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What is employee turnover? A guide for the modern workplace

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The Great Resignation continues, and the competition for quality employees remains fierce.

According to ABC News, over 4.5 million Americans quit their jobs in March 2022. As large as this number seems, it pales in comparison to Willis Towers Watson’s study that found 44% of employees said they are actively looking for a new job.

While there is ample opportunity available for people seeking a new employer, employee turnover is costing companies millions of dollars and heavy losses in employee morale and customer satisfaction.

Why is employee turnover so high? What are workers in search of that they’re not currently receiving? How can companies reduce employee turnover? What does employee turnover cost? These are critical questions for employees and employers alike. Let’s uncover some answers.

Employee turnover definition

Employee turnover is the result of employees leaving — voluntarily or involuntarily. It always has and will continue to be a normal event for workers and businesses. People progress in their careers, and companies grow and adapt new strategies.

Employee turnover rates will vary by industry and occupation. For example, restaurants and bars near universities often employ students who return home for the summer or graduate. Turnover rates are typically high for these businesses.

Conversely, factories located in poorer rural areas usually experience low turnover rates. Jobs are scarcer in those areas, and many workers remain with the same company their entire careers.

How to calculate employee turnover

Calculating a company’s turnover rate is simple: divide the total number of employees who have left the company during a certain period by the average number of employees during that same period. Then, multiply the total by 100.

For example, if your company has 35 out of 100 employees leave during a calendar year, your annual turnover rate is 35%.

What causes employee turnover?

A Pew Research Center survey conducted in February 2022 found that Americans quit their jobs in 2021 for these reasons (in this order):

  • Pay was too low
  • Felt disrespected at work
  • No opportunities for advancement
  • Child care issues
  • Not enough flexibility to choose their working hours
  • Benefits weren’t good
  • Wanted to relocate to a different area
  • Working too many hours
  • Working too few hours
  • Employer required a COVID-19 vaccine

The survey also found that those who quit their job and went to work elsewhere are more likely than not to say their new job has better pay, more opportunities for advancement, offers a better work-life balance, and they have greater flexibility.

[ Related: 20 best employee employee benefits of 2022 ]

How to reduce employee turnover

While employee turnover is a given and a cost of doing business, companies can take steps to reduce their turnover rate. Here are a few strategies how:

Ask your employees how they’re feeling and what they’re thinking

How do they feel about their compensation? The culture and environment where they work? Their opportunities for advancement? Do they believe they’re valued and respected? Employees are people — they want to be heard. Asking questions shows you care about them as individuals and value their feelings and opinions.

Listen to what they’re telling you

Talking with your employees regularly and listening to what they’re saying significantly impacts employee engagement and retention.

Act on their feedback

If your people are telling you that your company is paying less than the competition, check it out and act accordingly. Do they feel their manager doesn’t value them? Train managers to be better listeners and show more empathy. Listening without taking action lowers employee engagement.

Create a culture of belonging

A culture of belonging meets one of an employee’s basic needs as a person. It inspires them to be more productive, produce better results, and stay with the company.

Prevent employee burnout

Burnout and stress also lead people to look elsewhere for a new job. Companies need to encourage their people to take time off and work reasonable hours. Managers need to model behavior that helps employees not only be dedicated to their work, but also have a healthy work-life balance.

Invest in their career growth & development

Stagnation inspires turnover. An employee who isn’t progressing professionally often leaves their company — voluntarily or involuntarily.

Company leaders can reduce employee turnover by instituting internal learning and development programs, using third-party educational resources (local colleges, trade schools, seminars, etc.), developing employee mentoring programs, and aligning business goals with employee career goals.

[ Related: The benefits of upskilling & reskilling, explained ]

Cost of employee turnover

Excessive employee turnover costs everyone: employers, employees, and customers.

Employer costs

Statistics quoted by Built In report that the average costs for a company to replace an employee are

  • $1,500 for an hourly employee
  • 100 to 150% of the salary for an employee in a technical position
  • Over 200% of a C-suite employee’s salary

In addition, turnover negatively impacts a company’s bottom line through the cost of recruiting new employees, onboarding and training them, and decreased productivity as a new employee achieves the same level of productivity as the employee they replaced.

Employee Costs

While employer costs are measured financially, employee costs can primarily be measured emotionally. Remaining employees often become:

  • Less engaged. Results in lower productivity
  • Fearful. High turnover can cause employees to become nervous about their job safety. They spend a considerable amount of time on and off the job worrying about their livelihood and which of their co-workers will be the next to leave.
  • Doubtful. When an employee sees an exodus from the company, gradually or en masse, they begin to question what the company is doing wrong and why they’re still there.

All three of these leave an employee feeling stressed, unhappy, and unfulfilled.

Customer Costs

Ultimately, employee turnover impacts the customer through:

  • A decline in customer service. New employees often take longer to do their job, costing customers valuable time and leading them to go elsewhere.
  • Decreased quality. New workers are prone to making more mistakes. Remaining employees can become overworked, increasing their stress levels and reducing their performance, leading to inferior goods and services.
  • Disgruntled employees. Employees who leave a company due to job dissatisfaction or disengagement often speak ill of the company they’ve left, including justifying why they left to their friends who have stayed with the company. The attitudes of the remaining employees can suffer, leading to further erosion of the customer base.

Bottom line

Companies can use this information to create a better culture, treat employees fairly, and experience greater profitability.

Employees can benefit from this knowledge by better expressing their job dissatisfaction to their current employer and, if they decide to leave, have a better idea of what they’re looking for with their next employer.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

— Published May 31, 2022
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