Turnover Management Absense Management

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TURNOVER MANAGEMENT
Employee turnover
Employee turnover refers to the proportion of employees who leave an organisation over a set period (often on a year-on-year basis), expressed as a percentage of total workforce numbers. At its broadest, the term is used to encompass all leavers, both voluntary and involuntary, including those who resign, retire or are made redundant, in which case it may be described as overall or crude employee turnover. It is also possible to calculate more specific breakdowns of turnover data, such as redundancy-related turnover or resignation levels, with the latter particularly useful for employers in assessing the effectiveness of people management in their organisations.

Retention
Retention relates to the extent to which an employer retains its employees and may be measured as the proportion of employees with a specified length of service (typically one year or more) expressed as a percentage of overall workforce numbers.

Latest turnover trends

Our annual Resourcing and talent planning survey gives the latest the median crude or overall employee turnover rate for the UK, as well as the median turnover figure relating purely to those who left voluntarily (that is, resignations).While voluntary turnover rates have decreased recently as a result of challenging economic conditions, the flip side of this coin is that redundancy-related turnover has become more common.However, skills shortages persist for certain occupational groupings even during troubled economic times, so it is important to be aware of trends in turnover rates for different groups rather than simply focusing on headline figures.Turnover levels can vary widely between occupations and industries. The highest levels are typically found in retailing, hotels, catering and leisure, call centres and among other lower paid private sector services groups.Levels also vary from region to region. The highest turnover rates tend to be found where unemployment is lowest and where it is relatively easy for people to secure desirable alternative employment.

When does employee turnover become problematic?

There is no set level at which point employee turnover starts to have a negative impact on an organisations performance. Much depends on the type of labour markets in which the organisation competes. Where skills are relatively scarce, where recruitment is costly or where it takes several weeks to fill a vacancy, turnover is likely to be problematic for the organisation. The more valuable the employees in question - for instance where individuals have specialist skills or where they have developed strong relationships with customers - the more damaging the resignation, particularly when they move on to work for competitors.

By contrast, where it is relatively easy to find and train new employees quickly and at relatively low cost (that is where the labour market is loose), it is possible to sustain high quality levels of service provision despite having a high turnover rate. Some employee turnover positively benefits organisations, for example when a poor performer is replaced by a more productive employee or when a senior retirement allows the acquisition of welcome 'fresh perspectives. Moderate levels of staff turnover can also help to reduce staff costs in organisations where business levels are unpredictable month-on-month. When business is slack, it may be possible to hold off filling vacancies for some weeks.

Measuring turnover and retention Measuring employee turnover

Organisations may track their crude or overall turnover rates on a month by month or year by year basis, expressed as a percentage of employees overall. The formula is simply: Total number of leavers over period x 100 Average total number employed over period The total figure encompasses all leavers including those who leave involuntarily due to dismissal or redundancy (and as a result of retirement). It also makes no distinction between functional (that is, beneficial) turnover and that which is dysfunctional. Crude turnover figures are often used in published surveys of labour turnover as they tend to be more readily available and can be useful as a basis for benchmarking against other organisations. However, it is also useful to calculate a separate figure for voluntary turnover specifically, resignations - as such departures are unplanned and often unpredictable (unlike, say, planned retirements or redundancies) and hence can have a particularly adverse impact on the business. It may also be helpful to consider some of the more complex employee turnover indices which take account of characteristics such as seniority and experience.

Measuring employee retention

A stability index indicates the retention rate of experienced employees. Like turnover rates, this can be used across an organisation as a whole or for a particular part of it. The usual calculation for the stability index is: Number of staff with service of one year or more x 100 Total number of staff in post one year ago

Costing employee turnover

The costs associated with employee turnover (related to resignations rather than, say, redundancy) may be estimated by calculating the average cost of replacing each leaver with a new starter in each major employment category. This figure can then be multiplied by the relevant turnover rate for that staff group to calculate the total annual cost of turnover. The major categories of costs are: administration of the resignation recruitment and selection costs, including administration

covering the post during the period in which there is a vacancy induction training for the new employee.

