Involuntary Turnover

What involuntary turnover is

Involuntary turnover (الدوران غير الطوعي) is the departure of employees from an establishment by the establishment’s decision and not by their own, such as termination of service for poor performance, for a violation or because the job is abolished. It is measured as the number of such leavers in a period divided by the average number of employees in the same period. It is the counterpart of voluntary turnover, in which the employee leaves by the employee’s own decision.

It is a management indicator in performance management and retention, and it describes decisions of the establishment and not decisions of its employees. What follows is an explanation of the concept and of how to interpret the figure. It is not a statement on the lawfulness of any particular termination or on what follows from it.

How involuntary turnover differs from voluntary turnover and what falls outside it

Turnover divides leavers by who started the decision to leave. A neighbouring indicator measures something different, and some categories fall outside both:

• Departure by the employee’s decision. Voluntary turnover covers it, and its written rule for borderline cases counts a resignation after the employee was told that termination was coming as a departure by the establishment’s decision. Involuntary turnover follows the same rule from the opposite side, so no departure is counted on both sides.
• The share who remain. In retention rate, the count is of how many of a defined group remain, so the denominator is the number at the start date. It does not distinguish those who left by their own decision from those who left by the establishment’s decision.
• Agreed departure. Termination by agreement of both parties is described in mutual termination. An establishment can place it in a separate third category or assign it to the party that started the discussion, provided the rule is kept consistent across cases.
• Retirement, death and inability to work. These count as neither involuntary nor voluntary turnover, and they have separate categories in the establishment’s termination register.

What goes into the numerator

The numerator counts those whose service the establishment ended. The forms include:

• Performance. Termination after performance was found not to reach the required level, which a performance improvement plan (PIP) can precede.
• Conduct. Termination after a violation, preceded by the steps described in disciplinary action.
• Abolished jobs. The establishment no longer needs the job because of restructuring or a fall in work, a matter treated in layoff.
• Probation and expiry without renewal. Termination during the probation period, or the establishment not offering renewal when a contract of fixed duration ends.

The reason for each case is written when the procedure ends and not months later. If classification is left to the end of the year, it becomes hard to remember what happened in each case.

How involuntary turnover is calculated

The involuntary turnover rate equals the number of employees whose service the establishment ended in the period, divided by the average number of employees in the period, multiplied by 100. Take a hypothetical establishment with 190 employees at the start of the year and 210 at the end. The average number of employees is (190 + 210) ÷ 2 = 200.

During the year the establishment ended the service of 18 employees: seven for weak performance, three for a violation, six because their jobs were abolished and two during probation. The total is 7 + 3 + 6 + 2 = 18, so the overall rate is 18 ÷ 200 = 9.0%. By reason, the rates are 7 ÷ 200 = 3.5%, 3 ÷ 200 = 1.5%, 6 ÷ 200 = 3.0% and 2 ÷ 200 = 1.0%, and together they make 9.0%.

The establishment then looked at all the year’s departures. Thirty employees left by their own decision, which is 30 ÷ 200 = 15.0%. The total number of leavers is 30 + 18 = 48, which is 48 ÷ 200 = 24.0%, and the share of involuntary leavers among them is 18 ÷ 48 = 37.5%.

The figures are hypothetical and set to illustrate. They do not represent an establishment or a study, and the example does not mean that a distribution like this occurs in any establishment.

How the figure is interpreted

The overall figure is not interpreted alone, because it combines cases whose causes and meanings differ. In the example, the six whose jobs were abolished reflect a single organisational decision that may not be repeated. The seven whose service ended for weak performance may point to a matter in selection, induction or monitoring. We do not judge which explanation is correct from the figures alone.

A low figure is not proof of quality, and a high figure is not proof of poor quality. The figure can be low because selection is good, or because the establishment takes no decision on weak performance. It can be high because the establishment is addressing performance that it used to ignore, or because selection is weak. What separates the explanations is the evidence set next to the figure: the monitoring record and improvement plans, the distribution of appraisals, and what managers said about each case.

It is useful to measure by hiring cohort as well as by the average. Suppose 68 employees joined during the year, which is consistent with 48 leaving and the headcount rising from 190 to 210 (48 + 20 = 68). Five of the joiners had their service ended before the year closed, and they are among the 18. The early termination rate is 5 ÷ 68 = 7.4%.

