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If your company hires employees only to find they’re not a good fit and fires them, you’re dealing with involuntary turnover. A study of over 600 US companies found that 63.3% of businesses find retaining employees harder than hiring them.
This alarming statistic highlights companies’ increasing difficulty in keeping their talent, making it crucial to address involuntary turnover and its underlying causes. This blog discusses everything you need to know about it.
What is involuntary turnover?
Involuntary turnover is when employers terminate an employee from their position. It can happen for several reasons, like poor job performance and inappropriate behavior, all of which come under counterproductive work behavior (CWB).
This type of employee turnover can happen because of layoffs, firings, or terminations.
It’s essential to track the rate of involuntary turnover in your company. This information helps identify hiring, employee experience, or business planning issues. Fixing these problems can reduce involuntary turnover in the future.
Also read: How to create a positive employee experience?
Voluntary turnover vs. involuntary turnover: What’s the difference?
Voluntary and involuntary turnover are two different types of employee turnover.
Voluntary turnover occurs when an employee decides to quit the company on their own, while involuntary employee turnover occurs when the company or employers terminate, fire, or lay off employees. The main difference between the two depends on who initiated the process.
Voluntary employee turnover may occur due to inadequate compensation, retirement, relocation, better opportunities, etc.
Also read: What are the different types of compensation and benefits?
Types of involuntary turnover
Involuntary employee turnover is classified into four types: functional turnover, dysfunctional turnover, unavoidable turnover, and avoidable turnover.
Functional involuntary turnover: This involuntary turnover doesn’t affect the company’s performance. An example is letting go of poor performers so you can hire qualified candidates with the right skill sets.
Dysfunctional turnover: This type of turnover impacts your business directly. An example is when you terminate high-performing employees due to work ethics or misconduct.
Unavoidable turnover: This type of turnover happens due to unavoidable circumstances and is not a result of poor management. For instance, during the coronavirus pandemic, many companies, especially in hospitality, had to let employees go due to circumstances beyond their control.
Avoidable turnover: Occurs when employees are let go due to factors the organization could have controlled or addressed. This type of involuntary seperations often results from poor management decisions or organizational practices that lead to employee dissatisfaction.
Why does involuntary turnover occur?
One major cause of involuntary employee turnover is when new employees struggle to understand or apply the training they receive. Aptitude and skills tests can help predict their ability to learn and succeed in training programs.
Boost your hiring accuracy with Testlify’s aptitude test. It assesses logical, numerical, and verbal skills to find top talent.
Other factors are poor performance, policy violation, layoffs, termination due to misbehavior, etc.
Poor job performance
Not performing their duties effectively is one of the reasons why involuntary employee turnover occurs.
- Failing to manage their team properly
- Struggling to work well with managers
- Consistently delivering poor-quality work
Often, the employee will be given a chance to improve, which may involve a formal Performance Improvement Plan (PIP) outlining clear expectations. If there’s no improvement after these steps, involuntary employee turnover may still occur.
Also read: Steps to build impactful Performance improvement plan.
Policy violation
Every company should have clear rules about how employees are expected to behave and what actions might lead to warnings or being let go. When employees break these rules, it can result in being fired.
Common examples include:
- Stealing
- Frequently being late or missing work
- Discrimination, harassment, or bullying
- Damaging or misusing company property
- Using drugs or alcohol in a way that affects their work
Layoffs and termination
Sometimes, companies must let go of employees who meet all performance and conduct expectations. This usually happens when the business faces financial challenges and can no longer afford to keep everyone.
To address this, company leaders may restructure the workforce, leading to:
- Layoffs: Employees lose their jobs permanently, which counts as involuntary turnover.
- Furloughs: Employees are temporarily asked to stop working without pay but still retain their jobs. Furloughs are not considered involuntary turnover.
If a furloughed employee decides to leave instead of waiting to return, it’s classified as voluntary turnover.
How to calculate involuntary employee turnover?
To calculate the involuntary turnover rate, divide the number of employees who left involuntarily by the average number of employees, then multiply by 100.
For example, consider a company with an average of 800 employees. In the past year, 40 employees were subject to involuntary employee turnover.
