Employee churn rate

Attracting, selecting, developing and integrating capable employees takes time and money. Employee churn rate shows how much of the workforce leaves during a defined period, helping managers see whether valuable capability is being retained.

When to use it

• Answer the key performance question: “How well are we retaining our staff?”
• Assess this KPI within the Employee perspective.
• Plan data collection, formula use, reporting frequency, and data-source requirements for this KPI.
• Compare results against the targets, benchmarks, examples, or trend guidance available for this KPI.

Origins

Employee churn is a contemporary label for labour turnover, which personnel researchers have studied since the early twentieth century. Later models of voluntary turnover examined both a person’s motivation to leave and the alternatives they believe are available. As HR information systems developed, organisations could distinguish voluntary, involuntary, regrettable and functional exits instead of reporting one undifferentiated figure. That distinction matters because a stable headline rate can conceal the loss of critical people or unusually high early-tenure turnover.

What it is

Perspective: Employee perspective.

Key performance question: How well are we retaining our staff?

Employee churn rate, also called employee turnover rate, compares the number of people who leave with the workforce population over the same period. It is a useful signal of movement, not a complete judgment about retention.

Replacement carries visible costs for recruitment and training and less visible costs while a new employee learns the role and the organisation. In 2010, the US-based Society for Human Resource Management reported an average hiring cost of $7,123. Departing employees may also take tacit knowledge, relationships and experience that cannot be replaced quickly.

The headline rate should therefore be segmented by voluntary versus involuntary departure, regretted versus non-regretted loss, role, location, manager and tenure. This prevents a seemingly acceptable total from masking a serious capability or employee-experience problem.

How to use it

Measurement

Define the population, observation period and types of exit before calculating the measure. Keep those definitions stable when comparing periods.