Employee turnover rate is a useful success metric for any organisation. By calculating turnover rate, companies can quickly determine how well they are retaining their talent in a given time period. A high employee turnover rate is generally considered a cause for concern. Poor compensation, overworked employees, and bad management are just a few of the things that can contribute towards a rising turnover rate.
Regardless of the reasons behind it, the impact of high employee turnover shouldn’t be underestimated. Keen to find out what’s causing a spike in your turnover rates and what you can do about it? Our guide breaks down everything you need to know.
What is high employee turnover?
Employee turnover refers to the number of staff who decide to leave your company, with most departures being classed as voluntary or involuntary turnover. A typical case of voluntary turnover is when an employee resigns to pursue other opportunities elsewhere. Involuntary turnover can include when an employee leaves because they’ve been fired for misconduct, or when a department is downsized.
While employee turnover itself is unavoidable, a high turnover rate of employees doesn’t have to be. There are exceptions to the rule, but an average turnover rate of around 10% is considered ideal by most companies. Anything above this is usually considered high turnover and suggests something is fundamentally wrong within your organisation. Root causes can include poor management styles, a lack of career development opportunities, or a recruitment and retention strategy that’s not fit for purpose.
Why is high employee turnover bad for business? Mitigating the impact of turnover is challenging enough at the best of times. Vacant positions put a strain on your remaining workforce, impede productivity, and drain morale. There’s also the issue of having to kickstart a new round of recruitment, complete with time-consuming training and onboarding. For companies feeling the sting of high turnover, all of these negative effects are amplified.
High employee turnover rates per industry
While no sector is immune to the effects of employee turnover, some industries are more susceptible to it than others. In the United Kingdom, the average employee turnover rate is around 15%. This is one of the highest employee turnover rates in Europe and considerably higher than what’s considered acceptable by most businesses.
Unsurprisingly, it’s industries staffed by the lowest paid that suffer from high turnover rates. Take the hospitality sector as an example. In 2023, the annual employee turnover rate was more than 37%. Along with poor rates of pay, other factors like long hours and irregular shift patterns are largely responsible for driving this trend.
Hospitality might have the highest employee turnover rate of any industry, but it’s also a bugbear for the retail sector. With average turnover rates of around 34%, it’s one of the most transient job markets around. While seasonal staffing accounts for some of this, retail turnover rates are on the rise in general. It’s no surprise to see so many people leaving the retail sector. Weekend work and long hours mean there’s little hope of achieving a work-life balance. Meanwhile, pay is typically low, even at a managerial level.
Other industries with high employee turnover include manufacturing and construction. Manufacturing has a slightly higher turnover rate, with the average currently standing at 20%. A lack of career development opportunities, low rates of pay, and relatively little job security all play a role here. The construction industry is almost on par with manufacturing, with a high employee turnover rate of 19%. While compensation and career advancement are at work here, the seasonality of construction work is also a factor.
The effects of high employee turnover
Is high employee turnover good or bad? While it might be less of a concern for certain industries, the cost of high employee turnover can be felt across every sector.
1. Lower productivity
One of the most notable high employee turnover effects is plummeting productivity levels. You’ll almost certainly notice a significant drop if a vacant position remains unfilled for too long. Even when a new hire is installed in the role, it’s unlikely that they’ll match the same output levels as their predecessor immediately. Additional hiring cycles and training new recruits also take managers and other employees away from their work, further impacting productivity.
2. Puts a strain on HR departments
The disadvantages of high employee turnover rates are clear enough to human resources teams. Having to contend with high rates of voluntary departures will put constant pressure on your HR department as they’re forced to undertake endless rounds of recruitment.
If your brand reputation has suffered a blow thanks to high turnover rates, HR teams will have to work extra hard to source and secure high-quality talent for vacant roles. What’s more, the lion’s share of your HR department’s schedule will now be consigned to hiring, meaning other essential HR functions suffer.
3. Increased Recruitment Costs
One of the most direct impacts of a high employee turnover rate is the increased cost associated with recruiting new staff (read about how to reduce recruitment costs). Every time an employee leaves, the company incurs expenses in advertising the open position, conducting interviews, and processing new hire paperwork. These costs can quickly accumulate, especially for roles that require specialized skills or extensive training.
Additionally, the use of recruitment agencies, which often charge a significant fee based on the starting salary of the new hire, further elevates the financial burden. Beyond the immediate financial outlay, there’s also the often-overlooked cost of the time and resources spent by internal staff in the recruitment process. From screening applicants to conducting interviews and negotiating offers, these activities divert resources from other business-critical tasks, effectively adding to the overall cost of high employee turnover.
4. Demotivated teams and reduced morale
Low morale is another negative impact of high employee turnover and a signature of a company where staff comings and goings are now the norm. Resignations and empty roles place a burden on your remaining employees. Asking them to pick up the slack in the short term is one thing, but expecting them to take on too much can crush morale and send anxiety levels soaring.
If these employees are also expected to train new hires and help with onboarding, you’re only adding more stress. Eventually, an overworked employee can experience burnout, leading to them handing in their resignation.