The denominator in this reading is the cohort and not the average number of employees, so the figure is not compared with the establishment’s overall rate. It is a separate reading that asks what happened to those who joined during the year.

Involuntary turnover and the Labor Law

Voluntary and involuntary are management classifications used for measurement. In the Labor Law and the Implementing Regulation we found no text that uses these two descriptions of the termination of a contract.

Article 74 of the Saudi Labor Law (نظام العمل) lists the cases in which a contract ends. They include cases that arise from the will of both parties or of one of them, and cases that arise without the will of either. The article makes some of them subject to conditions or exceptions. A register classification should not be laid over the cases in Article 74 of the Labor Law mechanically. The text of the article is consulted, not a summary of it.

The Labor Law attaches different effects to different routes of termination by the employer. Article 75 of the Labor Law permits either party to end a contract of unspecified duration for a legitimate reason by written notice. Where wages are paid monthly, the notice is at least thirty days from the worker and at least sixty days from the employer. Where wages are not paid monthly, the notice is at least thirty days from either party.

Article 77 of the Labor Law sets compensation for the party harmed by termination for an illegitimate reason, unless the contract specifies compensation. The compensation is the wage of fifteen days for each year of service in a contract of unspecified duration, and the wages for the remaining period in a contract of fixed duration. It is not less than two months of wages.

Article 80 of the Labor Law lists nine cases in which the employer may terminate the contract without award, notice or compensation, on condition that the employer allows the worker the opportunity to state the reasons for objecting to the termination.

We suggest that the register record, in addition to the administrative reason for each termination, the basis on which the establishment relied and the notice and the opportunity to respond that the employee was given. That links the figure to what can follow from it. The compensation under Articles 77 and 80 of the Labor Law is described in unlawful termination compensation, and the notice period in notice period. Neither an indicator definition nor an establishment’s register decides whether a particular termination is lawful.

How terminations are recorded in the register

The figure is no more accurate than the register it comes from. We propose recording these fields on the line for each case:

• The date the relationship ended, and the employee’s length of service, role and department.
• The category: weak performance, violation, abolished job, termination during probation, or expiry without renewal.
• The person who took the decision and the person who approved it.
• The basis on which the decision rested, and the notice and the opportunity to respond that the employee was given.
• Whether an improvement plan or disciplinary steps preceded the decision, and on which dates.

The person responsible for the register reviews the category once before it is approved, and it is changed afterwards only for a written reason, so that the category does not move according to what is wanted in the report.

What to ask when the figure rises

A rise in the figure opens questions and does not answer them. These are questions we propose:

• Is the rise concentrated in one reason, or spread across the reasons?
• Is it in one department or under one manager?
• Were recent joiners terminated at a higher rate than others?
• Did anything change in selection or induction before that?
• Did the employees who left have documented monitoring plans before the decision?

Each answer may point in a different direction: to selection, to training, to monitoring or to the structural decision.

How involuntary turnover is misused

• Setting it as a target to reduce. A manager avoids a decision on poor performance, or pushes an employee to resign without being told that service is ending, so that a lower figure appears. The rule for borderline cases noted above counts a resignation made after the employee was told that termination was coming as a departure by the establishment’s decision.
• Mixing it with economic layoff. Abolishing jobs is a decision about the establishment and not about performance, and it is shown separately so that it is not taken as poor performance.
• Measuring without a reason. A figure that is not broken down does not show where to look.
• Judging a manager by it. For a manager of a small team, one employee changes the figure, so the count is shown with the rate.
• Publishing it with names. It is an aggregate indicator, and what concerns a particular employee is a private file.

Acceptable rates and useful comparisons

We set no acceptable rate and no reference rate for involuntary turnover, and no figure above which it counts as a fault. A useful comparison sets the establishment’s rate against earlier periods under a single classification rule, and then across its departments and by the length of service of those whose service ended. That comparison is our own reading and not a quoted text.

Involuntary turnover remains a record of the establishment’s decisions on the performance of its employees and on its need for their jobs. It points to a place that merits a question, and what is decided afterwards rests on the facts of each case and on the termination provisions that govern it, and not on the overall figure.

This is an explanation of the concept and of the statutory provisions cited, not legal advice.