Many of these costs consist of indirect management or administrative staff time (opportunity costs), but direct costs can also be substantial where advertisements, agencies or assessment centres are used in the recruitment process. More complex approaches to turnover costing give a more accurate and invariably higher estimate of total costs. These could include measures estimating, say, the relative productivity of new employees during their first weeks or months in a role and that of resignees during the period of their notice (both likely to be lower than the productivity levels of established employees). In practice, however, the vast majority of employers do not calculate the specific costs of employee turnover, as illustrated in our 2010 Resourcing and talent planning survey.

Why do people leave organisations?

Employees resign for many different reasons. Sometimes it is the attraction of a new job or the prospect of a period outside the workforce that 'pulls' them. On other occasions they are 'pushed' (as a result of dissatisfaction in their present jobs, possibly because of a lack of training, development and career opportunities) to seek alternative employment. The move might also be prompted by a combination of both pull and push factors. A poor relationship with a line manger, leading to disengagement, can often be a push factor behind an individuals decision to leave the organisation. More information on engagement issues can be found in our factsheet on this topic: The summer 2010 edition of our Employee Outlook looked in depth at the reasons why individuals wish to change jobs, finding that the three most common reasons are: to increase job satisfaction to attain better pay and benefits to learn new things.

Premature departure
In high-turnover industries in particular, a great deal of employee turnover consists of people resigning or being dismissed in the first few months of employment. Even when people stay for a year or more, it is often the case that their decision to leave sooner rather than later is taken in the first weeks of employment. Poor recruitment and selection decisions, both on the part of the employee and employer, are usually to blame, along with poorly designed or non-existent induction programmes. Expectations are also often raised too high during the recruitment process, leading people to compete for and subsequently to accept jobs for which they are in reality unsuited.

Investigating why people leave

Obtaining accurate information on reasons for leaving can be difficult. It is important to appreciate that the reasons people give for their resignations are frequently untrue or only partially true. Individuals are likely to be reluctant to voice criticism of their managers, colleagues or the organisation generally, preferring to give some less contentious reason for their departure. Where exit interviews are used to enquire about the reasons for leaving, the interviewer should not be a manager who has responsibility for the individual or who will be involved in future reference writing. Confidentiality should be assured and the purpose of the interview explained.

Using an external provider to conduct exit interviews will help employers capture more accurate data about why people are leaving, as individuals are more willing to be truthful when there is reassurance of anonymity. Alternative approaches to collecting exit data involve the use of confidential attitude surveys including questions on employees intentions to leave and confidential questionnaires sent to former employees around six months after their departure.

Improving employee retention

The first steps when developing an employee retention strategy are to establish: why employees are leaving the impact that employee turnover has on the organisation, including the associated costs.

The data obtained can be used to develop a costed retention strategy that focuses on the particular issues and causes of turnover specific to the organisation. It is worth considering the following elements, all of which have been shown to play a positive role in improving retention: Job previews - give prospective employees a 'realistic job preview' at the recruitment stage. Take care not to raise expectations only to dash them later. Make line managers accountable - for staff turnover in their teams. Reward managers with a good record for keeping people by including the subject in appraisals. Train line managers prior to their appointment and offer re-training opportunities to existing managers who have a high level of turnover in their teams. Career development and progression - maximise opportunities for employees to develop skills and move on in their careers. Where promotions are not feasible, look for sideways moves that vary experience and make the work more interesting. Consult employees - ensure wherever possible that employees have a 'voice' through consultative bodies, regular appraisals, attitude surveys and grievance systems. Where there is no opportunity to voice dissatisfaction, resigning may be the only option. See our factsheet on employee voice for more detail. Be flexible - wherever possible accommodate individual preferences on working hours and times. Where people are forced to work hours that do not suit their domestic responsibilities they will invariably consider looking for another job that can offer such hours. Avoid the development of a culture of 'presenteeism' - where people feel obliged to work longer hours than are necessary simply to impress management. Job security - provide as much job security as possible. Employees who are made to feel that their jobs are precarious may put a great deal of effort in to impress, but they are also likely to be looking for more secure employment at the same time. Treat people fairly - a perception of unfairness, whatever the management view of the issue, is a major cause of voluntary resignations. For example, perceived unfairness in the distribution of rewards is very likely to lead to resignations. Defend your organisation - against penetration by headhunters and others seeking to attract your staff, for example by refusing to do business with agents who have poached the organisations staff.

