Do you need help to keep your best talent on board? One key metric to pay attention to is the new hire turnover rate. This crucial figure can provide insights into your recruitment and onboarding processes and your company culture.
A high new hire turnover rate can be a major red flag, indicating something is amiss within your organization. Not only can this result in a loss of competitive edge, but it can also negatively impact employee engagement and harm your employer brand.
However, by carefully tracking and analyzing new hire turnover rates, you can identify areas for improvement and take action to retain your most valuable employees.
What is new hire turnover?
New hire turnover refers to the percentage of new employees who leave the company within their first year of employment. It is an essential metric for companies to track because it can indicate issues in the hiring process or company culture.
High new hire turnover rates can suggest that the company is not properly vetting candidates or providing adequate onboarding and training. It can also indicate that the company culture is not a good fit for new employees, leading them to seek opportunities elsewhere.
Why should you calculate new hire turnover?
Seeing a growing number of new employees leaving the company so soon should be alarming for HR. Here are a couple of reasons why:
- Recruitment costs
According to Glassdoor, an organization spends an average of $4,000 per hire from job sourcing and pre-assessments. There is also an additional cost involved in onboarding and training them, which needs to be repeated when you hire again to replace those who resigned.
- Productivity losses
There is a drop in productivity from when employees leave until the new hires step in, like missing critical business deadlines or rejecting business opportunities due to understaffing. It might also be the case that existing employees would perform the workload of those who left, which means giving them overtime pay.
- Decrease employee engagement
The extra workload can lead to employee burnout. And consistent staff changes can negatively affect employee morale. Lowered morale and engagement lead to decreased productivity, directly affecting organizational profitability.
Employee turnover can also impact your employer branding. Unhappy new employees who suddenly leave your company may share their negative thoughts and feelings on social media and employer review sites like LinkedIn and Glassdoor, which will also affect your recruitment budget. After seeing so many bad reviews, potential candidates would think twice about applying for your company.
How to calculate new hire turnover rate
To compute the new hire turnover rate,
- Determine the time period: Choose a specific period for which you want to calculate the new hire turnover rate. This could be a month, a quarter, or a year.
- Determine the number of new hires: Count the number of new employees hired during the period.
- Determine the number of new hire terminations: Count the number of new hires who terminated their employment during that period. This includes both voluntary and involuntary terminations.
- Divide the total number of new hires who left the company by the total number of new hires in a given period multiplied by 100.
For example, your company hired 50 new employees, and 5 of them left the company within the same quarter.
The new hire turnover rate for the quarter would be: (5/50) x 100 = 10%.
What is a normal new hire turnover rate?
New hire turnover is pretty common. Consider the following studies:
- Experts say that about 20% of employees leave within their first 45 days of employment.
- Nearly 30% of jobseekers left their jobs within the first 90 days of employment, as per Jobvite research.
- According to Work Institute’s Retention Report, around 40% of employee turnover occurs within the employee’s first year with the organization.
Even if they are common occurrences, organizations should still strive not to lose newly-hired employees to save organizational costs.
Why do new employees leave?
Employees quit for all kinds of reasons. Here are typical scenarios of why new hires leave even if they just got started:
1. Mismatch between expectation and reality of the job
Your job ad should paint a realistic picture of what it is like to work for your organization. Additionally, the recruiter or the hiring manager should give accurate information about the daily responsibilities and expectations of the job.
If the new employee finds out that the job is far from what’s described in the job description and during the job interview, the new hire would feel misled and deceived. It could lead to resentment and, eventually, the new employee leaving the company.
2. Poor manager-team member relationship
If managers don’t properly onboard new hires and integrate them into the team, the employee can feel alone and mistreated. Managers with a dictatorial leadership style or who don’t listen to their direct reports often lose their employees.
People spend a significant amount of their time at work. And if work seems like a never-ending tension and conflict, it is just a matter of time before the employee finds another employer.
3. Inadequate training
Onboarding plays a critical role in employee retention. New employees need to be trained in their roles, even with considerable work experience.
Every organization has a unique workplace policy and culture. Failure to provide the required training and support could lead to new employees struggling in their jobs and failing to meet expectations. All of these things negatively impact employee performance, which could result in termination.
