The success of a company in hiring, training, managing, and rewarding its employees is essential for achieving success. These factors are so important that they cannot be left to chance, as reducing employee turnover requires deliberate efforts. Thus, the most successful companies use data to ensure excellence: they compare their attrition rates with national and industry benchmarks, hold managers accountable for keeping lines of communication open with their reports, actively manage their career development programs, and consider total compensation metrics in the context of the cost of replacing high performers.
In this article, we will closely examine the employee turnover rate.
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What is Employee Turnover Rate?
The employee turnover rate refers to the total number of workers who leave a company during a specific period. This includes both voluntary departures and employees who are terminated or laid off – i.e., involuntary turnover.
The employee turnover rate measures instances of separation – employees leaving the company – during a specified period. Separations include anyone no longer with the company, regardless of the reason, and are divided into two types: voluntary, where people leave of their own accord, and involuntary, where people are terminated or are part of seasonal layoffs or reductions in force.
Employees who leave their jobs voluntarily often seek more money, better benefits, career advancement, a better work-life balance, or to escape an ineffective or toxic manager.
Important Statistics on Employee Turnover
Employee turnover, especially voluntary turnover, affects a company's ability to achieve business goals and is a major concern for executives. The reasons people leave vary, and companies cannot always prevent it.
Demographics are one factor of attrition. The number of retiring baby boomers reached a record high of 28.6 million in the third quarter of 2020, with some research showing that 3.2 million more baby boomers retired compared to the third quarter of 2019.
Meanwhile, millennials, who now make up nearly 40% of the workforce, do not stay in their jobs as long as previous generations. The U.S. Bureau of Labor Statistics reports that the median tenure for workers aged 55-64 is 9.9 years, which is more than three times the tenure of workers aged 25-34, at just 2.8 years.
Among workers aged 60-64, 54% had been with their current employer for at least 10 years in January 2020, compared to just 10% of those aged 30-34.
Then there is the issue of supply and demand. For certain roles and in certain geographic areas, there are not enough people with the right skills to fill open positions. We have seen persistent shortages of medical professionals, scientists, mathematicians, skilled tradespeople, engineers, and many IT specialties, and it is widely agreed that many of these shortages will continue even with higher-than-normal unemployment rates.
Finally, people want more from employers – not just money. Lifetime job security is no longer on the table for most professions, and even baby boomers are looking for more than just a steady paycheck, saying that working for a company with a meaningful mission is a top priority.
LinkedIn’s Talent Trends 2020 survey shows that people want to work at companies and with people who inspire them. Today’s workforce also values flexibility and time off, as well as a clear career path complete with training to advance steadily and remain marketable.
What Does the Employee Turnover Rate Tell Us About a Business?
The employee turnover rate should be viewed in context, as some industries, such as hospitality and retail, typically have higher turnover rates than average. A company should, and can, measure its turnover rate against similar companies in its industry to understand how well it retains talent.
Consider a restaurant: HR managers face challenges such as hiring many first-time, part-time, seasonal, and student workers. Additionally, upward mobility for restaurant employees often occurs through taking positions at new locations. However, even restaurants can develop strong "people plans" to reduce employee turnover rates, improve team morale and cohesion, all of which lead to a better guest experience.
High employee turnover rates generally indicate problems – in the company's hiring practices, culture, compensation and benefits structure, individual managers, training, career progression paths, and more.
Main Reasons for High or Low Employee Turnover Rates
Most studies on the reasons for high voluntary employee turnover agree that more money, time off, better benefits, promotion opportunities, and the possibility of a more supportive manager are the top five reasons good employees move to new positions.
This reality shows that most employee turnover can be prevented if a company is willing to invest in total compensation, open career paths, focus on flexibility, identify ineffective managers, and take decisive action when higher-than-average attrition is seen from a single department.
It is important to focus on elements that make employees happy: good compensation and benefits, a positive culture, largely driven by direct managers.
Types of Employee Turnover
Turnover encompasses all separations, whether people leave the company on their own, are terminated, part of a reduction in force, or a round of layoffs. It also includes separations due to retirement, death, and disability. Turnover differs from attrition in that it represents all departures from the company, whereas attrition refers only to voluntary turnover.
Voluntary vs. Involuntary Turnover
Voluntary employee turnover counts employees who left the company by choice, often to take a new job at a different company, pursue educational opportunities, for personal reasons, or to retire. Involuntary turnover is the termination of employees who were let go due to failing to meet performance standards and job expectations, committing misconduct, being part of seasonal layoffs, or being part of company-wide layoffs.
A recent study by the analytics firm Mercer estimated that the average annual turnover rate in the U.S. is around 20%, with about two-thirds of this being voluntary.
Employees terminated from their positions, except for unavoidable layoffs, fall under the category of desirable turnover because newer, harder-working, and more skilled employees can replace them. When it comes to voluntary turnover, losing people who left the company for new roles, not those who retired, is considered undesirable.
Simple factors like getting paychecks right and on time, tracking accurate vacation entitlements, smooth onboarding, ensuring benefits enrollment is easy, and getting timely answers from HR are critical to the employee experience.
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The Role of DocSuite System
In the modern work era, managing human resources and motivating employees to stay is crucial for the continuous success of companies. The DocSuite system plays a vital role in this context by offering a set of tools and features that enhance employee experience and reduce turnover. Let's explore how the DocSuite system can contribute to creating an inspiring and motivating work environment that fosters loyalty and productivity among employees:
Centralized Document and Information Storage:
Provides a central means for storing and managing documents and information, making them easily accessible for new employees and reducing the administrative burden.
Improved Information Exchange:
Enhances information exchange between teams, increasing employee collaboration, reducing confusion and redundancy, and thus lowering turnover rates.
Performance Tracking:
Offers tools to track and document each employee's work, making performance evaluation easier and promoting transparency and fairness in the workplace.
Task and Project Management:
Provides tools for managing tasks and projects, increasing work efficiency, and reducing employee stress.
Internal Communication Tools:
Offers internal communication tools, such as instant messaging and forums, to enhance communication between employees and reduce the need for long and ineffective meetings.
Online Training and Educational Resources:
Provides online training and educational resources, helping develop employee skills, increasing their satisfaction and loyalty to the company, and reducing turnover rates.
Software solutions enhance experiences that are the root cause of high employee engagement, which is linked to lower employee turnover rates.