CIPD viewpoint
It is important for employers to have an awareness of the rates of labour turnover in their organisation together with an understanding of how these affect the organisations performance and ability to achieve its strategic goals. Depending on the size of the business, an appreciation of the levels of turnover across occupations, locations and particular groups of employees (such as identified high performers) can help inform a comprehensive resourcing strategy. This approach remains important even during difficult economic climates because of the need for employers to plan ahead for when the labour market picks up. Tools such as confidential exit surveys and staff attitude surveys can help line managers understand why people leave the business, and enable appropriate action to be taken. Ensuring that new joiners have realistic expectations of their job and receive sufficient induction training will help to minimise the number of people leaving the organisation within the first six months of employment Measuring the levels and costs of employee turnover is vital in building the business case for effective recruitment and retention initiatives. These costings can be a powerful tool for winning line manager and board-level support for resourcing activities.

Further reading Books and reports

ACAS. (2010) Managing attendance and employee turnover. Advisory booklet. London: ACAS. Available at: http://www.acas.org.uk/index.aspx?articleid=1183 INCOMES DATA SERVICES. (2008) Improving staff retention. HR Studies, No 863. London: IDS. TAYLOR, S. (2002) The employee retention handbook. Developing practice. London: Chartered Institute of Personnel and Development.

Journal articles
JANAS, K.M. (2009) Keeping good people during bad times. Workspan. Vol 52, No11, November, pp66-70. LAWLER, E.E. (2008) Why are we losing all our good people? Harvard Business Review. Vol 86, No 6, June. pp.41-46,48,50-51. MACAFEE, M. (2007) How to conduct exit interviews. People Management. Vol 13, No 14, 12 July. pp42-43. RANKIN, N. (2008) The drivers of staff retention and employee engagement. IRS Employment Review. No 901, 1 July. 13pp.

ABSENSE MANAGEMENT
Why absence from work matters
Employee absence is a significant cost to businesses according to CIPD's research. Our annual employee absence survey has data on sickness absence costs, causes and the average number of working days lost. It also looks at trends and current practices in managing absence. Effective absence management involves finding a balance between providing support to help employees with health problems stay in and return to work and taking consistent and firm action against employees who try to take advantage of organisations occupational sick pay schemes. There are many reasons why people take time off work. These can be categorised as: short-term sickness absence long-term sickness absence unauthorised absence or persistent lateness other authorised absences, for example, annual leave; maternity, paternity, adoption, or parental leave; time off for public or trade union duties, or to care for dependents; compassionate leave; educational leave.

This factsheet focuses on sickness absence issues. For more information on authorised forms of absence see our factsheet on time off work.

Types of absence
*Minor illness includes colds, flu, stomach upsets and headaches.

Measuring absence
A key element in managing absence effectively is accurate measurement and monitoring. Measures can be used as trigger points, indicating to an organisation when absence needs to be investigated. Monitoring absence allows the employer to identify trends and to explore underlying causes. In the latest CIPD absence survey fewer than half of employers say they monitor the cost of absence, just under half of organisations have set a target for reducing absence and just over one third of organisations benchmark themselves against other employers. CIPD members can use our online tool which covers whether employers have an absence problem, how to develop an absence strategy and how to deal with short-term and long term absence.

How to measure time lost

Different measures of absence focus on different aspects of measuring time lost:

Lost time rate

This measure expresses the percentage of total time available which has been lost due to absence, and can be calculated separately for different departments to identify areas of concern. Total absence (hours or days) in the period x 100 Possible total (hours or days) in the period

Frequency rate
This measure shows the average number of absences per employee expressed as a percentage. It gives no indication of the length of each absence period or any indication of employees who take more than one spell of absence. No of spells of absence in the period x 100 No of employees By counting the number of employees who take at least one spell of absence in the period rather than the total number of spells of absence, this calculation gives an individual frequency rate.

