What Causes a High Employee Turnover Rate?

Time to Read: 5.3 minutes

Updated: December 28, 2022

Every business will experience some turnover of staff. But when retention rates fall significantly it can become costly to your business. Turnover costs the US economy $1 Trillion annually and the cost to individual businesses of replacing a single member of staff can range from 20-213% of a single employee’s salary, not including lost productivity and business opportunities and the impact on line managers and other staff. Now multiply that across an entire department!

With labor costs high and competition for skilled candidates fierce, understanding the reasons for high employee turnover is critical. By developing strategies to improve your organization’s ability to attract and, crucially, retain talent you’ll be better positioned to maintain a high-performance workforce and keep the business on an upward trajectory.

The Impact of High Employee Turnover on your Business

High employee turnover rates directly impact profitability. With high turnover, your business will begin to lack the skills and expertise needed to deliver on projects and objectives. When projects fail or orders are not delivered on time your reputation will suffer, making it harder to win new business. With more roles to fill, your hiring costs will rise. In today’s market, skilled candidates are in high demand meaning you may need to increase salaries and compensation to attract talent.

High levels of turnover can also affect morale. As your teams are stretched their confidence in their ability to perform will suffer, and knowledge of company processes and procedures will be lost making it harder for remaining employees to do their jobs. Your reputation as an employer may also be affected, making it harder to attract new employees.

What Causes a High Employee Turnover Rate

Turnover in and of itself is healthy for a business. But if the root causes of employee dissatisfaction are not addressed turnover can become a domino effect. What then are the reasons for high employee turnover? What makes an employee likely to leave your business?

Poor Company Culture

Your company culture is the combination of attitudes, behaviors and beliefs. Poor company culture is caused by everything from a lack of work-life balance, undefined values and purpose, a lack of commitment to diversity and inclusion policies and the effects of ineffective management.
Research by LinkedIn has shown that companies with a clear and purposeful mission experience a 49% lower attrition rate than those without. Research by Pew has also found that 53% of employees who left their jobs said that their new role offered greater flexibility and work-life balance.

Lack of Development and Career Progression Opportunities

Without a clear path for learning and advancement, employees can quickly become disillusioned. A PWC report found that US workers were willing to give up 12% of their salaries in exchange for training and development opportunities.

Below Market Compensation and Benefits

As mentioned, employees can be willing to accept lower compensation in exchange for other benefits, however, if your remunerations levels are routinely coming in lower than your competitors and the wider market you are demonstrating to your employees that you do not value their contribution to your business. It can also make it easier and cheaper for rivals to headhunt valuable skills.

Negative Employee and Candidate Experience

How your employees interact with and experience your organization throughout their tenure directly impacts their satisfaction. When trying to promote positive experiences throughout the employee lifecycle you need to eliminate everything from bad hiring processes, poor onboarding, low levels of recognition, no chances to provide and receive feedback, boredom and overwork.

Solutions to Improve Retention and Lower Turnover

Once you understand the reasons for high employee turnover, you can begin to put in place strategies designed to improve employee satisfaction, engagement and ultimately retention. An outsourced recruitment solution can be an effective way to access the technology, tools, and resources you need to build these solutions into your attraction and retention processes – at speed and scale.

1. Use Data and Analytics to Predict Attrition

Employers have access to large amounts of employee and hiring data including hiring statistics, exit interviews and satisfactions surveys. All of these can be useful in mapping the causes of turnover and analyzing the impact of organizational changes such as leadership or cultural shifts. This data can help develop strategies for reducing turnover and identify the greatest areas for ROI.

2. Benchmark Compensation to Market Rates

Understanding the competitiveness of your remuneration offerings requires benchmarking analysis on a regular basis. Once you know market rates, you can make your base pay packages as attractive as possible to new (and existing!) talent. You will also ensure that pay raises are aligned with (or in excess of) industry averages, giving your employees less reason to look elsewhere.

3. Develop a Positive Company Culture Built on DEI

Equality, diversity and inclusion should be the foundation of positive company culture. 72% of employees say that an organization’s ED&I efforts would be central to their decision to stay with a company and a LinkedIn survey found that half of employees aged 18-20 said they have left a role because a lack of inclusion made them uncomfortable. Cultures that are built on diversity are more welcoming, more supportive, and more collaborative.

4. Provide Standardized and Frequent Opportunities to Give and Receive Feedback

Feedback is a two-way street. Employees should be given regular chances to receive feedback and recognition for hard work. In celebrating your employees, you are reinforcing their engagement with your organization, its culture, and their connections with each other. Equally you should be providing employees with the chance to give anonymous, critical feedback on your organization. Being open, receptive, and willing to action feedback reinforces your commitment to providing a better employee experience.

5. Demonstrate Clear Paths to Success

Whether hiring one or 100 employees, providing new employees clear career paths at the outset shows your commitment to investing in your workforce. It also gives them an incentive to stay with you. Companies that are committed to hiring internally and promoting from within find that employees stay with them 41% longer compared to those that don’t. Training and development opportunities can also be a clever, cost-effective way to ensure that your employees learn new skills that will be beneficial for your business in the long term while also promoting engagement.

Attract and crucially, retain, the skills and expertise you need to ensure business growth and success with Pierpoint.
Talk to an expert today to discuss your hiring needs.

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Jen Mulholland

Jen is a successful recruitment and marketing professional. Driven by a genuine passion for writing, she provides insightful, accurate and engaging content for the Human Resources community across a wide range of topics and industries.

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