Recruiting new employees involves a significant investment of resources, including money, time, and manpower. Therefore, no company wants a new hire to leave prematurely. One cause of this problem is the hasty recruitment to fill vacancies. Adopting a "Hire Slow, Fire Fast" approach, as discussed by Jim Collins in "Good to Great," can help mitigate this issue.
In this article, Hireforce will discuss "New Hire Turnover," also known as the first-year turnover rate. This is a pressing issue where new employees resign just as they are getting familiar with the job, leading to costs for new recruitment and training. So how can we control this rate at the lowest possible level? Let's take a closer look.
What is New Hire Turnover?
New Hire Turnover, or first-year turnover rate, is a crucial HR metric used to calculate the number of employees who leave within their first year. This turnover can be voluntary (resignations) or involuntary (terminations). Tracking new hire turnover assesses the effectiveness of the recruitment process and onboarding. High first-year turnover impacts employer branding, budget, and team morale.
Reasons Why New Employees Leave
Job Mismatch with Description: If the job differs from what was described during recruitment, employees may feel misled and leave. Accurate job descriptions are crucial.
Poor Management: "Employees don't quit companies; they quit their bosses." Proper onboarding and fair treatment by managers are essential.
Inadequate Training: Without adequate onboarding, new employees may struggle to meet expectations and feel ineffective.
How to Calculate New Hire Turnover
New Hire Turnover as a Percentage of Total Employee Turnover
One way to consider the new hire turnover rate is to indicate the percentage it represents within the total number of employee departures. In other words, new hire turnover is viewed as a subset of overall employee turnover. While this method is less commonly used, it can serve as a useful reference for organizations with a high number of departures.
The formula for calculating this is as follows:
You can adjust this formula to calculate new hire turnover based on a timeframe that suits your company, such as 30, 60, or 90 days.
New Hire Turnover as a Percentage of Total New Hires
The second (and more common) way to calculate new hire turnover rate is to calculate the percentage based on the total number of new hires.
The formula for this calculation is as follows:
The calculation of the new hire turnover rate will be based on data for a calendar year.
This means that if one out of 10 employees you hired resigned, the new hire turnover rate would be 10%.
New hires are those who have joined the organization within a certain period after being recruited. Depending on the business situation and the time required for employees to integrate effectively, a different timeframe can be chosen. High-turnover organizations might use a 30, 90, or 180-day range instead. Whichever timeframe is chosen, be consistent in the calculation method to allow for comparison between different periods.
How to Reduce New Hire Turnover
- Improve Job Advertisements: Ensure accurate and transparent job descriptions.
- Manage Expectations: Communicate both the positive and negative aspects of the job during the recruitment process.
- Assess Relevant Skills: Use aptitude and personality tests to ensure candidates have the right skills.
- Seek Cultural Fit: Understand your organizational culture and hire accordingly.
- Transparency about Career Opportunities: Be clear about career development paths from the start.
- Pre-Onboarding Preparation: Engage new hires before their first day with welcome videos or company gifts.
- Effective Onboarding Process: Provide a structured onboarding process to help new hires settle in.
- Continuous Support: Regularly check in with new employees and provide guidance.
- Build a Healthy Work Environment: Create an open and diverse culture and offer attractive benefits.
- Feedback from New Employees: Gather feedback to understand and improve the employee experience.
Why is New Hire Turnover Important?
Seeing new employees leave early for valid reasons is a cause for concern and can impact your organization in several ways:
- Employer Brand: Abrupt departures can lead to negative reviews on social media platforms like Facebook, Google, and Glassdoor, deterring qualified candidates from applying.
- Recruitment Budget: High turnover increases recruitment costs, including hidden expenses related to the time-to-hire process.
- Team Balance: New hire turnover creates gaps and shortages in personnel, requiring time and resources to recruit and train new employees. This can affect team productivity and morale.
To enhance employee loyalty, consistency in actions and words is key. Ensure the job aligns with the description provided during recruitment and develop a positive work environment for your employees.
Your Partner in Building Winning Teams
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