High employee turnover rates have been prevalent in modern workplaces, posing a challenge to human resource leaders and recruiters. A situation that has only escalated following the COVID-19 pandemic. 2021 goes down as the year of the 'Great Resignation' as the number of quits hit a historic high of 4.5 million by November. According to an earlier U.S. Bureau of Labor Statistics report, September recorded a staggering 164,000 quits, raising the numbers to 4.4 million, with the private sector being the hardest hit at a 3.4% quit rate against the government's 1.0%.
The trends are set to continue into the better part of 2022, but the hire rates are equally going to increase as employers fill the job openings. So far, the search for job flexibility has been a major cause for most recent resignations, though other traditional quitting reasons still played a part.
Traditionally, strategic hiring processes have proved effective in enhancing staff retention. So moving forward, it's paramount that company hiring managers and recruiters refine their hiring strategies to source and engage the right talent, thereby reducing turnover rates. This should go hand in hand with complete organizational overhaul to provide the employees with competitive opportunities, flexible work schedules, and an overall rewarding job experience.
What Is a High Turnover Rate?
A high employee turnover refers to a situation whereby more employees are leaving an organization than it's normally expected. Generally, annual employee turnover in the United States averages 18%, with voluntary and involuntary turnover at 13% and 6%, respectively. However, optimizing hiring practices and improving management and organizational culture can lead to a lower rate, preferably below 10%, which is considered an ideal healthy turnover rate.
But this is just the average. The rate may vary depending on the job levels and the industry. Some industries generally have high turnover rates, while others record pretty low resignations. For instance, a schedule of employee turnover statistics published by Finances Online depicts a sharp variance in the rates across different industries:
- Retail and ecommerce – 30.7%
- Gaming, media, and entertainment – 22.6%
- Technology – 21.3%
- Life sciences and medical services – 20.6%
- Consulting – 19.7%
- Manufacturing – 18.8%
- Financial services – 15.9%
- Energy – 15.2%
How Is Turnover Calculated?
Calculating your turnover is essential because it's the only way you can learn whether the rate at which you're losing employees is healthy. High turnover has negative implications on a company, such as low productivity, increased employee recruitment and training costs, poor customer experiences, and so forth. Thus, knowing your company's turnover allows you to take the necessary control measures whenever it exceeds the expected levels.
This involves plugging in your numbers into a simple formula, then comparing that against the average industry rates, as follows:
Find your average number of employees by adding the number of employees at the start of the period to the number of employees at the end of the period and divide that by two. Divide the number of employees who left during that period by your average number of employees, then multiply that number by 100.
The formula looks like this:
(# of employees at start of the period) + (# of employees at the end of the period) / 2 = (avg. employees)
(# employees who left) / (avg. employees) * 100 = Turnover Rate
For instance, if you had 300 employees at the beginning of the year and closed with 360; and 50 employees left during the year, you would calculate the turnover as follows:
Average employees: (300+360)/ 2 = 330
Turnover Rate: (50 / 330) * 100 = 15%
Causes of High Turnover
Causes of high employee turnover vary from employer to employer. However, the most common cause universally is poor hiring processes. Statistics indicate that one-third of workers resign within six months of getting hired. In confirmation of this, nearly three-quarters of employers admit to hiring the wrong candidate for a job, while 66% of employees confirm to have ever accepted a position only to discover they were not the right match.
If hiring managers and recruiters take time to fill positions with the right talent, they can eliminate loads of issues associated with employee/job mismatch, thereby minimizing the turnover rate. For instance, a previous report by HubSpot cited inflexible work schedules and lack of work-life balance as major contributors to turnover. Here are the findings of the poll.
- Lack of work-life balance – 41%
- Lack of flexible work schedule – 37.6%
- Lack of remote work options – 30.8%
- Employees switching career paths – 29.9%
- Lack of career growth opportunities – 27.4%
- Burnout – 20%
By hiring strategically, businesses can mitigate the likelihood of employees quitting due to the reasons outlined above. Generally, matching hires to job roles is one of the key factors in boosting employee engagement. To a large extent, this helps eliminate issues of work-life balance, burnout, the need to switch paths, and more.
