- Employee turnover is the cyclical process of hiring, losing, and replacing employees.
- It’s a normal part of business, but a turnover rate of 18% or more is high, costing companies money, morale, and productivity.
- Companies can improve employee retention by supporting new employees, improving the terms of employment, and investing in workplace culture.
Companies should strive to reduce employee turnover now more than ever. Zippia reports that, as of 2021, the national average annual turnover rate was 47.2%, and Gartner projected a 20% increase in turnover rate in 2022.
Losing and replacing employees cost companies over $1 trillion in 2022, according to Zippia statistics. It costs them morale and productivity as well. Employees get the impression that the company is unstable, and they’re under more stress as they pick up the slack for employees that leave.
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6 strategies to reduce employee turnover
Employers can reduce employee turnover through several retention strategies that help optimize the employee lifecycle. To reduce turnover, HR teams should:
- Conduct exit interviews
- Optimize employee onboarding
- Invest in company culture
- Offer flexible work arrangements
- Develop a (better) benefits and compensation strategy
- Facilitate employee training and development
1. Conduct exit interviews
HR teams can remove the guesswork from voluntary departures by conducting effective exit interviews. Doing so helps managers and HR staff understand why an employee is leaving the organization. Reasons might include insufficient compensation, poor management, or lack of growth opportunities.
Over time, exit interview data might reveal common themes that departing employees mention. Combining this data with workforce analytics can uncover more patterns that lead to more effective employee retention strategies.
2. Optimize employee onboarding
A crucial part of understanding turnover is recognizing the speed at which employees come and go. If employees are quitting within their first year, this suggests they’re not adjusting well to their new roles or the organization in general.
HR teams can turn to a number of data sources to adjust their onboarding process. Employee feedback from exit interviews, as well as HR metrics pertaining to employee engagement and time-to-productivity, offer insight into how to support new employees better.
For example, if engagement among new employees seems to be an issue, HR team members can help new hires plug into the company culture by introducing them to others in the company through welcome events, checking in routinely, and establishing an onboarding buddy system. Perhaps the onboarding process is unclear, or many tasks are manual, which points to issues with the software solution or how its workflows are configured.
3. Invest in company culture
New and tenured employees alike might be leaving due to toxic company culture. Fixing workplace culture is a feat that will take time. However, investing in employee engagement software, social collaboration tools and workplace events helps to set a new tone for the company culture. These efforts, in turn, help boost morale and foster connections that make employees want to stay.
Examining turnover data more closely in terms of demographics might reveal that the company culture doesn’t respect and value employees from a range of backgrounds, identities, and abilities. In response, a company can create or revamp diversity, equity, and inclusion (DE&I) initiatives in the organization by offering:
- Freedom to establish employee-initiated, employee-led employee resource groups (ERGs).
- Diversity and inclusion training framed as learning opportunities about unconscious bias, workplace harassment, how to foster an inclusive workplace environment, and how to be an ally.
Regardless of whether a particular demographic makes up most of the turnover, fostering social collaboration and team building helps boost workplace culture and employee engagement, too. In fact, according to Zippia, highly engaged employees are 87% less likely to leave. To this end, companies can set up:
- Corporate volunteer events.
- In-person celebrations/events.
- A mentorship program.
- Interest groups for employees to connect on shared interests, e.g., Slack channels, book clubs, etc.
- Avenues for giving and receiving employee recognition, for instance, in Leapsome.
- Feedback loops through employee engagement tools to identify signs that employees are unhappy.
Pulling some or all of these levers can result in returns on employee satisfaction and engagement.
3. Offer flexible work arrangements
Today’s employees value flexibility more than ever. More than half of surveyed employees at the end of 2021 reported that flexible work policies influenced their decision to leave or stay with a company.
As a result, companies should abandon a one-size-fits-all approach to how work gets done, focus on results, and let employees decide how they work best, whether remotely, in-office, or hybrid.
4. Develop a (better) benefits and compensation strategy
Low pay and lackluster benefits play a big role in employee resignations. A Pew Research Center survey conducted in 2022 found that 63% of surveyed employees cited low pay as the reason for quitting, while 43% cited subpar benefits.
Human capital management (HCM) vendors, such as Workday and Oracle HCM, use industry benchmarks to help a company determine and improve the level of competitiveness in their compensation strategy.
Analytics in benefits administration software indicates to HR how effective the current benefits package is. For example, employee engagement metrics such as enrollment and usage are good starting points for assessing how competitive a company’s benefits are.
5. Facilitate employee training and development
Employees desire an employer that will invest in and support their professional development, so if the employer fails to do so, this could be a reason for turnover. In fact, lack of opportunities for growth and advancement – as well as low pay – were cited as top reasons why people left their jobs in the Pew study.
HR and learning and development teams can create pathways for career development through:
- Learning management systems that host personalized training and recommendations.
- Mentorship programs.
- Performance management to encourage and reward goal setting.
- Manager training, as poor management is another major contributor to employee turnover.
Employee turnover FAQ
What is employee turnover?
Turnover, also known as employee churn, refers to a cyclical process of hiring, losing, and replacing employees in an organization. Turnover is different from attrition, which similarly involves employees leaving. However, the key difference is that, with attrition, people who leave are not replaced, leading to overall fewer roles – and thus also fewer people – in the organization.
Employee turnover is quantitatively captured in turnover rate, which is the percentage that shows the rate at which employees enter and leave the company. Turnover rate is usually measured in a monthly or annual timeframe.
The employee turnover rate is different from the attrition rate. While turnover rate measures the rate at which employees leave and are replaced, attrition is captured in a different formula that shows the rate at which a company’s workforce is shrinking over time.
What are the four types of employee turnover?
The turnover rate alone doesn’t tell the entire story. The right strategy or combination of strategies to reduce employee turnover depends on the type of employee turnover a company is experiencing. The scope and type of company departures determine whether a company indeed has a turnover problem and, if so, how to best resolve it.
There are four main types of employee turnover:
- Widespread turnover.
- Department or role-specific turnover.
- Voluntary turnover.
- Involuntary turnover.
Employees across teams, departments, and roles come and go. This points to deeper, structural issues that will take longer to pinpoint and remediate. In this situation, pursue all of the above strategies, but prioritize holding exit interviews (strategy 1) to pinpoint reasons for employee turnover.
Department or role-specific turnover
A particular department or role that’s a revolving door is easier to handle because the HR team can more easily pinpoint why it’s happening, though it can also be symptomatic of broader organizational issues. Moreover, high turnover is expected in certain industries, such as retail and food service. Try strategies 2, 3, and 6 that focus on onboarding, compensation, and manager training, respectively.
This is the most important turnover type to focus on, whether it’s widespread or role-focused. Voluntary turnover includes, for the most part, employees who quit. However, there might be some outliers in this category: for example, employees who retire. Companies experiencing a high employee turnover rate consisting mostly of resignations should prioritize exit interviews (strategy 1) before pursuing the other, more targeted strategies.
Turnover in general does not necessarily signal a problem. Layoffs due to economic circumstances or terminations of low-performing employees are a normal part of the business cycle. Layoffs as part of employee turnover don’t warrant further investigation, as the reasons are usually obvious. However, if there’s a trend of low performers and increased terminations, that’s part of the turnover story that signals misaligned recruiting strategies. Recruiters might need to adjust the minimum qualifications and conduct skills assessments before hiring.
How do you calculate employee turnover rate?
Turnover rate =
Number of employees who leave their role within a set time frame
Average number of total employees in the same time period
- Define the time period for measuring turnover. This could be a month, quarter, or year, or it could be a time frame surrounding a particular event.
- To find the average headcount for that time period, add the number of employees at the beginning of the period to the number of employees at the end of the period and divide by two.
- Then, divide the number of employees who left their role by the average headcount for that period. Multiply that result by 100 to arrive at the turnover rate.
Here’s an example of this formula in practice:
A company has 100 employees at the start of the month and 80 at the end. The average headcount is calculated like this: (100+80)/2 = 90 total employees on average.
Let’s say 20 employees moved to another role during that month. This is the equation for turnover rate: (20/90) x 100 = 22.2%
This turnover rate is higher than the current national average of 57.3%.
Why is it important to reduce employee turnover?
Reducing employee turnover is important to lowering people management and recruiting costs while improving employee morale and productivity. The cycle of hire, lose, replace and repeat comes to a stop or at least slows down when putting the above strategies into place. The right combination of strategies will depend on the nature of an employer’s particular employee turnover problem. The more systemic the causes are, the more strategies HR teams will need to test and implement.
The right HR software that includes robust people analytics can assist with reducing employee turnover. Check out our HR Software Guide.
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