In 2021, one in four workers quit their job. Other research shows that an astonishing 33% of new hires quit their new role within the first 90 days. Employees leaving isn’t always a bad thing, but when unexpected resignations start piling up, you need to pay attention. Acting fast when you see excessive turnover helps you create a more competitive employer brand and retain talent. So let’s find out what employee turnover is, when it’s a problem, and what you can do about it.
What Is Employee Turnover?
Employee turnover refers to the number of workers leaving an organization. While it often indicates the overall number of workers who have left during a certain period of time (such as one year), it can also be used to measure workers who have departed from a specific department, or individuals of a specific gender, ethnicity, or other group who are no longer at the company.
There are three main situations in which workers leave:
- Voluntary turnover: This happens when a worker decides to leave your company. For example, they may leave because they are unhappy or because they get a different job.
- Involuntary turnover: This occurs when an employee is fired because they violated company rules or did not meet expectations. It can also happen as a result of restructuring or business downturns.
- Employee attrition: Attrition refers to employees leaving due to normal changes in their life, rather than because of a problem. Workers may retire or go back to school, or, in some cases, may even have passed away.
Usually, turnover is measured by the turnover rate. You can calculate your turnover rate by dividing the number of people who left your company in a specific period (such as a year) by the number of employees you had at the beginning of that period and multiplying that by 100. For example, if you had 100 workers at the start of the quarter and 10 of them have left, your turnover rate for the quarter is 10% (10/100 x 100=10).
You can use the same formula to calculate different types of turnover, such as voluntary or involuntary turnover, to get a clearer picture of why workers are leaving. If you had 100 workers and eight left due to voluntary turnover, for example, your voluntary turnover rate is 8%. If 10 workers left overall, and eight of them left voluntarily, you might want to look at why team members want to leave your workplace.
Why Is Employee Turnover Important?
You don’t want to lose good employees. Here’s some of the ways resignations and firings can harm your business.
- High turnover can hurt your brand: When potential job candidates see you’re always looking for new workers, they may wonder why you have so many vacancies. Similarly, vendors, clients, and other stakeholders may question why workers don’t want to stay.
- High turnover can signal a bigger problem: There’s a reason workers choose to walk away from a paycheck. If you have multiple workers leaving, it can indicate a problem with compensation, company culture, or another issue.
- Employee turnover is expensive: It costs an average of 33% of a worker’s yearly salary to replace them. For c-suite executives and high-level workers, it can cost as much 213% of their annual salary to replace these employees.
- It can hurt your workplace culture: When people quit and especially when multiple people resign at the same time, it can leave remaining workers feeling unsettled. They may reevaluate their loyalty to the company and consider whether they should follow suit. If multiple employees have recently been fired, remaining employees may be left feeling worried, wondering “Am I next?” A constantly revolving workplace can make it hard for employees to feel stable or to build camaraderie with their team.
- Employee turnover can hurt your bottom line: If there are always new faces at your company, you may always be playing catch-up and working on onboarding instead of gaining traction on work projects.
Is All Employee Turnover Bad?
Employee attrition is just a normal part of business, for example. Some industries also have higher than average turnover. While you can take steps to reduce turnover in retail work, for example, you will still see higher rates than other workplaces.
There is also healthy turnover that can be positive for your organization. For example, a worker may simply have no more growth opportunities at your organization and may be moving on. In this case, you’ll have space for a new worker and you’ll be building your employer brand as an incubator of talent. Equally, when a toxic worker or poor performer leaves, it can actually improve the entire team’s morale and performance.
Sometimes, change creates a chain reaction of shifts. If you’re restructuring, for example, or changing your values, goals, or company mission, some employees may realize they are no longer a good fit and decide to leave. This can give you an opportunity to hire talent that better aligns with your new goals and can take your business into the future.
So how can you tell when employee turnover is a concern and when it’s not a problem? If multiple people are quitting, especially if you’re caught off guard by their leaving, there may be a hidden problem.
To determine whether turnover is excessive—and therefore a problem—look at your turnover rate. If your voluntary turnover rate is suddenly higher than before (especially if it’s significantly higher than your industry average), investigate. You are more in control of your involuntary turnover. If your involuntary turnover rate is high, this may be a reflection of changes made at the company. It may also indicate you need to change your hiring practices to onboard the right talent.