40 involuntary turnover employees / 800 total employees = 0.05
0.05 x 100 = 5%
The company had a 5% rate of involuntary employee turnover for the year.
According to a SHRM report, the average involuntary turnover rate is 6%. The key to maintaining balance is investigating the reason behind both voluntary and involuntary employee turnover.
Note: Though there is no proper percentage that indicates healthy involuntary employee turnovers. Turnover rates of more than 20% must be investigated.
Why should you even calculate turnover rate?
If you don’t know why your employees are leaving your company, how will you make the necessary changes to remain successful?
Calculating the turnover rate helps identify issues in your hiring process. A high involuntary turnover rate suggests you’re not hiring the right talent.
In that case, improving your recruitment process, like adding skill tests, can help.
While many companies track retention and turnover rates, digging deeper and finding the root cause of losing high performers is more important.
You need to use other metrics and methods to determine if lacking L&D is the real issue. Involuntary employee turnover is a good starting point for understanding your workplace culture, but you can gain deeper insights through exit interviews and employee surveys.
Also read: Types of learning and development activities in a company
How do you manage and reduce involuntary employee turnover?
Employers can reduce the negative effects of involuntary turnover by having clear and fair policies for managing performance. This includes offering employees chances to improve, providing feedback, and keeping communication open.
Being honest with underperforming employees and helping them improve can lower the chances of firing them due to performance issues.
Planning ahead can also help avoid layoffs or reorganizations. By aligning staffing levels with business needs and market demands, companies can minimize the need for involuntary employee turnover.
6 best practices to manage involuntary turnover rate
Conduct skills-based assessments
Skills-based assessments offered by Testlify help manage involuntary employee turnover by ensuring new hires have the right skills and competencies for the job. Rather than relying on resumes, these assessments evaluate candidates through practical tests, including situational judgment tests, that simulate real job scenarios.
Also read: Real-world examples of SJTs to predict job performance.
This method allows HR to assess how candidates would respond to challenges in the actual role, ensuring they are qualified and a good fit for the company. Statistically, 68% of employees prefer hiring processes that include skills-based assessments, up from 56% in 2023.
Skills-based assessments reduce the risk of poor performance and misalignment by hiring high-quality candidates who can perform well on the job. This leads to lower involuntary employee turnover and better overall employee retention.
Follow a clear recruitment process
A high turnover rate might indicate a poor recruitment process. The job description may not clearly mention skills and qualifications. Ensure candidates have a clear picture of company policies and expectations.
For example, if your company requires employees to work weekends, make sure candidates know this upfront to avoid any misunderstandings later. Clear communication during recruitment helps ensure better job fit and reduces involuntary employee turnover.
Check out your candidate’s communication skills with Testlify.
Use AI technology
We already know that the two main reasons for involuntary employee turnover are poor performance and economic reasons.
HR professionals can use dedicated tools like Testlify to conduct a skills analysis to determine any possible skills gap. They can also provide targeted training to upskill or reskill employees as necessary.
Technology can help make data-driven decisions to adapt to economic changes, quickly identifying areas where adjustments are needed in team size, structure, spans of control, and employment types.
Offer growth and development opportunities
Providing vital L&D programs can reduce turnover, as 94% of employees are likelier to stay with a company that offers training. Practical training aligned with business goals and job needs helps employees meet performance targets and reduces involuntary turnover.
Recognize and review employee performance
Deloitte reports that recognition boosts employee engagement, productivity, and performance by 14%. A 15% increase in engagement can lead to a 2% margin rise.
It is important to recognize and review employee performance every quarter. This way, you can make necessary improvement plans, provide regular feedback, and organize coaching and training for struggling employees.
Exit interviews and employee surveys
If involuntary employee turnover is necessary, use exit interviews as a learning tool. They help you understand why it happened. Maybe an employee struggled due to poor training or felt burned out by company culture.
Identifying these underlying issues allows you to make improvements and reduce the chance of future involuntary separations.
Employee surveys should also be conducted to understand broader concerns, like job satisfaction, management practices, or work-life balance. Regular feedback helps pinpoint potential risks early so you can take corrective action before turnover becomes a bigger issue.
