3 steps to calculate labour turnover in hospitality and retail.

Understanding labour turnover

Labour turnover plays a significant role in effective workforce management and when done properly can highlight challenges that need addressing.

But to do this, understanding of labour turnover rate isn't enough; you should also familiarise yourself with its different types and underlying causes.

Labour turnover can be classified into four types:

1️⃣ Voluntary turnover: refers to an employee’s decision to leave a company on their own accord.

2️⃣ Involuntary turnover: results from termination due to performance issues or other reasons.

3️⃣ Retirement turnover: occurs when an employee leaves upon reaching retirement age.

4️⃣ Internal movement turnover: refers to transitions within the company, such as promotions or departmental changes.

Including internal movements in labour turnover calculations is optional but can be useful because the role they leave still requires a new employee to fill it.

Understanding the various types of labour turnover helps in understanding the nature of employee departures and their subsequent effect on your business.

For example, voluntary turnover can provide insight into the number of employees leaving for competitors or leaving the industry all-together. Conducting exit surveys or interviews can give valuable information about an employee’s motivations for leaving which help you improve.

Labour turnover can be attributed to various personal and organisational factors, ranging from individual choices to broader issues such as:

❗ Overwhelming workload

❗ Lack of recognition

❗ Unsatisfactory company culture

❗ Trained relationships with managers

❗ Limited growth opportunities

❗ Inefficient management

❗ Inadequate compensation

❗ Unfavourable perception of management

Through a detailed examination of labour turnover data, organisations unearth the primary factors driving employee departures, which may include personal choices, organisational issues, and internal shifts.

Calculating labour turnover rate: A step-by-step guide

Having familiarised ourselves with the concept of labour turnover, its types, and reasons, let's calculate employee turnover rate.

The process included collecting employee data, finding the average number of employees, and using this information to calculate employee turnover rate percentage.

Step 1️⃣ : Gather employee data

The initial step in determining the labour turnover rate is gathering data on employee exits, new hires, and the total workforce during a specific time frame. This information is critical in calculating the number of employees who have departed the company within a given timeframe and the average number of employees during that same timeframe.

Correct data is critical for dependable calculations. So make sure your human resources department provides the most recent information.

Step 2️⃣: Calculate average number of employees

Next, calculate the average number of employees during the period under consideration. To do this, add the number of employees at the beginning and end of the period and divide the total by two.

For example, if you’re wondering how many employees your company had on average, and it had 100 employees at the start of the month and 110 employees at the end of the month, the average number of employees would be (100 + 110) / 2 = 105.

Step 3️⃣: Determine labour turnover percentage

Once the average number of employees is calculated, the next step involves determining how to calculate labour turnover percentage. Divide the number of employee departures by the average number of employees, and then multiply the result by 100 to get the final turnover percentage.

For instance, if five employees left your company during the month, the labour turnover percentage would be (5 / 105) x 100 = 4.76%. This figure represents your company’s monthly employee turnover rate.

Interpreting your labour turnover rate

Interpreting the labour turnover rate is a significant step towards pinpointing potential issues and opportunities for enhancement within the organisation. By examining the rate in comparison to industry standards and analysing employee departures, companies can gain valuable insights into their workforce dynamics and implement strategies to address challenges and enhance overall performance.

When interpreting the annual turnover rate, it’s important to compare it to industry standards to determine if it’s within a healthy range or if there’s a need for intervention. Average Labour Turnover Rate in Hospitality

The hospitality industry is known for having one of the highest labour turnover rates among all sectors. According to the Bureau of Labor Statistics, the annual turnover rate in the hospitality sector in the United States was about 73.8% in 2019, significantly higher than the average across all industries. This high turnover rate is often attributed to factors such as seasonal employment, low wages, and the physically demanding nature of many hospitality jobs.

The retail industry, much like the hospitality sector, is often associated with a high labour turnover rate. This can be attributed to various factors such as low wage levels, part-time or seasonal employment, and the demanding nature of customer service roles.

According to the Bureau of Labor Statistics, the turnover rate in the retail sector in the United States was around 60% in 2019. This rate is notably higher than the average across all industries, underlining the unique challenges faced by retail businesses.

Contrasting your company’s turnover rate with industry standards allows you to spot potential problems and devise suitable corrective measures for your company’s turnover rate.

Besides benchmarking your turnover rate against industry standards, analysing employee departures provides valuable insights into potential organisational problems, such as losing employees. Assess who is leaving, when they are leaving, and the reasons for their departure.

This analysis can help identify patterns and trends that may indicate problems with:

❗ Recruitment

❗ Onboarding

❗ Work-life balance

❗ Staff engagement initiatives

By addressing these issues, companies can improve employee satisfaction, productivity, and overall organisational performance.

Strategies for reducing labour turnover

The implementation of strategies aimed at reducing labour turnover can substantially boost employee satisfaction, productivity, and the overall performance of the organisation.

One effective strategy for reducing labour turnover is to enhance employee engagement. Competitive compensation is a crucial factor in attracting and retaining top talent, as 44% of employees leave their positions to pursue higher wages. Ensuring that your company’s compensation packages are consistent with market rates for comparable roles can help maintain a motivated workforce.

In addition to competitive compensation, recognising employees’ achievements and providing opportunities for growth and development contribute to employee engagement. Implementing training and development programs, mentorship initiatives, and career advancement opportunities can help keep employees engaged, motivated, and committed to the organisation.

Bolstering recruitment and onboarding processes is another strategy that’s effective in reducing labour turnover. Ensuring that job descriptions are accurate and up-to-date, conducting thorough background checks, and providing comprehensive onboarding programs can significantly improve employee-organisation fit and increase retention rates.

By bolstering recruitment and onboarding processes, companies can better identify and hire candidates who align with their organisational values and culture, ultimately leading to lower turnover rates and a more stable, satisfied workforce. Investing in these processes not only helps retain existing employees but also attracts top talent to the organisation.