It’s very rare that an employment at a certain company lasts for a lifetime – mainly because the average person works for about five years within a certain company before they move. Most of the time, they terminate their contract and move to another company.
There are, however, two types of terminations that can occur – one of them being voluntary and the other one being involuntary (a.k.a. being fired). Keeping track of both of them is an effective tool for businesses to know why they decide to leave a particular company.
Defining Voluntary Termination Rate
Also referred to as the voluntary separation rate, this measure applies across a wide organization range. It is particularly useful for companies that have a fairly high turnover rate for the position – such as operators of a call center or talent market recruiters.
To put it as simply as possible, the voluntary termination rate is a metric that measures the employee percentage leaving a company of their free will. Reasons may vary; they may resign because they have found a better place to work in, or they may be planning to retire.
As a result, voluntary terminations are different from involuntary ones – the latter being when the customer has been laid off and forced to leave the company.
Determining the Voluntary Turnover Rate
To determine the voluntary termination rate, you have to find out the number of individuals that have left the business of their own volition over the past twelve months.
Let’s just say that 25 of those people decided to leave the country and that they could no longer work as part of this company. Their leave was voluntary, and nothing in particular about the company influenced their decision – other than the fact that they found a better place to work at.
Once you have that figured out, you need to determine the number of people that have joined the business over the same past twelve months. For the sake of this example, let’s say that your company hired on average about 1,000 people.
Now for the voluntary termination rate: you need to divide the number of employees who left your business of their own accord by the total average of employees over the past year. In this example, you will get 35 / 1o00 = 3.5%. In this case, 3.5 percent marks the voluntary termination rate.
Here is the exact formula: Voluntary Termination Rate = Number of People that Voluntarily Left the Business /Total Number of People that Were Hired – obviously, these numbers being reported to the last twelve months.
In most cases, voluntary termination may cause low morale, as well as extra costs to the company – which is why you may want to determine why is it that people decide to leave your business. In these cases, surveys are something you should do on a regular basis for every employee that decides to quit.
Once you have a good idea of the cause, you might find ways to improve your company’s situation. If you address the exact problem, the risk of losing talent and knowledge will no longer be looming over you.