How to reduce new hire turnover
Fortunately, there are many steps that companies can take to reduce new hire turnover. Here are strategies HR can implement to prevent losing new employees and retaining top talent for the long haul.
Optimize your hiring process
Prevent new hire turnover by hiring the right people. Here are some steps to retain new employees:
Improve job posts
New hires are more likely to quit if the actual job is far from what’s described in the job advertisement. To avoid this, make sure that the tasks you listed reflect the employee's daily responsibilities.
You also need to enforce this information during the job interview and encourage candidates to ask questions about the job to ensure both parties understand what is expected of them.
Mention the workload, working hours, working conditions, salary, benefits, and KPIs so candidates get the full picture before they commit to the role, should they be selected.
Conduct evaluations to measure skills and competencies
Candidates need to walk the talk in their resumes about their qualifications. Predict future performance and mitigate bias by conducting different types of assessments that measure candidates’ knowledge, skills, cognitive and behavioral abilities.
If you hire an underqualified candidate, they may feel frustrated because of their inability to perform their jobs correctly. They will also lose their confidence because they feel unsure about themselves and their abilities, which could motivate them to resign and find another job.
Find a culture-fit
A company's culture plays a crucial role in how successfully a new employee adapts to their role and interacts with their colleagues.
To ensure that a candidate is a good fit for the organization's culture, HR needs to have a clear understanding of the company's internal culture. This enables them to attract candidates who reflect that same culture and values.
During the hiring process, recruiters need to asses applicants’ behaviors and values to see if they match the organization's. An employee referral system is one effective way to attract culture-fit applicants. Employees already know the company culture, so they are inclined only to ask friends and colleagues who share the same values and beliefs.
Another way to evaluate culture add is to ask teamwork and situational questions during job interviews to know more about the applicant’s personality.
Plan and improve the onboarding process
First impressions count. So ensure the first day runs smoothly to set the stage for success.
Create a supportive environment by delivering a good onboarding experience :
- Give the new hire a warm welcome. Show the new employee around the company or office. Introduce them to their team.
- Take care of paperwork and documentation. Make it easy for them to start working by preparing their workplace and tools ahead of time.
- Schedule a one-on-one meeting to discuss company policies, culture, and benefits. Provide a handbook that employees can refer to anytime. Make sure HR is available to answer follow-up questions new employees may have after the meeting
- Follow up with new employees after one month, 3 months, and 6 months to check their progress, identify their challenges, discuss opportunities, and provide support in any way possible.
- Don’t forget to ask for feedback regarding the onboarding experience to make it better for the next set of new hires.
Create a healthy workplace culture
Culture plays a huge factor in keeping employees. Here are some tips for building a thriving workplace environment:
Build an inclusive workplace culture
Focus on creating a workforce that feels valued and supported, regardless of background, gender, or age. Create safe workspaces that provide safety and comfort for all employees, especially disabled staff. Provide diversity training to address stereotypes and biases in the organization.
Create a culture of honesty and transparency through employee surveys and one-on-one meetings so every employee feels heard and acknowledged. Establish a non-discrimination policy that reflects the company’s commitment to treat everyone fairly.
Offer meaningful benefits and work perks
Prevent good employees from jumping ship by offering valuable benefits, especially if you are unable to provide competitive salary packages.
According to SHRM’s Employee Benefits survey, employees deem flexible working hours as the most valuable work benefit. Other benefits included in the survey are leaving early on Fridays, 4-day workweeks, paid self-care days, and mental health time off.
HR must design work benefits that make employees happy without disrupting company operations or hurting the HR budget.
Provide leadership training for managers
A toxic manager can make a new employee quit their job. Leadership training provides an excellent way for managers to enhance their capabilities and inspire their teams.
It bridges the gap between the organizational culture leaders think they are creating and the kind of culture they wish to create. Leadership development not only improves employee engagement. Well-trained managers attract, retain and inspire individuals to perform better.
Additionally, leadership training includes mentoring and coaching team members, which helps boost employee morale. Employees give their best and are more inclined to stay loyal when they have managers that are invested in their welfare and growth.
New hire turnover is an important recruiting metric HR shouldn’t ignore. Understanding what it means and how to compute it will help improve your recruitment, onboarding, and employee engagement strategies so you can attract and retain the right talent for your organization.