Hiring top talent and high-performing employees is the lifeblood of any company. At TravelPerk, we understand how important it is to hire the right staff and keep them. The last few years have seen various industries experience a shake-up in their workforce, impacting employee turnover and retention rates. Below, we dig into exactly what employee turnover and retention are and what they mean for companies’ bottom line.
What is employee retention and turnover?
Employee retention is the rate at which companies and organizations keep their staff . It’s usually recorded as the percentage of full-time employees with a certain length of time at the same company. This is then taken as a portion of the overall staff. So, if a company has an employee retention rate of 75%, it means that 75% of their workforce has been in post for more than one year.Employee turnover is the other side of the coin. It refers to the number of employees who leave a company over a certain time period - usually a year. This covers all staff departures, from voluntary turnover - including retirees and resignations to involuntary turnover, such as layoffs. Seeing specific metrics and employee turnover trends can be particularly helpful to companies as an indicator of their management effectiveness. It can also help improve their employees' experience.
What is a good employee turnover rate, and why is it so important?
For jobs with in-demand skills or positions where training and recruitment are lengthy and costly, high turnover can quickly become a problem. High-performing employees with niche skills or strong customer relationships can also be particularly difficult to replace, making the hiring process lengthy and laborious. In a fast-paced business environment, the old adage ‘time is money’ holds true. That's why understanding the drivers behind employee turnover can help you with employee retention, boost employee performance, and ultimately save time and money for your business.Generally, a good employee turnover rate is
considered to be around 10%, and employee retention should be around 90%. Some industries have higher employee turnover rates than others. For example, the hospitality industry tends to have a turnover rate higher than the national average. There’s always room for improvement regarding employee retention and turnover. So, we’ve put together some surprising statistics for managers and human resources professionals to give you insight into the current state of employee retention and turnover and how companies can improve their rates.
Losing employees costs more than you might think
Aside from the financial costs of a high employee turnover rate, other factors that are harder to measure can occur when team members leave for a new job. If a company has a persistently high turnover rate, it can
- A survey from SHRM in 2022 estimated that the average turnover costs lies between 6 - 9 months of an employee’s salary. This daunting figure means if an exiting employee's annual salary was $100k, the bill for replacing them could be a staggering $50-$75k. However, this number doesn't consider intangible costs when an employee leaves such as loss of productivity, employee satisfaction, and reputation in the job market.
- New hires mean more training. In the US alone, employers invested around $108 billion in employee training in 2023.
- Last year, on average, American employers spent $954 on training for each employee.
damage employee moraleand, in turn, lower productivity and make it harder to attract the best talent.Sources:
Not all industries have equal employee turnover rates
- In December 2023, the average employee turnover rate was 3.8%.
- Of this figure, approximately 2.5% of turnovers are due to employees quitting, while the remaining is attributed to redundancies and firings.
- The industry with the highest turnover rate is leisure and hospitality, with a rate of 5.8% in the last month of 2023.
- Other sectors with higher turnover rates are construction (4.2%), the retail trade (3.9%), and real estate (3.4%).
- Government jobs have some of the best retention rates, with an average number of total separations at just 1.5% in December 2023.
U.S. Bureau of Labor Statistics Job Openings and Labor Turnover Summary,
U.S. Bureau of Labor Statistics Job openings, hires, and total separations by industry, seasonally adjusted
Top causes of employee turnover
A high turnover rate is a big issue for companies. That’s why
87% of human resources department leaderssay their employee retention rate is their highest priority for the next few years.There are lots of factors that lead employees to take the decision to leave their current employer and increase the annual turnover rates. Naturally, there will always be reasons for employees to move on. However, these main drivers of voluntary turnover show there are things employers can do to ensure that they don't have to find new employees unnecessarily.
- Being overworkedis one of the top reasons for employee turnover. 77% of workers have experienced burnout from excessive work hours at their current job, and 42% quit their job because of this.
- According to a TINYpulse survey, employee recognition is key. When team members feel their work goes unacknowledged, they are twice as likely to seek new job opportunities.
- Work-life balance remains a top priority. Over three-quarters of employees stated they would reject a new job offer if it threatened the equilibrium of their personal and professional lives.
- Team members are three times more likely to look to leave their current position if they feel unsupported by management.
How to reduce employee turnover statistics and boost employee retention
Research from Harvard Business Reviewshows there are several reasons employees will be motivated to stay with a company longer. These range from career development opportunities to job satisfaction and company culture. Understanding these factors gives managers an idea of how to improve the employee experience.Below are employee retention statistics that shed light on the initiatives that HR professionals can instigate to keep hold of your best team members, enhance their career advancement opportunities, and increase employee satisfaction and wellbeing retention rate.
- Employees with greater job satisfaction do so partly because they have access to professional development and growth opportunities.
- Employees who feel they are progressing in their careers are 20% more likely to still work at their companies in one year.
- A McKinsey study found that 70 percent of respondents said their jobs gave them a sense of purpose, with 63% wanting their company to provide more meaning to their daily functions.
- Company culture driven by a purposeful mission is also key. Employees who believe their company has a higher purpose than just profits are 27% more likely to stay at their companies.
- Remote work is an important part of company culture to boost wellbeing. 52% of employees said that flexible work policies will impact whether they stay at their organizations. A positive onboarding program for new hires can also help. 69% of employees who undergo a well-managed onboarding process have a more positive view of their work environment and will stay with their company for at least three years.
- Providing opportunities for professional development is key to cultivating strong employee retention rates. 43% of highly engaged employees receive feedback and chances for career growth at least once a week.
- Companies implementing regular feedback sessions boost employee engagement and have 15% lower turnover rates than businesses that don't give consistent support.
TINYpulse Employee Retention Report,
In summary, for companies to be competitive, HR leaders need to attract, hire, and retain the most high-performing employees with robust employee retention strategies.Offering flexibility, career development, a purposeful mission, and a work environment that encourages employee wellbeing can help boost your retention and prevent your top talent from becoming job seekers!