Description
Separations during the reporting period as a percentage of average headcount.
Formula
Separations / Average headcount * 100
Interpretation
Separation Rate measures the percentage of employees who left the organisation during the reporting period. It reflects both voluntary and involuntary separation reasons.
For example, a result of 20 per cent indicates that separations equated to 20 per cent of the average size of the workforce. A result of greater than 100 per cent indicates that separations exceeded the average size of the workforce during the period.
High separation rates can have negative consequences for an organisation related to cost, efficiency, productivity and customer service.
Separation and replacement can create not only departure costs (e.g. accrued vacation) but also vacancy costs (e.g. lost productivity, recruitment advertising) and new hire costs (e.g. screening, relocation, ramp-up productivity losses).
Separations often represent lost knowledge of organisational history, culture and processes. Depending on the calibre of replacement, separations may also carry a net loss of skills and knowledge among the workforce. Lastly, separations may negatively impact the morale, workload and stress levels of remaining employees.
Excessively low separation rates, however, can also negatively impact the organisation.
Low separation rates might foster insularity, potentially inhibiting innovation and creating a stagnancy of skills and ideas.
Low separation rates may also reflect ineffective performance management programs that encourage career complacency or fail to manage out poor performers.
Separation Rate can be useful in understanding the overall rate at which employees are leaving the organisation and can thus provide an indirect indication of turnover costs, demands on the staffing function and impact on culture and employment brand.
However, analysis that is oriented toward action planning and improvement must disaggregate Separation Rate into its voluntary and involuntary components. Voluntary Separation Rate can help to identify gaps in the organisation’s ‘offer’ of employment, while Involuntary Termination Rate can help identify gaps in hiring and onboarding as well as performance management processes.
Data Sourcing
Organisations typically source termination actions from either a separation reason or date field in an HRIS job table.
Analysis
Employers can analyse this measure by a large number of subgroups and characteristics to identify high- or low-result pockets for best practice sharing or corrective action. Understanding turnover within these populations can also help organisations to monitor potential skill gaps, diversity issues or threats to business strategy success. Common dimensions used for analysis on this measure include organisational unit, tenure, performance rating, grade, job family, job function, employment level, ethnic background, age and gender.
Limitations
Separation Rate does not indicate what level of separations is the result of employee-initiated versus organisation-initiated actions. Without additional analysis, this measure also does not indicate the specific reasons for separations (e.g. poor manager, compensation, returning to school). Separation Rate does not fully measure turnover, as it does not account for the level of separations replaced with new hires. The measure provides only a very indirect notion of the organisational costs of turnover. Specific or estimated expenses and productivity losses must be taken into account to assess turnover costs.
Targets
Targets related to separation rates are most useful when devised for related measures Voluntary Separation Rate and Involuntary Termination Rate, separating issues of firings and layoffs from resignations and retirements. However, a target for Separation Rate as the sum of targets for these two other measures can also be useful for monitoring and influencing the impact of turnover on organisational resources, productivity and employment brand strength.
Most organisations target moving their Separation Rate results toward the 25th percentile or lower within a relevant benchmark group. Depending on industry and labour market conditions, this often translates to an absolute target of between 5 and 10 per cent. Certainly, organisations might have higher targets if they expect temporary fluctuations (e.g. reorganisations) or if they are working from a very high result gradually to a lower level over a period of years.