In the context of human resources, turnover is the process of replacing a departing employee with a new hire. An organization’s turnover experience is measured as a percentage rate, which is referred to as its turnover rate.
Investors should be aware of the turnover rate when considering an investment opportunity. High turnover has often been viewed as a measure of employee dissatisfaction, especially during periods when it is relatively easy to find alternative work. Because a high turnover rate is costly, well managed companies quickly address issues relating to compensation and job satisfaction.
Over the last several months, the country’s largest employers, including Amazon, Walmart and Target, have announced significant increases in wages and other employee benefits, such as healthcare and employer supported education. Recently, Walmart announced that its current turnover rate was the lowest in five years.
It should be noted that, despite heightened rhetoric during the current political season, the effective starting wage for large employers is at or approaching $15 per hour, significantly higher than the current federal minimum wage of $7.25 per hour.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA