Over the last year, much has been said about “The Great Resignation” and what it means for businesses and the economy in general. The figures are pretty alarming. According to a recent report, at least one in four people quit their job during 2021.
Employee turnover rates are at an all-time high, which doesn’t bode well for businesses across all industries. In this article, we’ll spend some time understanding the concept of employee turnover, why it happens, and pre-emptive steps you can take to minimize it.
Employee turnover is the number of employees that quit or leave their employment during a defined period (weeks, months, or years.) A high employee turnover rate indicates that many employees are leaving and that their tenure at the organization was brief.
It’s also important to understand the different types of employee turnover:
So, when is a company’s turnover rate considered too high? According to the 2021 Bureau of Labor Statistics report, the annual turnover rate in 2020 was 57.3 percent.
If your company’s turnover rate is lower than this, you’re in good shape; if it’s higher, you need to take action.
It’s quite simple to calculate your company’s turnover as a percentage. Simply divide the number of separations in a given period by the average number of employees. Then, multiply that figure by 100.
Turnover Rate = Number of Separations ÷ Average Number of Employees x 100
Today, there are numerous HR software tools at your disposal that you can use to analyze your business’s turnover trends by month, year, or quarter. These tools can help you spot an unusually high employee turnover rate. They can also report whether separations were voluntary or involuntary and which areas of your organization had the highest turnover. They can also analyze turnover by factors such as age, ethnicity, and gender.
The causes of voluntary turnover are varied and plentiful. Here are some of the most common reasons:
When people feel that the stresses of their jobs have become unbearable, many will simply quit. The causes of excessive stress and burnout include an unreasonably high workload, multiple conflicting deadlines, excessively long work hours, and a lack of resources required to succeed.
Low wages are a common reason for an employee’s departure. Changing jobs to move to a company that offers better pay is particularly common among younger workers.
A bigger salary offer isn’t the only reason some employees get lured away by a competitor. Today, people often leave to go and work for companies that offer more attractive benefits and perks such as health insurance, paid time-off and sick leave, retirement funding contributions, or more flexible work schedules that give them the freedom to work when it suits them.
Managers and leaders that instigate, tolerate, or ignore issues such as a toxic workplace environment, interpersonal conflict, and any form of harassment and discrimination will likely see high levels of employee turnover. Other poor management practices that often cause people to head for the door include favoritism, nepotism, micromanagement, and a lack of recognition.
These days, few employees will be inclined to stay with your company for the long term if they feel they have few prospects for advancement into more challenging or rewarding roles. It follows that neglecting to invest meaningfully in employee training programs is also a common cause for employee dissatisfaction and turnover.
Today, looking for and finding a new job has never been easier. Recruitment has become an almost fully digital industry, and with online job boards proliferating, it’s quick and easy to discover and apply for new positions. The ability for people to get instant access to information about available jobs has helped increase employee turnover rates in recent years.
In days gone by, the notion of staying with a single employer for decades – even until retirement – was commonplace and accepted. That’s no longer the case, and, as we mentioned earlier, staff turnover rates are particularly high in companies that employ a large number of younger workers.
Thanks to the internet and digital collaboration tools, certain workers, such as those working in call centers or in customer representative roles can perform their roles remotely from their homes. As a result, employers insisting that every employee be physically present in the office can expect higher turnover rates.
The number of people choosing to leave the corporate world behind to start their own businesses is on the up. Many others have embraced the notion of the Gig Economy with enthusiasm, opting to work more flexibly doing one or more part-time jobs.
The devastating events of the last two years caused by the pandemic have made many workers pause to rethink their priorities and reassess their futures. Now, many are ditching the “rat race” in favor of a career where they truly feel they’re making a positive impact on their community and the environment.
High turnover rates can sometimes result from a company hiring people that aren’t suitable for the role. When an employee lacks the skills required to perform their job or is a poor cultural fit for the organization, their period of employment is generally short-lived. When short-term retention rates are low, poor onboarding processes are often the culprit.
There are multiple direct costs imposed on the business when employees decide to leave.
First, every time you lose an employee, you immediately lose all the investments you’ve made (both time and monetary) in their training and development.
Next, the cost of job advertisements, agency commissions, and brand marketing can quickly add up.
While the recruitment process goes on, there are direct costs for the business, as other employees cover the vacant headcount. This situation may mean employees need to work more overtime, or the company has to hire temps. Alternatively, managers need to accept that the levels of service they provide will diminish.
Once a replacement is found, it will usually take time for the new employee to achieve the level of performance expected. They’ll have new systems and processes to master, new relationships to develop, and a new company culture to absorb. All of these things take time.
If you give your employees opportunities to grow and develop – personally and professionally – you’ll see your employee turnover rate drop. More skilled employees will be more motivated, productive, and deliver more value.
First impressions matter. New employees should feel welcomed and accepted from the beginning. Checking in with them regularly shows you value their feelings and have a vested interest in their wellbeing. Failing to see what they need periodically within their first year is a sure-fire way to lose a valuable member of your team.
If people are worried about how they’re going to receive medical care or feed their family while they wait for payday, they’ll likely be distracted and may go as far as to look elsewhere for a better employment opportunity. So, why not consider offering health insurance and a financial wellness program? Your financial wellness program could include Earned Wage Access (EWA) to reduce the stress associated with being short of cash in between paychecks.
Employee turnover levels can start to creep up if people feel they’re just a small cog in a large machine, invisible to their management. So, make sure you regularly update employees about how well the business is doing. If there are challenges, be honest with people about what’s happening, why, and what’s being done to fix it.
Flexibility is valued by all employees, not just those who are office-based. Giving employees the ability to swap shifts quickly and easily is a practical way to help them remain loyal.
Look at establishing internal feedback mechanisms that allow your people to share their thoughts and feelings in a safe, non-threatening environment. Many companies offer rewards for staff that contribute feedback and ideas that help the business become more profitable.
To foster a positive work environment, ensure that your facility or office is clean, safe, and comfortable. Ensure that work breaks are scheduled and offer refreshments where possible. Say “no” to any form of abusive, discriminatory, or toxic behavior such as bullying and harassment.
Remember to conduct a thorough exit interview when employees decide to move on. It’s important to understand why an employee is leaving and learn if there’s anything you can do to reduce the chances of other employees leaving for similar reasons in the future.
It’s important to remember that employee turnover rates vary from industry to industry. The turnover rate is generally higher in sectors such as food service, sales, construction, and arts and entertainment.
The industry with the highest employee turnover rate is accommodation and food service at 130.7% as of 2020.
Other industries near the top of the list include arts and entertainment (129.3%), retail trade (69.7%), and construction (69.6%).
Industries with the lowest turnover rates include government (24.2%) and finance and insurance (25.1%).
Employee turnover is a complex and multi-faceted issue, but it’s not always a bad thing. A level of employee turnover is actually good for everyone. Some employees need to change their work-life balance; some have skills better suited to different roles, while others are more suited to a different industry. For companies, an influx of new ideas and energy can be beneficial too.
If you feel that your level of staff turnover is becoming problematic, there is a range of practical steps you can take to help keep those turnover rates to a minimum.
Payactiv is the partner of choice for businesses seeking to help their people fully engage in both work and life and remain loyal and happy in their work environment. Our all-in-one Livelihood platform takes a holistic approach to improving financial wellness and increasing employee satisfaction.
Learn more about Payactiv’s Service, or book your demo now.
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