A Guide for Reducing Employee Turnover

What is Employee Turnover?

Employee turnover is the number of employees who leave an employer during a set period of time. A one-year period is typically used to calculate the employee turnover rate. Most employers track turnover rate as a success metric for human resources and company culture. Larger organizations often drill down to track employee turnover by department or another category, such as job title, age group, or gender.

Voluntary Turnover and Involuntary Turnover

Staff turnover can be divided into two separate categories: voluntary turnover and involuntary turnover. Voluntary turnover is any situation where an employee decides to leave. The employee leaves their current job for any of the following reasons:

• A new job opportunity with a better compensation package (higher salary, more PTO, and appealing benefits).
• They return to school to further their education as part of a career change or career growth strategy.
• Their spouse or partner has found work in a different city. Relocation is a common reason for employees to voluntarily leave a company.

Involuntary turnover occurs when the employer ends the employment relationship with an employee. Terminations occur due to:

• Attendance issues
• Insubordination (including dishonesty and breaking company rules)
• Poor performance
• Harassment or inappropriate behavior

All companies have a turnover rate. This is normal. Each type of business has an expected turnover rate. To determine whether the annual turnover rate for your company is average, high, or low, you will want to compare it to other businesses in your industry. Otherwise, you might think you have an artificially high employee turnover rate or that your staff turnover is low when you have issues you need to address.

How to Calculate Employee Turnover?

The Bureau of Labor Statistics (BLS) publishes numbers for the United States. It also releases employee turnover calculations by region and market sector. Forty-million employees left their jobs voluntarily in 2018. In the same year, 21.9 million workers were either laid off or terminated.

You calculate the annual employee turnover rate like this:

Annual Average Number of Employees x 100 = Annual Turnover Rate Number of Employee Departures

If a company has 40 employees and six of them left during the year, its annual turnover rate is calculated as follows: (6 departures / 40 employees) x 100 = 15% annual turnover rate

The reason for the employee leaving has no bearing on the employee turnover rate. The voluntary and involuntary turnover rates are used to calculate the annual turnover rate.

You can perform further research to determine whether you have a high turnover for your industry and general economic conditions. If the labor market is generally tight with employers struggling to fill available positions and a number of employees leave, it could be a sign of an internal problem.

What Causes Employee Turnover?

Employees cite several reasons for leaving an organization. Here are some of the main ones:

Poor Fit with the Organization

A candidate can have all the skills necessary to do a job on paper. This doesn’t guarantee that they will fit in with your company culture and values. Someone who does not understand the company culture is not going to feel comfortable. They will disengage from their manager and coworkers. Disengaged employees will lose their motivation.

Lack of Training or Resources to do Their Work Well

A study by the Wynhurst Group found employees who participate in a structured onboarding process are 58% more likely to stay with their employer for at least three years. A well-structured onboarding program boosts employee engagement. It helps new team members feel welcome. The onboarding program reassures workers that they will have the training and resources they need to be successful.

Difficulty Interacting with their Manager

The old adage goes: employees leave managers, not jobs. The relationship between an employee and their manager is crucial. When the employee and the manager’s personalities clash, it can be a significant issue in the workplace. Managers will have difficulty getting along with employees if they are not clear in their expectations. Supervisors who play favorites among team members will also have problems with team members.

Lack of Opportunities for Advancement

Job candidates will be curious about career paths and opportunities for advancement within a company before accepting a position. If there is no way to advance their career, employees will likely move on once they have mastered their current job.

Better Offer from Another Employer

Employees leave their current employers when they receive a better offer from another company. Some employees decide to change jobs for another reason, such as a better benefits plan or more vacation entitlement. Other employees may want the chance to work from home.

Employees Feel Overworked

When employees tell human resources that there is too much work for them to complete comfortably every week, it becomes a problem. It won’t take very long for the employees to feel stressed at work. Too much stress leads to lower productivity and a higher number of mistakes. Eventually, employees will become burned out and will look elsewhere for work.

How to Reduce Employee Turnover

Some employee turnover is inevitable. The following tips help HR teams wondering how to decrease staff turnover and maintain a positive company culture. Employee retention is a major issue, especially given current workplace trends.

1. Hire the right employees from the outset

Hiring ill-fitting candidates for available positions is a costly mistake. The average cost of a bad hire can be as high as 30% of the employee’s first-year salary (US Department of Labor).

Hiring the wrong person translates to lost productivity. Managers have to spend more time with a poor fit giving them instructions and coaching them. A poor hire may also mean losing clients and difficulties communicating within work teams. It also means higher costs for recruiting, hiring, and training a replacement.

2. Terminate poor hires quickly

Even if you screen all job candidates thoroughly in your hiring process, you will still hire some people who just aren’t a good fit. If the job is not working out for either party, it’s important to resolve the situation and part ways before the cost of employee turnover increases further.

Everyone has a type of environment where they can do their best work. It may not be in your company with your team members. When someone has tried and just does not fit in, it’s just as frustrating for the employee as it is for the manager. The employee should be free to move on to a different job where they can use their skills and abilities more effectively. Find another employee who is a better fit for your company.

