How To Reduce Employee Turnover

Understanding employee turnover is a critical issue for business managers and employers as it plays a role in determining why employees leave or stay in a company. According to the 2021 Bureau of Labor Statistics Report, the employee turnover rate during 2020 was a relatively high 57.3%.

Considering that the growth and success of businesses are primarily dependent on the performance of their employees, the goal of every business owner and manager is to attract and retain the best talent in their respective industries.

Understanding the reasons behind employee turnover is key to helping managers to create a working environment that every employee will be pleased to be a part of and that offers a pleasant and constructive place to work.

What Is Employee Turnover?

Employee turnover is the rate at which employees leave a company over a period of time, usually a year. Employee turnover is slightly different from employee retention even though they are related. First, it’s worth noting that employee turnover covers an employee leaving, whether that’s voluntary or involuntary. Voluntary turnover occurs when an employee decides to leave a job or organization based on personal choices rather than the company making the decision.

Some factors that may influence voluntary turnover include relocation, a better job offer, illness, constant conflict with the manager, retirement, etc. Others are high workload and stress, lack of work/life balance, not feeling valued or respected, inadequate work benefits, toxic work environment, etc.

On the other hand, involuntary turnover is when employees with no intention to leave an organization are asked to leave. Factors that may warrant involuntary turnover include poor work performance, absenteeism, or committing a terminable offense.

The goal for most employers is to minimize employee turnover and most manage their business with this in mind. While you can easily control and manage involuntary turnover, voluntary turnover is more complicated and can be detrimental to the growth of a business. The way to manage voluntary turnover is to create a positive, productive working environment where your employees want to stay.

Turnover Rate by Industry

Most industries have an average turnover rate of about 19 percent. Interestingly, the rate of turnover varies from one industry to another. For example, the hospitality industry has one of the highest employee turnover rates due to prolonged and anti-social working hours.

Similarly, Tech and IT industries also face the challenge of a high turnover rate of 20.9 percent. Other industries with notably high employee turnover are manufacturing, retail, and consumer goods.

The Implication of High Employee Turnover

High employee turnover can come with substantial financial implications for a business. Conversely, businesses with low turnover rates are more likely to surpass companies with high turnover rates, including producing as much as four times in profit.

According to the Employee Benefit News(EBN), excessive turnover can cause an organization about 33 percent of its employer compensation package. It’s shown that the replacement cost of an employee earning a median salary of $75,000 per year is $25,000. Depending on the employee’s position, the financial impact of high employee turnover on a business could be catastrophic.

The report further suggests that employee turnover also results in indirect costs from losing knowledge when an employee leaves. The report further showed that the time spent in scouting for a replacement and the time a new employee spends acclimatizing to the job adds to the indirect costs of turnover.

However, the financial implications of employee turnover are only a fraction of the damage a business might suffer. High staff turnover has an overall negative impact on an organization and affects the overall performance of a company while also contributing to a hostile atmosphere. And, the reality is that when competent employees leave and get replaced with inexperienced staff, the business is likely to suffer a stunt in growth and performance.

Another challenge employers struggle to deal with is maintaining the company’s image in the face of high employee turnover. Most recruiters find it challenging to source candidates for an organization known to have a reputation for high staff turnover.

So, What Can You Do to Improve Employee Retention Rates?

Reducing employee turnover while improving staff retention rate is key to the growth of any business entity. Talent and competency shouldn’t be the only yardstick to recruit staff. How well a new staff member will fit into the business’ culture is a vital question to ask while hiring a new employee.

Using behavioral-based questions during an interview will help determine if a potential candidate would fit into the business’ culture. And, employees are far more likely to jump ship if they do not fit into your company’s culture and work ethics, so it’s best to be sure whether someone will be a good personality fit from the beginning.

Offer Attractive and Competitive Remunerations

One of the main reasons for staff turnover is lack of satisfaction for example take-home pay and other financial benefits. Money is a huge factor for every employee. With utility bills and expenses to take care of, you should offer your employees competitive pay and benefits to encourage them to stay. Researching the salary and benefits your competitors offer can give a great insight into employees’ expectations and is a comprehensive road map for what you should be offering.

Encourage Career Progression

Job satisfaction comes from various areas, including feeling as though one’s employer is invested in career goals and growth. A job with no progression will encourage many people to search for another option that is more likely to offer advancement and add value to their CV.

Outside of offering training, many people want a clearly defined career path to grow and enhance their skills. Providing this and explaining how people can progress is a great way to retain staff who want this type of stability.

Create a Flexible Work Schedule

Many people get easily frustrated when there is a lack of work/life balance in their schedule. While flexible work schedules might not be feasible for some jobs, adjusting work hours with your employees’ interests in mind is vital in creating an excellent working culture.

Give Your Employee a Sense of Belonging

Monetary rewards play a significant role in reducing employee turnover. However, it is not always guaranteed to prevent staff from leaving your organization. Giving employees a sense of belonging by appreciating their efforts, and ensure to praise when expectations are exceeded or targets are beaten. A working culture that offers positive and inclusive vibes is generally a much better place to be and means people will stay longer.

While it’s true that some people are happy to stay in a job simply to show time in one company on their CV whether they’re happy there or not, many employees are far more likely to remain in a positive work environment rather than a toxic and stagnant one.

Many companies face challenges with finding top tech talent, from candidate qualifications to team dynamics, to economics that fit their financial scale. Our unique solution for hiring top 1% independent contractors worldwide addresses all of these concerns! Get in touch!

Originally published at on Jul 23, 2021, by Joanna Blomfield.




The World's Best Developers on Demand

Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium

How to encourage employee time tracking in 5 simple steps

How to increase the ad accounts limit in Facebook Business Manager

How Willy Wonka Helped Me Find My Purpose

Listening to Others: Part 3

Amazon SDE-1 Off-Campus Interview Experience (Selected)

Reflecting on The Secrets of Consulting

Your Conversation Just Took A Downturn, Now What? (Difficult Conversations Series 2/4)

These AI responses to a listicle are scareably relatable.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store


The World's Best Developers on Demand

More from Medium

3 Ways to Foster a Great Remote Engineering Culture

Async vs Sync communication at work

5 Things I Learned From My Dentist Wife That Apply to Engineering

4 simple techniques for introverted software engineers for collaborating effectively