Employee tenure refers to the length of time an individual employee spends employed with the same company. Employee tenure can also be used to describe the average length of time employees as a group tend to stay employed with the same employer. 

Why Is Understanding Employee Tenure Important?

HR professionals measure employee tenure in terms of individual employees and as an average of how long employees stay employed with the same employer. Both measurements can be impactful when developing employee benefit packages, estimating employee engagement, and evaluating company culture. 

For instance, employee tenure often impacts when employees become eligible for certain benefits, such as increases in paid time off. Equally, a company seeking to increase employee tenure beyond five years might consider offering an increase in paid vacation time to employees after they’ve been with the company for five years. 

Similarly, a company with an average employee tenure below the industry average may wish to research what factors are driving their employees away. Common factors shortening tenure are low compensation, low engagement, and low trust in management. Companies can research whether any of these factors are impacting their organization through conducting compensation studies, engagement surveys, or exit surveys.

What Is the Average Employee Tenure?

According to the U.S. Bureau of Labor Statistics, the median employee tenure in the U.S. in 2020 was 4.1 years. However, this median does not paint a clear picture across all demographics and industries. 

Employee tenure tends to be longer for older employees. A significant difference was found by the U.S. Bureau of Labor Statistics when comparing tenure for employees aged 55-64 (9.9 years median employee tenure) with employees aged 25-34 (2.8 years median employee tenure). 

Employee tenure in the U.S. also tends to vary across industry. Manufacturing held the highest median employee tenure in 2020 of 5.1 years, while wholesale and retail trade held a median of only 3.3 years. 

Ways To Manage and Address Employee Tenure

While age and industry are external factors impacting employee tenure, there are plenty of internal factors that companies can influence to encourage longer employee tenure.

Developing a strategy to address employee tenure is key to retaining the right employees for the long-term. Consider these steps to improve employee tenure in your organization.

Plan For Internal Mobility

Employees are more likely to extend their tenure when they believe that career growth is an option in their organization.  

One way HR can provide value and encourage longer employee tenure is to develop career path plans and educate managers on the various options. Encourage managers to review this in conversations with their direct reports to demonstrate commitment to employee growth.

HR can also develop temporary assignment programs that will give existing employees visibility and a chance to grow new skills in other departments and roles. Equally, when permanent roles become available, it should be considered whether the role can be posted internally before seeking external candidates.

When employees are able to develop their skills without leaving the organization, succession planning is also improved. This occurs because succession plans can choose from a bench of multi-faceted employees with strong institutional knowledge when long tenure employees eventually retire. 

Invest in Leadership Training

Managers have a big impact on employee tenure, but are often not well-equipped to encourage longer tenure. Encouraging employees to grow in ways that may ultimately lead them to move into another department or role seems counterintuitive. However, this growth benefits both the employee and the organization as a whole. Organizations benefit by retaining employees who develop cross-department knowledge and by ensuring that top performers remain engaged. Successful leadership training should include goal-setting around this type of encouragement. 

Beyond the direct impact of encouraging employee growth, poor management can lead to increased employee turnover if employees exit the organization to get away from a particular manager. Leadership training can set the framework for what a successful manager looks like in your organization and provide a basis for evaluating manager performance. 

Focus On Building a Strong Corporate Culture

Employees are more likely to stay when they feel that they are a part of a strong corporate culture. Encouraging feedback from employees and showing a commitment to taking action in response to employee concerns can help grow a positive culture. 

Evaluate Total Compensation

Low compensation is one of the top reasons employees leave their employer. Conducting compensation studies and developing a compensation strategy can directly impact employee tenure. 

Stay On Top of Performance Management

Some employees are simply not worth the effort to retain for the long-term. By following through on performance management strategies from the beginning of an employee’s tenure, you can ensure that low performing or troublemaking employees are exited before they can negatively impact others. Effective performance management will also aid in identifying strong employees who can be encouraged toward longer tenure. 

Advantages of Longer Employee Tenure

Encouraging employees to extend their tenure can have significant benefits for employers. These benefits range from financial advantages to knowledge retention and productivity.

Starting with the financial, it has been estimated that the cost of replacing an employee can range from one-half to two times their annual salary. This stems from recruitment costs and work loss while the position remains unfilled. Encouraging longer employee tenure lessens these costs by lowering the frequency at which a position needs to be refilled. 

Beyond financial considerations, longer tenure employees are more likely to have institutional knowledge of the organization and are therefore able to complete routine parts of their role easily. By contrast, new employees take longer to complete the same tasks. This impacts the new employee’s role and also can slow down progress on team projects when other employees must wait on the new employee’s part of the project to move forward. Retaining an employee with longer tenure ultimately helps the organization’s productivity as a whole through task speed and institutional knowledge learned from years on the job.

Disadvantages of Longer Employee Tenure

Depending on the nature of your business or industry, longer tenure may not always be a beneficial goal. For instance, if you are unable to offer the new challenges and career growth sought by employees, it won’t make sense to encourage all employees to stay long-term. Doing so can result in only the least ambitious employees sticking around. Such employers should engage in honest communication with employees to set expectations that these roles are not intended to build into a long-term career in the organization. 

Longer employee tenure can also be problematic when it limits the influx of new ideas and methodologies. New employees can bring about positive change simply by questioning the status quo. Organizations wishing to benefit from longer tenure employees without sacrificing new ideas do well by encouraging training and development through sources external to the organization. 

Finally, you should be selective about which employees are encouraged toward long tenure. If an employee fails to perform or causes havoc with other employees, then retaining them will only prolong the damage they can cause. Following performance management processes will aid in identifying and either improving or exiting problematic employees. 

Conclusion

Employee tenure measures how long employees stay with their employer. Measuring employee tenure provides both individual and organization-wide data points that should inform HR strategies. Determine what optimal employee tenure looks like for your organization and follow through with steps to encourage longer employee tenure from the right employees.

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