Before we discuss the effective ways of reducing turnover in detail, let's first do a quick summary of some of the most cited causes of high turnover.
- Poor recruitment processes – As discussed above, failing to match a candidate's abilities and skills to their job role affects their performance in many ways, pushing them to resign.
- Toxic work environment – Working at a company with a demoralizing corporate culture, toxic bosses, or colleagues, is one of the top reasons why people quit.
- Inflexible work schedules – This has been one of the primary causes of the high turnover in the post-pandemic era and will continue to impact employee retention negatively in many businesses.
- Overwhelming work – Is most common, especially in some service industries where employees are forced to work overtime regularly.
- Poor compensation – If you offer employees insufficient benefits, they are highly likely to leave for a higher-paying job at the earliest opportunity.
- Poor management – Ineffective management creates a poor work environment and hinders employees from growing or finding fulfillment in their jobs. As a result, they are more likely to leave whenever an opportunity comes up.
- Lack of growth opportunities – Where there are no opportunities for career advancement, employees are likely to resign in pursuit of those opportunities elsewhere.
Ways to Reduce Turnover
High employee turnover impacts businesses in many ways, the most notable being the high costs of recruiting and training new employees. Low productivity, poor brand image, lack of customer satisfaction are also some undesirable results of unhealthy turnover. Moreover, hiring and training new staff comes at a hefty cost. According to Gallup, the cost of employee replacement can go up to twice their compensation. Added together, these factors can affect your profitability significantly.
However, you can mitigate this by:
Hiring the Right People
Sourcing for the right candidates for a job is a pretty involved process. However, if you get the basics right, making the right hires can be much easier. For instance, you need to define your company values clearly to attract candidates that share them. This should be followed by a thorough interview process to get to know the candidate better. You should also take time to acquaint them with your business so they can gauge how well they fit into the role or the company.
Conduct Thorough Onboarding
The goal of onboarding is to make the new employee feel comfortable in their new role and to get them up to speed as quickly as possible. This can be done by providing them with all the necessary information and tools they need to effectively do their job. Thorough onboarding provides them with the confidence to do their jobs better, and it familiarizes them with the company culture, which fosters their sense of belonging.
Be Clear About the Work Arrangement
When hiring employees, it's essential to state the nature of the work arrangement. If the role requires full-time in-person office attendance, fits a hybrid arrangement, or allows remote working, you should mention that so you can attract the candidates comfortable with your specific arrangement.
Don't assume that if it's a typical office job, the candidate will be comfortable working from the office full-time. The job environment is changing, and many candidates expect some form of flexibility, at least in most jobs. So be sure to set that clear.
Offer Competitive Compensation
Your employees will always be on the lookout for opportunities that offer better compensation. It’s important to offer competitive pay. This includes salaries, bonuses, and benefits. Consider conducting regular salary surveys to find out what other businesses in your industry and region are offering so you can stay in the loop.
Employee Retention Starts With Hiring
A high turnover rate should be a cause for worry for every business. Not only does it affect productivity and bloat recruitment and training costs, but it also leads to poor customer experiences and creates a poor brand image. Overall, these factors affect a business's profitability and slow down its progress. Thus, it's crucial to calculate your turnover rate regularly and take the necessary control measures whenever it exceeds the expected levels. Above all, you should prioritize hiring the right people, onboarding your employees thoroughly, and offering competitive pay to keep your team engaged and minimize turnover.
Among other things, it's essential to invest in the right HR technology to optimize your hiring processes. Lumina is a user-friendly platform that connects human resources and marketing by allowing you to quickly convert your current job postings into short, branded videos that attract candidates and empower recruiters. All you have to do is provide your email address, and you'll receive a customized job posting within 24 hours. Get started with Lumina today to improve your hiring efforts!