KPI for Measuring of % Termination Rate within 4 years posted in category HR

WinningKPI - HR - KPI for Measuring of % Termination Rate within 4 years posted in category HR

This indicator is for measuring the number of employees that terminated employment within 4 years as a % of the total number of employees. This is calculated by dividing the total number of employees that terminated within 4 years by the total number of employees, in a given time period.
This % Termination Rate KPI is used to measure the turnover in the company. Companies want to avoid the costs of employee turnover, as recruitment costs are very high. However, in order to get a good picture of the turnover rate, the information from this % Termination Rate within 4 years KPI should be taken more into depth. The company should look at reasons for termination and whether it was voluntary or involuntary turnover.
For instance, if a high turnover rate is due to involuntary turnover (where the company laid off staff), the business probably saved more by firing the low performing employees, and the cost of re-recruiting was worthy (low performance employees represent a high cost for the company).
This KPI can be used with the % of New Hires achieving 12 Months Service KPI to gain an overview of they turnover figure. All this information can be used by HR to develop strategies that will retain high performance employees, better the recruitment process and save costs for the company.

Formula:
Total number of employees that terminated employment within 4 years/ total number of employees x 100

KPI Units: %

KPI Time Frame: update annually or every 4-5 years

Posted by Oana Boteanu | Help to protect community: Flag for moderation

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Example:

A medium size company of 400 employees uses this KPI to measure turnover, in terms of how many of the new employees terminate their contract within 4 years (calculated over a 5 year period 2007-2012)

Total number of employees: 400
Total number of employees that terminated employment within 4 years: 80
80/400 x 100 = 20%
This represents a cost for the company as for that 20% of employees, new recruitment costs had to be covered to re-employ.

However, long term employment is not a trend anymore nowadays, and most employees finish their career at a company within 2-4 years. Although the company has to cover the recruitment costs every 2-4 years, it is likely that the short term employment brings more value to the company than long term employment would.
Oana Boteanu | + | September 9, 2012 at 5:29 am

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