What Can You Do to Reduce Unhealthy Employee Turnover?
If you have excessive turnover and you’re losing talented workers, there are a few things you can do.
- Hire for fit: During the interview and hiring stages, ask questions about what an employee is looking for in their work and why they want to work at your organization. Would this candidate fit in your workplace? Do they share your values? How do they work, and does that approach match how your current team works? Would the candidate’s personality work well with the team you already have? Do they have the skills and previous experience needed for their role? Could you see this person doing a good job at your company and working well with your current employees?
- Examine your onboarding: Set your workers up for success. Create checklists to help new hires keep track of all the steps they need to take when they begin working at your company. You can create an onboarding packet using Connecteam. This packet or series of files should contain all the documents and information your workers need, including information about expectations, job duties, upcoming deadlines, and more. Pair new employees with established workers who can show them the ropes and can help them integrate into the work culture. A great onboarding process helps new workers feel supported and confident that they can succeed.
- Embrace clarity: If managers have one idea of what workers are supposed to do and workers understand their role differently, conflict happens. Managers may become unhappy with an employee’s performance and workers may feel they are working hard but missing the mark. Always communicate deadlines, work roles, expectations, and requirements clearly and in writing. Use simple language and examples to get everyone on the same page.
- Focus on leadership: A study from DDI’s Frontline Leader Project concluded that 57% of workers quit because they are unhappy with their manager, and another 32% have considered leaving a role to get away from a manager. As such, you should only hire managers, supervisors, and leaders with good emotional intelligence and communication skills. You might also want to offer leadership coaching to help build these skills.
- Show workers you value them: Studies show that companies who focus on employee recognition have teams that are 56% less likely to be considering quitting. A simple platform like Connecteam Recognition and Rewards lets you send tokens that employees can convert into gift cards from major brands. Having this sort of system means you’re reminded to send recognition, so employees consistently feel seen.
- Understand why turnover is happening: If multiple employees quit in a relatively short amount of time, it’s time to investigate. You may want to create anonymous surveys so employees feel safe sharing their concerns. Ask what workers want to see and whether they are seeing anything at the company that could be improved. You may also want to conduct exit interviews with workers who are leaving. This gives you a chance to find out why employees chose to walk away. For example, you may notice workers are migrating out of your community, to a new industry, or to more flexible work arrangements. Knowing the “why” can help you decide what your organization could do to retain talent.
- Offer competitive pay: Can your workers get a better offer or more benefits by switching to your competitor? Are your benefits and wages competitive for your local area? Check your industry competitors, too, to make sure your wages and benefits are keeping up.
- Build a great culture: Create company values and a strong purpose that will inspire workers. Make your employees part of something bigger. Look around and consider what you can do to make the workplace more attractive. Could you offer flexible shifts workers can claim? Can you pay for lunch occasionally or check in with workers to get to know them? Can you celebrate events together as a company? Don’t overlook the power of these small steps in bringing your team together.
- Address changes in the company directly: If your industry is changing, you’re restructuring, or several workers have quit recently, address this. You might want to hold an all-hands meeting or start a chat with workers online to reassure your team that they’re valued. Help workers understand how their jobs may be affected and what you will be doing to support employees. Ask workers to come to you for a chat if they’re worried about the changes at the company. This gives workers a chance to discuss any concerns, and gives you the opportunity to address these before employees start looking for new work.
- Offer career advancement: Offer opportunities within the company so valuable talent will want to stay. Mentorships and job shadowing can help your team with professional development. Create documents outlining advancement opportunities within your company so your workers understand how they can climb the career ladder without changing companies. You can also create custom video training for your team with Connecteam. Workers can access this training anywhere and can study at their own pace so they keep growing and developing new skills.
Helping Talent Stay
Saying goodbye is never easy, but it can be even more challenging if talented workers are leaving your company. If you’re surprised by the number of people quitting, you may want to start building a more attractive workplace, offering advancement in your organization, and investigating the cause of voluntary turnover. Doing so can help keep workers happy, can improve productivity, and can help you retain your best employees.