Bradford Factor
By measuring the number of spells of absence the Bradford Factor identifies persistent short-term absence for individuals and is therefore a useful measure of the disruption caused by this type of absence. It is calculated using the formula: SxSxD where S = number of spells of absence in 52 weeks taken by an individual and D = number of days of absence in 52 weeks taken by that individual. For example: 10 one-day absences: 10 x 10 x 10 = 1,000 1 ten-day absence: 1 x 1 x 10 = 10 5 two-day absences: 5 x 5 x 10 = 250 2 five-day absences: 2 x 2 x 10 = 40

what absence policies need to contain

A clear policy should be in place that supports the organisations business objectives and culture and explains the rights and obligations of employees when absent due to sickness. Legislation requires employers to provide staff with information on any terms and conditions relating to incapacity for work due to sickness or injury, including any provision for sick pay. The policy should: provide details of contractual sick pay terms and its relationship with statutory sick pay explain when and whom employees should notify if they are not able to attend work include when (after how many days) employees need a self-certificate form contain details of when they require a fit note from their doctor explain that adjustments may be appropriate to assist the employee in returning to work as soon as is practicable mention that the organisation reserves the right to require employees to attend an examination by a company doctor and (with the workers consent) to request a report from the employees doctor include provisions for return-to-work interviews give guidance on absence during major or adverse events (for example, snow, pandemics or popular sporting events such as the Olympic Games or World Cup).

Fit notes
In April 2010 sick notes were replaced by fit notes. When completing a fit note a doctor has the choice between two options: not fit for work may be fit for work.

If the doctor selects may be fit for work, one of the following four options also has to be selected: phased return to work amended duties altered hours workplace adaptations.

The doctor then has the option to make any additional comments. Employers should arrange to meet with an employee who is assessed as may be fit for work to discuss appropriate ways to manage the return to work process.

Managing short-term absence Absence interventions

Effective interventions in managing short-term absence include: a proactive absence management policy return-to-work interviews disciplinary procedures for unacceptable absence levels use of trigger mechanisms such as the Bradford Factor to review attendance involving trained line managers in absence management providing sickness absence information to line managers restricting sick pay involving occupational health professionals.

Return-to-work interviews can help identify short-term absence problems at an early stage. They also provide managers with an opportunity to start a dialogue with staff about underlying issues which might be causing the absence. Ddisciplinary procedures for unacceptable absence may be used to make it clear to employees that unjustified absence will not be tolerated and that absence policies will be enforced. Only a small number of organisations use attendance incentives or bonuses as a tool of absence management according to our latest absence survey.

The role of line managers

Line managers have an important role to play in the management of absence. Managers need good communications skills to encourage employees to discuss any problems they may have at an early stage so that employees can be given support or advice before matters escalate. However, our surveys show that only around half of organisations train their line managers in the skills needed to do this effectively. Line managers need to be trained in: the organisations absence policies and procedures their role in the absence management programme the way fit notes operate and how to act upon any advice given by the doctor the legal and disciplinary aspects of absence including potential disability discrimination issues maintaining absence record-keeping and understanding facts and figures on absence the role of occupational health services and proactive measures to support staff health and wellbeing the operation (where applicable) of trigger points the development of return-to-work interview skills the development of counselling skills.

Managing long-term absence

According to our surveys, absence of eight days or more accounts for about one third of total absence and absence of four weeks or more accounts for around a fifth. Consequently organisations need to have a formal return to work strategy for those returning after prolonged absence. Awareness of potential disability discrimination claims is also crucial. The role of the line manager is vital in managing long-term absence but other interventions are also important. These include: occupational health involvement and proactive measures to support staff health and wellbeing restricting sick pay changes to work patterns or environment return-to-work interviews rehabilitation programmes.

