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Employee turnover rate, importance of employee turnover rate

Why is employee turnover rate significant and how do you read it?

2021/07/01
By Nadine Hashem

Staffing might be one of the most important tasks yet one of the hardest and most critical one. 

 

You take time to hire people, train them not to mention the costs associated with the training they undergo. 

 

When you finally hire an employee, you want them to be loyal, hardworking, fast learners and committed.

 

The last thing you want is losing the good ones after training them and investing in them. 

 

Employee turnover is an issue especially for restaurants’ industry. The Nation’s Restaurant News mentioned that employee turnover is an issue for restaurants especially when the economy is doing well and many opportunities arise for employees.

 

Restaurant turnover rate is usually higher than other sectors for different reasons but mainly for the people being hired. 

 

Most of the employees at a restaurant are at a young age, probably studying at university and trying to get some extra cash to support them. 

 

Their work is often seasonal and they usually find themselves a career other than at a restaurant. 

 

What is the employee turnover rate?

 

The employee turnover rate is the proportion of employees who leave work at a certain period of time.

 

It’s normal to have people that come and go, and people always come and go so the rate will never be 0 especially in restaurant sector. It’s important though to keep that rate on the lower side.

 

How to calculate the turnover rate?

 

It’s not very hard to calculate the employee turnover rate.

 

First, write down the number of employees at the beginning of the year and at the end of the year and divide that number by 2 to get the average number of employees.

 

For example, if you had 100 employees at the beginning of the year and 80 at the end of the year, the average number of employees would be 180/2 = 90.

 

Second, subtract the number of employees you had at the end from the number of employees you had at the beginning then divide it by the average number of employees.

 

100-80=20, 20/90= 0.22 x 100 = 22% is the employee turnover rate for a given year.

 

Why is the employee turnover rate so significant?

 

It is costly 

 

The Center for Hospitality Research at Cornell estimates that the cost of employee turnover is around $5,864 per person for a typical front-line employee.

 

This loss is due to the different processes a restaurant should go through to replace their employees like the recruiting, selection and productivity loss.

 

It harms your reputation 

 

Imagine dealing with employees that constantly come and leave your restaurant!

 

It gives the impression that you are a…, not so good of an employer among potential employees. 

 

Good employees will avoid you because of this reputation and you will end up losing skillful employees that might drive up your sales.

 

It affects your customer service 

 

People like the idea of a familiar waiter or hostess when they visit their favorite restaurant.

 

Constantly replacing your staff, especially the front liners harms the relationship with your customers especially when the new staff isn’t familiar with the menu or prices.

Even frequently changing the chef is not professional because you're risking the quality and taste offered.

 

The employee turnover rate for the year of 2018 was 74.9%. 

 

 

 

What does this number mean?

 

Which number is a high rate of turnover?

 

Which is a normal one or a good one?

 

How do you read your turnover rate?

 

0% - 25 % the rockstar rate

 

While a 0% turnover rate is almost impossible, having a low rate is totally reachable. 

 

Even with a low turnover rate, you have to keep an eye on employees who leave and identify the reason.

 

Make sure you have a transparent policy that encourages employees to inform you of their true reasons for leaving.

 

Aiming at a low turnover rate shouldn’t outweigh your standards for hiring the most qualified employees.

 

An adequate reward system and performance evaluation both help you reserve the good ones and let go of the low performers. 

 

26% - 50 % a yellow light 

 

If you have a turnover rate in this range, it means that you’ve got yourself a healthy and appealing work environment. Your employees are happy working with you but there is room for improvement.

 

Prepare employee questionnaires to identify what is more likely to keep them around and what is missing in their career. 

 

Plan training sessions for each department depending on your needs and areas of improvement.

 

51% - 75% the alert 

 

At this stage, you are losing lots of your employees, including the good ones and your best performers maybe.

 

It’s the time for you to act upon your turnover rate.

 

Work on your training programs and performance evaluation.

 

Check the departments that have the highest turnover rate to identify the motives.

 

Above 76% a red flag

 

In the restaurant industry, when the economy is on the rise, there are plenty of opportunities for employees to choose from. 

 

Check If your work environment isn’t encouraging or healthy, if your salary scheme isn’t fair or it’s lower than the market.

 

Inspect reasons of turnover through a transparent communication policy with your employees. 

 

Working on lowering your turnover rate isn’t a one-time thing to do.

 

It’s an ongoing process and it should be a part of your company’s values. 

 

Monitor the changes that you apply and their impact on retaining the employees.

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