Employee turnover is something that every business experiences. In the US, millions of workers leave their jobs every month, which makes employee turnover a normal occurrence. The problem is, turnover can be very costly for your business.
Not only does finding and training a replacement require time and money, but your business will suffer every day a position remains empty in the form of lost productivity, project delays, and decreased employee morale. That’s why it is best for businesses to do anything they can to reduce their turnover.
In this article, we’re offering six best strategies to reduce employee turnover and keep it at a minimum. Let’s dive right in!
What Is Employee Turnover Rate?
Employee turnover is one of the most important HR metrics that displays the loss of talent in the organization. Some of the most common reasons for the movement of employees out of the organization include resignation, contract termination, layoffs, retirement, relocation, poor management, lack of training and others.
Employee turnover costs companies losses in productivity and money, because they need to invest efforts on hiring, recruiting, onboarding and training. The hiring process alone can take up to 36 days on average, meaning lost profits to the company. HR teams need to calculate employee turnover rate and compare these rates across months and years to increase employee retention.
How to Calculate Employee Turnover Rate?
To predict performance and improve the efforts of the human resources teams, it is important to calculate employee turnover rate. Take the number of separations within a month, divide it by the average number of employees and multiply by 100:
Turnover Rate = (Number of Separations / Avg. number of Employees) X 100%
Companies should aim for the employee turnover rate equal to 10%, but most companies fall into the range of 12% to 20%. To learn whether the turnover rate in your company is high or low, compare it with the average turnover rate in your industry or consult the following diagram that displays average turnover rates across industries in the US.
6 Strategies to Reduce Employee Turnover Rate
1. Hire the Right People
Did you know that a whopping 80% of all turnover results from poor hiring decisions? If you want to keep employee retention at a high level, you need to make sure you hire the right ones in the first place.
The first thing to take into consideration is, of course, whether the employee is the right fit for the open position. However, you should also think about whether they will fit in your company culture. No matter how outstanding a candidate looks on paper, if they have trouble fitting in, they won’t stay around for long. In fact, research has shown that over 30% of new hires who quit within the first three months cite company culture as the reason for leaving.
To figure this out, you need to ask job applicants questions that will tell you how they would react in certain situations. You should also inform all candidates about your company culture; the candidates that don’t fit in will hopefully eliminate themselves.
2. Offer Competitive Salary and Attractive Benefits
One way to ensure your turnover reduces is to offer more competitive salaries. At the end of the day, the main reason why everyone goes to work every day is to earn money.
In addition, offer a benefits package with components such as life insurance and paid time off. See how much other companies similar to yours offer and what kind of bonus packages they have for roles similar to the one you are advertising. Try to offer more than, or at least the same as, your competitors.
Even though this might seem like a great expense initially, bear in mind that the cost of hiring a new employee is double the old employee’s salary; so you are basically saving money in the long haul.
3. More than Just Money
The world of work has changed as a result of the rise of new industries and the increased importance of technology, making pay and benefits just one of many important features of any job.
Flexible working hours, an option to work remotely, and the ability to maintain a healthy work-life balance are some of the key aspects that influence the decision of an individual to change jobs. Opportunities to grow and a sense of fulfillment have also become important factors. Company culture is now one of the main concerns and has become something that many employees seek to improve in order to offer a better work environment.
In other words, if you want to increase employee retention, you’ll need to take into consideration all the things that employees look for in an employer beyond salary.
4. Pay Attention to Engagement
A report by Gallup revealed that teams who score in the top 20% in engagement realize nearly 60% less employee turnover. Engaged employees come to work with purpose, passion, and energy. On the other hand, disengaged employees are very easy to lure: nearly 70% of disengaged workers say they would leave their current role for a 5% pay raise compared to highly engaged employees who would need a 20% raise in order to quit their current job.
The problem is that for many employers, the interest in engagement is limited to the results of engagement surveys. It is not enough to simply run an annual engagement survey; you actually need to take action based on the results and work to build a culture of engagement in your company throughout the year.
5. Communicate Clearly
Clear communication is vital for the success of any team. Sharing values and objectives across all departments will help all team members understand where individual contributions fit in the bigger picture.
Feedback is crucial. Studies have shown that companies that implement regular feedback see nearly 15% less employee turnover. If employees feel like they are talking to a wall each time they try to ask for or provide feedback, they will eventually give up. Establishing a consistent dialogue and regular feedback sessions is a great way to improve the communication between employees and managers, strengthen the relationship between them, and as a result, reduce turnover.
One-on-one meetings are an excellent format for productive communication, but you can also conduct stay interviews on a regular basis and implement exit interviews in order to understand what your workers value and what drives them away.
6. Good Management Is Crucial
An employee’s level of satisfaction largely depends on the relationship with their direct manager. If this relationship is positive, the employee is more likely to be engaged in their role and remain loyal to the company.
Employees want to have regular, meaningful communication with their managers, and not only when it comes to receiving praise. In fact, more than 80% of employees say that they appreciate constructive feedback, regardless of whether it is positive or negative.
On the other hand, employees don’t like to be micromanaged. This is a common problem in modern businesses that often tend to monitor everything their employees do at work with the help of different software products. The good news is, there are tools that allow managers to stay on top of things without smothering their subordinates.
actiTIME is a timesheet tool that neither tracks every online activity of its users nor takes work station screenshots. It is the right piece of software for companies where managers trust their teams, which contributes to increased job satisfaction and, as a result, reduced turnover.
Final Thoughts on Employee Turnover
Remember, every company is unique and your employee turnover rate might be influenced by various factors. Once you’ve established your company’s overall turnover rate and carefully considered why your employees are leaving, you should create a plan of action and take more proactive control. These six strategies to reduce employee turnover will help you get started with making your company one of the few that truly appreciates its team members.