There are four typical elements in the recovery and return-to-work process: Keeping in contact with sick employees. Planning and undertaking workplace controls or adjustments. Using professional advice and treatment. For more information see our factsheet on occupational health. Planning and co-ordinating a return-to-work plan.

Our guidance Manager support for return to work following long-term sicknessabsence looks at the key behaviours managers need to support successful and lasting returns to work after long-term absence. There is an associated checklist.

The legal position

Used properly the Acas Code of Practice Disciplinary and Grievance Procedures together with the employers own procedures provide the main tools for addressing unacceptable absence see our factsheet on discipline and grievances in the workplace for more information. Following the announcement of a major Government review due to report in autumn 2011, an overhaul of the sickness absence process may take place in 2012.

Disability discrimination
The management of employees who become disabled as a result of sickness may mean employers have to make reasonable adjustments as dictated by the disability discrimination provisions of the Equality Act 2010 before they can return to their job. Employers should be aware that conditions such as stress might be covered under this legislation. Our surveys show that stress-related absence continues to increase. The types of adjustments that employers might be required to consider include: making physical adjustments to the workplace allocating some of the disabled persons duties to another person transferring the disabled person to another vacant post with or without reasonable adjustments being made altering the disabled persons working hours through, for example, part-time working, job sharing or other flexible hours arrangements providing special equipment to assist the disabled person to perform his or her tasks and giving training in the use of the equipment.

For more information on the definition of disability and how to address the issues see our factsheets on disability and stress in the workplace.

Other legislation affecting absence management

If an employer requests a medical report from a health professional, it is essential that the Access to Medical Records Act 1998 is adhered to. Employers must be careful not to breach the Data Protection Act 1998 (DPA) when they collect, use and store information about their employees absence. Details of an employees health, either physical or mental, are categorised as sensitive personal data under the DPA. CIPD members can find out more on the legal aspects from our employment law FAQs on Absence management and on Data protection.

CIPD viewpoint
Effective people management policies are needed to encourage employee motivation and commitment and to reduce absence. Employees need well-defined job roles, challenging but realistic targets, and support and training to help them achieve these targets. It is important that employers support employees with effective return-to-work programmes as part of their absence management strategy. It is also important that employers remember that most absence is genuine that and employees often need support in their recovery. Our research reveals that some of the most successful tools in reducing employee absence are an early intervention by line managers and good communication. This effective communication can help to identify underlying causes of absence. A large part of managing absence is about ensuring that staff can raise issues that may be troubling them at an early stage so that they can be addressed before they

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escalate. Effective absence management is also about creating work environments where employees are less likely to wake up and think I dont feel like going in to work today. A focus on employee wellbeing can also be an effective way to avoid absence problems developing.

Books and reports

ACAS. (2009) Managing attendance and employee turnover. Advisory booklet. London: Acas. Available at: http://www.acas.org.uk/ ASHBY, K. and MAHDON, M. (2010) Why do employees come to work when ill? : an investigation into sickness presence in the workplace. London: Work Foundation. INCOMES DATA SERVICES. (2011) Absence management. HR Studies, No 936. London: IDS. INCOMES DATA SERVICES. (2011) Sick pay. HR Studies, No 939. London: IDS. ROBSON, F. (2008) Absence management. CIPD toolkit. London: Chartered Institute of Personnel and Development. SPURGEON, P., MAZELAN, P. and BARWELL, F. (2007) New directions in managing employee absence: an evidence-based approach. London: Chartered Institute of Personnel and Development.

Journal articles
BIRKINSHAW, C. (2010) Absent without leave. Employers' Law. May, pp18-19. GELDMAN, A. (2010) XpertHR sick pay survey 2010 : fit notes. IRS Employment Review. 3 December , 3pp. GOLDMAN, L. and LEWIS, J. (2010) Fit for purpose? Occupational Health. Vol 62, No 6, June. pp18-19. MILSOME, S. (2010) Use of absence triggers in managing absence: the IRS survey. IRS Employment Review. 23 February. SUFF, R. (2010) Return-to-work interviews survey 2010: line managers' effectiveness. IRS Employment Review. 28 September, 9pp.

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