5. Prevents growth planning
What does high employee turnover mean for your business growth forecast? If your workforce is in a constant state of flux, it’s almost impossible to start planning for the future. Do your long-term plans include international expansion or market dominance? If you’re investing heavily in reacting to high turnover and talent shortfalls, these goals are simply unattainable.
6. Damaged brand reputation
High turnover rates spell bad news for your brand’s reputation. Customers appreciate continuity after all, with inconsistent service levels and constant changes to your team appearing unprofessional. Your reputation as an employer is also likely to take a hit. What does a high employee turnover rate say about you as a business? To a candidate looking for work, a high turnover rate driven by involuntary departures doesn’t inspire confidence and suggests job security.
Common causes of high employee turnover
What causes high employee turnover? If you’re struggling with low retention rates, you’ll need to get to the root of the problem. Below are some of the most common reasons for high employee turnover that you’ll want to look out for.
1. You’re underpaying your employees
If you’re paying less than your competitors, this is bound to have an impact on your turnover rate. Big salaries aren’t the be-all and end-all, but you need to be offering other benefits to employees to secure their loyalty. What’s more, businesses need to be responsive to inflation. If low rates of pay haven’t sent your staff packing, stagnant wages will.
2. Your teams are overworked
Overwork your employees too much, and you risk losing them for good. This may already be a symptom of high turnover, with depleted departments having to cover the shortfall of departing colleagues. Some employees may experience burnout, while others will simply refuse to accept this is the new normal. In either case, you’ll be adding to your turnover rate.
3. No career advancement
Some employees may be happy to coast in undemanding roles indefinitely. However, most will want some degree of advancement. If you’re not offering professional development opportunities or providing pathways to promotion, ambitious employees will be looking elsewhere for them.
4. You’ve hired the wrong people
First-year turnover is a major problem for many businesses. This can happen for a multitude of reasons. A new hire might have received a better offer from another company or feel unchallenged in their new role. Others may not have the skills and experience promised in their application, while some may simply prove a bad fit with your organisation.
5. Employees are being managed badly
Bad managers have a habit of outstaying their welcome and flying under the radar of their superiors. If an employee isn’t being recognised for their work or given the feedback they need to thrive, they’ll consider alternative employment options. Other times, toxic behaviour and misconduct from managers may trigger mass resignations.
High employee turnover solutions
Have you had a shock after calculating employee turnover? Now’s the time to be proactive and take steps to reduce turnover for good.
1. Offer competitive salaries and development opportunities
Unless compensation is on par with your competitors, low pay will continue to play a role in high turnover. Upping starting salaries and committing to pay rises aligned with cost-of-living increases will help you retain employees and attract a better calibre of talent. If you don’t have much flexibility with pay, at least ensure you’re offering employees other perks like flexible working, professional development pathways, and growth opportunities.
2. Make senior leaders and managers accountable
If you suspect bad leadership is at the root of high turnover, it’s time to make those in management positions accountable. Some may need a little nudge to drive productivity and provide their direct reports with the support they need. Others will need to undergo a more fundamental rethink of their management style.
3. Play to employee strengths to keep them engaged
A lack of employee engagement is a key cause of high turnover. To overcome this, look to your teams to find out what areas they excel in. Some may be better utilised in another department, with a new remit just the thing to inspire engagement and turn them into loyal assets.
4. Reconsider your approach to recruitment
Bad hiring decisions are often the cause of first-year turnover. If candidates are lacking essential skills and experience, refine the screening process. Are new hires struggling to adapt to your company culture? Make sure your organisation’s core values and beliefs are integrated into everything from job descriptions to the onboarding process.
5. Listen to what your employees have to say
Ultimately, it’s your employees themselves who can give you the clearest picture of what’s causing high turnover. To unlock this employee experience, use anonymous feedback surveys to see what your teams have to say about your organisation. For more involved feedback, consider hosting interviews with your employees and ask for their input regarding everything from compensation rates to company culture.
How to deal with high employee turnover
Once you’ve identified what’s keeping employee turnover high, you can start making changes. For most businesses, there’s no single high employee turnover solution. Instead, you’ll need to adopt a multi-pronged strategy to retain your staff longer.
Whatever actions you’re putting in place to tackle turnover, one area worth focusing on is recruitment. Are people rarely seeing out their probationary period before abandoning their role? Are new hires hot-footing it to competitors frequently? There’s an obvious problem with your hiring process.
Successful recruitment is far from straightforward, especially if you’re depending on a small team and manual processes. Missed communications can take the best candidates out of the race, while a second-rate tracking system increases the odds of someone slipping through the cracks. With recruitment software such as Teamdash, you can overcome all these hurdles and more.
A well-rounded applicant tracking system will provide you with instant oversight about every eligible candidate, including where they stand in the process. What’s more, the best software will allow you to broaden your reach, connecting with as many job boards and networks as possible. Furthermore, automation will make human error history. By enabling automatic reminders, email communications, and interview scheduling, nobody gets forgotten about.
Keen to see how recruitment software can help with retention and lower high turnover rates? Why not arrange a Teamdash demo today?