3. Pay competitive wages and offer a comprehensive benefits plan

Have your human resources department do some homework to ensure that you offer competitive compensation to your team members. Employees will leave if they find that another company is offering more money and better benefits. You’ll want to ensure that you are paying at least the market rate. If you are able to pay better than average rates, you will be able to attract better job candidates and retain them.

Conduct a salary survey of your competitors at least once a year. Get a good idea of whether your salary scale is too generous, competitive, or too low. Adjust the salary scale based on the research results presented by the human resources department.

4. Show employees they are appreciated

When employees do something well, make a point of saying “thank you.” Recognize them when they go above and beyond their job description. Mention their efforts in the company newsletter or blog. Post the employee’s good deed on the internal communication platforms so everyone can see it.

Ask your employees to recognize their co-workers in a similar fashion. Both employees will become more engaged and more likely to enjoy their job. Everyone wants to feel appreciated at work. It goes beyond being paid a fair wage. Employees who feel valued have a stake in the company.

5. Offer flexible work arrangements

To do their best work, employees need employers to understand that they have personal lives too. The “traditional” arrangement where only one person works in the household is no longer feasible. Most couples need two incomes to make ends meet.

Employees juggling childcare or care for disabled family members or elderly relatives while working undergo a lot of stress. When employees have some work flexibility, it gives them some breathing room to be a better parent, caregiver, and employee. A flexible work arrangement could look like staggered starting hours for employees. Workers can start their day any time between 7 a.m. and noon, as long as they work their regular workday. This kind of schedule gives employees the flexibility to attend appointments and school events during the day without taking time off from work.

Other employers offer flexible work arrangements by allowing employees to work from home a few days per week. This option lets employees retain their relationships at the office and gives them the convenience of being at home on certain days.

6. Introduce performance management to your employees

The main (and perhaps the only reason) employees want to sit through a performance review is to discover whether they will be getting a raise. Most employees don’t find the annual performance review helpful or compelling. The review doesn’t give the employee a plan for improving their performance at work.

Performance management is a much better option. It requires a commitment from the employee and their manager. Performance management is based on frequent, honest, and open communication. Supervisors coach employees and reinforce good habits. Employees are encouraged to learn from their mistakes and to use their good ideas in other situations.

The manager and the employee discuss work and performance issues regularly. These informal discussions tell employees where they are doing well and understand where they need to improve. The manager also provides support for the employee as they work on improving any problem areas.

7. Make employee engagement a priority

Employee engagement should be a focus beyond just the annual or quarterly satisfaction survey. It needs to be a year-long priority. When employees trust the company leadership, they are more likely to form relationships with their managers and supervisors. Employees are also more likely to feel proud to be part of the company. Proud employees give their best effort, are more productive, and are less likely to leave for other jobs.

8. Ensure employees have some challenging work

We know that not every task that employees perform will be engaging and challenging for them. There are always going to be some tasks that are boring but necessary. When assigning tasks, try to mix up the less-interesting ones with some engaging assignments.

All employees should have equal access to the interesting assignments as they come up. If these plum assignments are limited to only a few teams or employees, it will create a toxic atmosphere in your company. Employees who are bored at work will leave. They will find jobs with other companies offering more challenging positions.

9. Give employees opportunities to grow in their careers

Employees will work hard if they can see that they have an opportunity to advance in their careers. If there is no opportunity to advance, employees may become frustrated and start looking for employment elsewhere.

What is employee development? There are different ways to encourage employees to reach their career goals:

• Career development services
• Employee mentoring programs
• Leadership development programs
• Training programs
• Tuition reimbursement programs

Does your company offer employees the option to transfer between departments to explore different career opportunities? Can they shadow someone in a position they are interested in to learn about the job before applying for a transfer?

10. Improve your toxic culture

About one-quarter of US employees dread having to go to work (SHRM). They don’t feel valued by their employers. They don’t feel safe when expressing their opinions. These are employees who are likely to be actively looking for work elsewhere.

It does not make sense that a business deliberately tries to establish a toxic culture for its employees. A corporate culture can become unhealthy if it is not closely monitored.

When the employee turnover rate starts to climb, take a look at the reasons why employees are leaving. Some companies find it helpful to schedule exit interviews to ask their workers about the reasons for their departure. The departing employee is encouraged to be frank about anything that factored into their decision to leave.

Some employees will take this as an opportunity to share all their frustrations about their boss. Others will react more maturely and share specific aspects of working for the company they found frustrating or negative. Use this information to make changes to improve your workplace culture.

Three Things to Remember:

1. It is normal to have a staff turnover rate. All companies have some employees who leave during any given year for various reasons. Turnover rates are only a concern when they suddenly jump or are higher than the standard percentage for your industry.

2. By hiring the right candidates for available positions from the outset, you can eliminate many of the difficulties that go along with high staff turnover rates. It is important to hire a candidate with the right qualifications. It is even more important to find someone with the right attitude to fit in with your company.

3. Pay attention to employees and treat them with respect if you expect them to give you their best effort. They want to be appreciated for their efforts and paid a fair wage. In return, they will help you grow your business.