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What are the top reasons for a high employee turnover rate?

Turnover represents a big barrier to your organization’s ability to achieve its objectives. It’s therefore a key concern for leadership.

Voluntary vs involuntary turnover

Voluntary turnover, as the name suggests, refers to employees who leave the organization by choice.

This can be to take a different job, pursue education or training, for personal reasons, or to retire.

Involuntary turnover is due to terminations – either for issues of performance, fit, misconduct, or as part of involuntary redundancy proceedings.

According to the most recent data available from the US, about 2/3 of turnover is generally voluntary, and the average rate per year is about 20%.

Turnover: the cost

Losing an employee, you don’t want to lose can end up costing your business up to 2 times their annual salary. The cost of a “bad hire” could potentially be even higher.

The top reasons for employee turnover

Most studies agree that in the context of an individual organization, high voluntary turnover is caused, principally, by 5 things:

  • Pay and time off being seen as inadequate.

  • Benefits being sub-par.

  • Limited career paths.

  • Being offered a specific promotion.

  • The prospect of a better boss.

All of these reasons can be headed off at the pass if an organization is willing to invest in compensation to stay competitive, open up career paths, provide flexible working patterns, and identify and deal with underperforming or toxic managers quickly.

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Trends driving turnover in the wider economy

Turnover rates are higher than ever in most industries at the moment, and there’s no single reason. In part, the move to shorter tenures in position (and within the same company) is a trend that’s existed since the 1980s. In part, it’s a question of demographics, with an older and less mobile generation (the baby boomers) retiring from the workforce, and the younger generation not staying in their jobs as long. (The average tenure in any role for the 25-34 age group is only 2.8 years, as opposed to over 10 years for 60-64 year olds.)

Simple questions of supply and demand also contribute to high staff turnover. There simply aren’t enough highly skilled people in some areas to fill all the roles open for them. And this means that many talent shortages – and high turnover rates – are likely to persist even in conditions of high unemployment as scarce labor will remain a seller’s market.

Finally, with the nature of work itself having shifted rapidly over the past few years, people expect more from their employers, and not just in the form of pay. With the traditional rewards for loyalty (like guaranteed employment and a comfortable retirement) increasingly unavailable, even baby boomers are looking more for a steady paycheck. Flexibility, purpose, and development opportunities are all more important than ever. And if your people can’t get them from you, there’s plenty of places offering them.

But while you consider these variables, you should also be careful to remember that with tenures shortening, high turnover is here to stay.

And with the right mindset, this doesn’t have to be a bad thing.

What is the employee lifecycle?

The “employee lifecycle” is the management of every part of your employee’s journey with your company, from initial candidate scoping to their onward journey as an alumnus.

The companies which handle this process the best tend to have not only the most satisfied and engaged employees around, but also to be among the most attractive places for candidates to seek their next job.

Consider that the top-performing Silicon Valley “unicorns” all have tenure averages well below the average of 2.8 for 25-34 year olds. Facebook, with an average tenure of 2.1 years, actually represents the company with the longest lasting employees in the pack. These businesses however have no shortage of eager candidates, perform highly in terms of revenue and profit, and also have large and established networks of alumni (many of whom return to them as boomerang hires in due time.)

While there are certainly many steps you can take to reduce high turnover – most of which are simple best practice – in the future, organizations will be forced to manage turnover as a consequence of the more fluid nature of the job market.

How can Unit4 help you to do this?

Unit4’s HCM solution provides a single source of truth for your entire employee experience and journey – from onboarding to onward journey – encompassing everything from performance to training and career management and development. To see for yourself what it can do to transform your approach to talent strategy and optimize organizational turnover, check out our dedicated product page here or click here to book a demo.

FAQ Section

What jobs have high employee turnover rates?

Exact rates will differ from country to country, but some industries have a higher “base rate” of turnover, including retail, hospitality, tech and IT, and sales. 

What is a normal employee turnover rate?

Turnover varies between industries, from just 24% in government to over 100% in travel and hospitality. According to the 2021 Bureau of Labor Statistics Report, the annual turnover rate in 2020 was 57.3%. Turnover has been trending up for the past several years but has been severely exacerbated COVID-19.

How can employee turnover be improved?

Employee turnover can be improved by companies studying their current turnover rates. Companies can create a positive culture and great workplace in order to keep staff engaged. Additionally, companies can improve their hiring process and review pay and benefits. 

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