Fluctuation

What is fluctuation?

Fluctuation (from the Latin fluctuare, “to sway back and forth”) is a term used in social and economic science to describe fluctuations in personnel within an organization. Specifically, fluctuation describes the number of employees leaving and joining a company.

The turnover rate is often regarded as an important key performance indicator for an organization. If the fluctuation rate is too high, too many employees are leaving or changing jobs. In this case, it is advisable to look for the causes. After all, every entry and exit is associated with high investments in recruitment, onboarding and induction.

If the turnover rate is too low, the organization runs the risk of not receiving any new or fresh impetus in the organizational structure. A company can become outdated and thus lose touch with the market. Fluctuation is therefore not a bad thing per se, but merely a descriptive technical term.

What are the reasons for staff turnover?

There are many reasons for employee turnover. The most common reasons include

• Expiry of the employment contract
• Termination by the employee:in
• Termination by the employer:in
• Retirement of employees:in
• Departure due to employee incapacity to work:in

What types of fluctuation are there?

Fluctuation in itself considers all employees entering and leaving a company. However, depending on the issue at hand, more specific fluctuation rates can also be calculated. A distinction is usually made between three types.

Natural fluctuation

Natural fluctuation refers to the normal planned entry and exit of employees. These can include retirement, expiry of the employment contract, parental leave, parental leave or death.

Company-internal fluctuation

Intra-company turnover describes the change in personnel within an organization. This is often a good sign, as it is seen as flexibility on the part of the employer. However, if it is too high, it can lead to too much unrest and thus dissatisfaction among employees.

External fluctuation

From an employer’s perspective, external employee turnover is often the most important consideration. It describes departures through active termination or a termination agreement. These terminations of cooperation are often the result of dissatisfaction. Employers often switch to other companies due to better conditions and working conditions.

Why do employees resign?

There can be many reasons why employees leave a company. This is precisely why it is all the more important to carry out a precise root cause analysis if the turnover rate increases. The following causes often lead to an employee leaving:

Employee satisfaction
The employee is dissatisfied with the working conditions e.g. too long commute, no home office regulation or poor management

Lack of employer loyalty
The company has not succeeded in building a bond with employees. This makes the company interchangeable and there are no explicit reasons for employees to stay with the company.

Low remuneration
Remuneration does not correspond to the market level. This means that employees receive higher remuneration for the same work.

Poor working atmosphere or corporate culture
The internal working atmosphere or corporate culture is an increasingly important factor in deciding for or against a company. Specifically, it is about the way people in an organization treat each other. If the working atmosphere is poor, employees will leave the company, even if they will earn less in other companies.

Personal reasons
Personal reasons such as a change of direction, changed family situations, illness, new partnerships or geographical circumstances can also be reasons for leaving the company.

How is a fluctuation rate calculated?

The fluctuation rate can generally be calculated using the following formula: Number of departures divided by the average number of employees multiplied by 100. However, there are also special variants, such as the BDA and Schlüter formulas, which we examine in detail here:

The BDA formula

According to the Confederation of German Employers’ Associations (BDA), the fluctuation rate is calculated as follows:

Fluctuation rate = voluntary departures / average number of employees in the period x 100

Example fluctuation rate = 25 / 125 * 100 = 20 %

The Schlütel formula

This calculation is based on the average number of employees, but considers the headcount as at the reporting date at the beginning of the period to be analyzed.

Fluctuation rate = departures / (number of employees at the beginning of the period + entries) * 100

Example fluctuation rate = 25 / (110 + 35) * 100 = 17.24 %

Can fluctuation be beneficial?

Fluctuation is a natural thing. The economy and companies are always changing. The people who work there change accordingly. Therefore, a change in the workforce is not a bad thing. This is often necessary in order to meet new market requirements, e.g. when new technologies or services become established on the market, a company needs people with the relevant skills. Fluctuation is therefore important and beneficial. It brings new skills and a breath of fresh air to the products, services and corporate culture.

However, fluctuation becomes dangerous when employees actively leave the company. As a result, they take knowledge with them into the market and the workforce is no longer available to the company. As a result, the company can no longer manufacture or market its products or services. Fluctuation then becomes a serious threat to the company. Employers are therefore advised to always closely examine the fluctuation rate and analyze the causes of such departures. Knowing whether and how an employee leaves the company says a lot about the company itself.

Why is high staff turnover expensive for a company?

Losing an employee through active resignation, e.g. due to termination, is often very cost-intensive and expensive for the company. Depending on the study, the cost of an active resignation that has to be replaced by a new employee is estimated at around 77 – 135% of the annual salary. Here is a summary of the expected costs:

• 20 – 40 % due to reduced performance of departing employees due to demotivation or leaves of absence, etc.
• 15 – 30 % recruitment advertising costs for replacement person
• 5 – 0 % Selection and onboarding costs for replacement person
• 35 – 50 % Training period for the replacement person
• 2 – 5 % Administration time of the HR department

What is a normal fluctuation rate?

Based on a report by the Federal Employment Agency from 2018, the following fluctuation rates are common, which vary greatly depending on the industry:

• Temporary employment 126.3 %
• Agriculture, forestry and fishing 76.3 %
• Hospitality industry of 68.9 %
• Information and communication with 67.4 %
• Metal and electrical industry 17.0 %
• Mining, energy and water supply 17.4 %
• Public administration and defense, social services 13.4 %

Proven measures against fluctuation

Analysis of the causes

Fluctuation is only the result, but never the cause. It is therefore important for companies to analyze exactly why employees actively leave the company. It is necessary to proactively engage in dialog with the people concerned. This is not only about the employees who are leaving, but also about the active employees. In a trusting and safe atmosphere, an attempt should be made to understand and learn about the employees’ motivations. This is the only way to derive active measures that can lead to a reduction in fluctuation.

Invest in the people

The best way to keep staff turnover to a minimum is to invest in the workforce. Spend time together, listen to each other, give space to address conflicts and challenges in order to nip potential causes for a possible, active departure in the bud. Proactively ask for feedback, but make sure that this happens in a safe atmosphere. Only with openness and trust is it possible to discover such causes.

Be authentic

The relationship between employers and employees is similar to a relationship in a marriage. Only through honesty, mutual respect and openness is it possible to maintain this relationship in the long term. Therefore, if you lie to your staff or create a bad working atmosphere, employees will leave you. The manner of communication is often much more important than the content itself. For example, your staff can always accept a lower salary if they understand why this is the case and that there may be business reasons for it. However, if you show through expensive cars and lavish behavior that there is no shortage of money, employees will feel betrayed and lose trust. Without trust, no relationship can exist, as there is a high probability that these people will leave your company in the medium term.