maximum benefit from the policies and procedures we'd put in place."

Acas Helpline

08457 47 47 47

Related guides on

Use our interactive tool to investigate what kind of flexible working will best suit your employees and you

Making a job offer and getting new workers started

Set the right pay rates

The employment contract

Flexible working - the law and best practice

Meet the need for work/life balance

Implement staff incentive schemes

Fit the training to your needs

Use appraisals to manage performance

Recruiting and interviewing

Workers leaving: the basics

When an employee resigns

Inform and consult your employees

Manage absence and sickness

How to deal with stress

Set up employment policies for your business

Improve the performance of your staff

Skills and training for directors and owners

Develop your management team

Evaluate your training

Here's how asking employees for ideas improved our business

Here's how a staff incentive scheme improved our business

Related web sites you might find useful

Managing attendance and employee turnover guidance on the Acas website

Staff motivation online courses on the learndirect business website

Employee retention and turnover explained on the Chartered Institute of Personnel and Development website

ICE regulations explained on the Acas website

Front line managers guidance on the Acas website

Stress at work guidance on the Acas website

Leadership online courses listed on the learndirect website

You can find this guide by navigating to:

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