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What Is Company Turnover?

Using “company turnover,” companies may report on key numbers in annual reports.
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  • Written By: Mary McMahon
  • Edited By: Nancy Fann-Im
  • Last Modified Date: 23 September 2014
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The term “company turnover” can have several different meanings, which may refer to revenue, utility of assets, or employees, depending on the context. In all cases, the term involves the number of complete replacements within a given accounting cycle, whether of company staff or products for sale. The context can determine whether low or high turnover is more desirable, and companies may report on key numbers in annual reports and other disclosures to investors and staff to provide them with information about the company's overall health.

In the sense of employee turnover, the term describes the number of times the staff members are replaced within a given period. At a company with 30 employees where 15 leave each quarter, turnover is high. Conversely, if one employee leaves every five years, the company has low turnover and overall longevity. This form of company turnover is usually viewed most favorably when it is low, because this suggests the company is a pleasant place to work and employees do not wish to leave.

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Some regions use this term to describe overall revenues. High company turnover indicates large sales volume, while low turnover can imply the company has difficulty moving products and services. One advantage to accounting from a turnover perspective is the ability to account for a company that sells in small volume, but at high value. Hearing that a company landed one sale for the year is not very impressive, unless that sale happens to be something like a very expensive cruise ship and the company actually has a very respectable turnover rate.

Another form of company turnover is asset turnover, where accountants look at how efficiently a company uses assets. This is determined by dividing total revenue by the value of assets. High asset turnover shows that companies move assets through quickly to make them profitable, while low turnover illustrates that the company retains them. This is not necessarily a sign of economic problems, however, as a company may be focused on an investment and growth period to improve revenues in the future.

In discussions of company turnover, it is important to find out what is meant by this term, because it can be so variable. Sometimes this is evident from context; in discussions about employment conditions, for example, people usually mean employee turnover when they discuss the turnover rate. If the meaning is not evident, it may be advisable to ask for clarification. It can also help to find out what kinds of measures are being used to calculate turnover, as this may have an impact on the meaning of the data.

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Rotergirl
Post 2

Employees at my small company are very worried right now. We've had layoffs, furloughs and a reduction in our hours we can work. People are looking for other, more stable jobs, and I suspect we are going to see some big turnover by the end of the year. People are just not going to put up with what amounts to salary cuts, with nothing except, "Be glad you've got a job" in return.

The company thinks it has troubles now. Wait until we have 30 employees quit by the end of the year. It's coming. I can't quit unless someone offers me some kind of plum position elsewhere, but I am waiting to see how management will respond when suddenly, a third of their workforce disappears. It's bound to happen.

Pippinwhite
Post 1

Employee turnover is a big deal right now. Companies are talking about employee retention, because, for some of them, it's finally started to dawn on them how much they lose when they have layoffs and do nothing to retain the employees they have.

I saw a really interesting article that said a new hire may take as long as two years to reach the same level of productivity as the old hire, and this time period increases with the number of years the former employee was on the job.

The article also said a company may invest as much as 20 percent of a new hire's salary in training and mentoring.

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