Skip to content

How to Calculate and Reduce Your New Hire Turnover Rate

Turnover is something that every organization has to deal with, but it is especially difficult when that turnover comes from a recently hired employee. Reducing your new hire turnover rate will positively impact your business in a number of ways, financially and otherwise, like improving employee morale and your organization’s talent brand.

Why your new hire turnover rate matters

A new hire, on average, costs an organization $4,000. However, that doesn’t take into consideration lost productivity from having a smaller staff during the hiring process. It can take up to 8 months in a new role for an employee to reach full productivity and it’s estimated that having low turnover can make your organization 4 times more productive. This also doesn’t count the time and resources spent onboarding and training new employees that then have to be repeated when the hiring process has to be repeated.

Another impact a high new hire turnover rate can have on your organization is decreased morale. It is a  chicken and egg debate, low morale leads to high turnover which then decreases morale further. High turnover adds responsibilities to your current employees which can increase stress. When a new hire who leaves the effect is compounded, removing any sense of relief an employee might have felt at having the extra help. 

Both a loss in productivity and low employee morale can also decrease your talent brand. It is impossible to build a positive culture with a negative morale, which in turn makes it much more difficult to attract high level and productive applicants. 

Fortunately, there are many ways to address a high new hire turnover rate. Having some turnover is unavoidable, so before you spend a large amount of resources trying to eliminate it, it is important to learn how to calculate your rate. Then, you can see if any changes you implement move the needle for your organization.

How to calculate your new hire turnover rate

There is no set time frame for what constitutes a new hire, but it is usually looked at in one of two ways. The first is anyone who left your organization in the first 90 days or whatever your organization’s probationary period is. The second, more common way to define a new hire is employees who leave within the first year.

Regardless of the time frame you decide to use, the calculation will always be the same.  Take the number of new hires no longer with your organization (quit, been terminated, etc.) and divide by the total number of hires. You can calculate new hire turnover rate for your organization as a whole, or for a single position or group.

How to reduce your new hire turnover rate

Once you know how to calculate your organization’s new hire turnover rate, you can look into ways to improve it. There are steps you can take throughout the recruitment process, both pre-hire and post-hire.

Pre-Hire Strategies

1. Make sure you are hiring for the right qualities

80% of turnover comes from bad hiring decisions. This can come from a rushed hiring decision, leaving unconscious biases unchecked, or even focusing on the wrong qualities in the hiring process. Soft skills are a much better indicator of job success and yet, for hiring managers, they are often prioritized behind hard skills. And while technology can’t make your hiring decisions for you, it can help to give you an indication of potential success on the job.

2. Communicate clearly in the interview process

Setting expectations is extremely important for reducing turnover. If an employee walks onto a job and it isn’t what they expected, it can be much harder to motivate them in that position. It can be daunting to potentially lose a high level candidate in the interview process, but the costs to your organization will be much lower than if they quit a short time into the job.

3. Focus on the candidate experience

Use best practices for your recruitment process. A positive candidate experience will flow much better into a positive employee experience than a negative one will. Remember that in recruiting you are setting your expectations for how you will interact with the candidate on the job should they become an employee.

Post-Hire Strategies

1. Have a structured onboarding process

Onboarding has one of the largest impacts on employee retention. The numbers speak for themselves. As much as 20% of all turnover occurs within the first 45 days on the job and a solid onboarding process can boost retention by as much as 70%. One onboarding challenge many organizations have run into is the virtual workplace. Take the time to develop an effective virtual onboarding process for those employees who are working from home.

2. Show appreciation to employees

It seems simple, and it is. 79% of employees who quit their job cite a lack of appreciation as the main reason. The same study found that over 65% of employees weren’t even recognized one time in the previous year. Showing appreciation to employees is one of the simplest ways to improve new hire turnover rates. Lay the groundwork early, and make sure to continue to do so throughout their career with your company. Not only will it make them more likely to stay with your company, but it will make them more productive when they do.

3. Learn how to motivate your employees individually

Having a great company culture and building teamwork are important in any organization. But it is also important to remember that not everyone is motivated the same way. Learn what motivates each employee and structure their work and incentives around that. If you know their motivations going into the job, it will make you much more successful creating a plan for them and encouraging them to stay with your organization.

One of the dangers of a high new hire turnover rate is that its outcomes often lead to your turnover continuing to increase. If you don’t recognize and address it early on it can create a snowball effect. The good news is that the steps to overcoming it are fairly easy to implement. 
As you are designing processes to guard against a high new employee turnover rate, learn how Cangrade can help you identify candidates with a high level of job fit with Pre-Hire Assessments.