Churn Rate

Meaning & Definition

Churn rate is a measurement used by the Human Resources department that indicates how many employees have exited the company during a particular timeframe (usually one year). Churn rates provide a snapshot of how often people are leaving and are used by many companies to evaluate employee retention efforts, while also measuring workforce stability and how effectively the company retains its employees.

Importance of Churn Rate

• Provides HR with important information needed to track employee turnover rates.
• Identifies areas within teams and roles where there may be retention deficiencies.
• Facilitates effective workforce planning and offers insight into hiring projections.
• Measure of employee engagement and satisfaction.
• Provides a platform for organisation leaders to evaluate the effectiveness of their organisation’s culture and HR policies.

Legal Compliance / Policy / Regulation

Churn Rate is an internal HR Metric used for Analytics and Workforce Metrics. There are no statutory regulations or definitions of Churn Rate under Indian Labour Laws.

Regarding Churn, exit processes must respect Indian Labour Laws, while final settlements, including payment of wages, gratuities, leaves, etc., must comply with the Payment of Wages Act and employer-provided gratuities.

Note: While the Churn Rate has no specific statutory compliance requirements, employee separations must follow the same statutory and policy guidelines as other business functions, such as hiring.