What is turnover in the workplace?

According to recent reports, people are voluntarily quitting their jobs faster than businesses are capable of replacing them, leading to huge financial troubles, with over 4.3 million workers leaving their jobs in December 2021 alone!

As a result of these record breaking retention rates, employee turnover rates have become a hot topic. So what does it mean? And how does it affect your business?

We’ll walk you through everything you need to know about employee turnover, the current trends, and provide some tips for weathering high turnover.

Table of Contents

What Is Employee Turnover?

“Employee turnover” refers to workers parting ways with the institution or company they work for. The “turnover rate,” on the other hand, defines the total number of workers leaving within a certain period of time.

One thing you should know here is that turnover is a generalized term; turnover can occur in different ways, both undesirable or desirable, and shouldn’t be confused with attrition. Let’s have a deeper look at some aspects of these terms.

Voluntary turnover

When an employee leaves a company or institution based on his or her own decision and not the employers’, it’s considered “voluntary turnover.” Voluntary turnover can take many forms including resigning, retiring, moving to a different company or organization, relocating and/or traveling with spouses.

This kind of turnover is usually a common cause of concern among executives because they’re usually unpredictable, out of the employer’s control, and can cause major disruptions in the workplace. Additionally, voluntary turnover can also be costly, whether directly (retiring) or indirectly (losing top talent).

A recent report resulting from Gallup in partnership with Workhuman found that creating a culture of recognition can save a 10,000-employee company up to $16.1 million in turnover costs annually.

With that being said, voluntary turnover doesn’t always have to be a bad thing, as it can also open the door for fresh and high potential talent to join the organization.

Involuntary turnover

Involuntary turnover is when parting ways with the company happens for reasons that are out of the employees’ hands.In human resources, it is usually divided into two subtypes:

Controllable

The most popular form of controllable involuntary turnover is when an organization terminates an employee’s contract or asks them to resign (while resigning itself is voluntary, if it stemmed from the company’s decision it’s considered involuntary).

The cause is usually due to poor performance, which negatively affects the flow of the workplace or the business itself, or because of the employee’s unprofessional behavior, such as violating one or more workplace policies.

Uncontrollable

Uncontrollable (unexpected) involuntary turnover may include aspects that neither parties are able to control, such as death, disability, and aspects like forced downsizing.

Depending on the situation, involuntary turnover can have some advantages and drawbacks. It can cause concerns among some employees about their job security, but it can also restore the workflow and productivity of those who were negatively affected by a terminated employee.

Turnover vs attrition vs churn

Since the vast majority of turnovers are usually controlled by employers, the term “turnover” is sometimes used to simply describe involuntary turnovers.

The term “attrition” was used to describe the situations in which employees leave the organization of their free will.

The only difference between voluntary turnover and attrition is that employers will not opt to fill the roles of those who resign or leave the company. In other words, the role is left unfilled and the company doesn’t “turn it over” to new employees.

Lastly, churn simply refers to the overall number of employees who end up parting ways with the company, including both turnover and attrition.

What Causes Undesirable Turnover?

When turnovers are unexpected and you end up losing top talent, it can cause noticeable hiccups in the day-to-day operations of a workplace. For that reason, all business owners and executives should keep the reasons behind employees’ departures in mind as well as the events that trigger a sudden leave.

This helps in retaining top employees, but also improves work efficiency and helps you handle those unexpected events when they inevitably come up again.

Reasons employees leave

Here’s a quick look at some of the reasons why employees might part ways with a company, whether positive or negative:

• Employees are dissatisfied with their pay and are aspiring for a higher salary, which also includes other companies offering them unsolicited job offers with higher pay
• Employees feel underappreciated and overworked by their employers
• Personal reasons, such as marital problems, divorce, resignation to take care of an ill family member, relocating to a new city, or inheritance
• Looking for new challenges or seeking a new field of work, including starting their own business
• Seeking another job title in a company with better career advancement opportunities
• Conflicts with company policies and visions or with the workplace culture as a whole
• Trying to strike a better work/life balance

How Can Businesses Tell If Employees Are Ready to Leave?

High turnover can be a big problem for companies, making it important to be able to identify the signs of an employee ready to leave, so that the business can work to mitigate these reasons going forward. And while this may not be enough to save the employees already planning on leaving, it will certainly save time and money in the future.

Some of the most obvious signs of an employee with one foot out the door include:

• Noticeable decrease in the employee’s productivity level
• Showing less interest in committing to long-term plans and projects
• Taking longer vacations and more time off than they usually do
• Privately or openly expressing dissatisfaction with the workplace environment or their managers
• Showing more activity on job finding apps and websites, such as LinkedIn
• Avoiding social events held in the workplace or leaving as early as possible
• Obvious lack of enthusiasm or interest, especially when dealing with patrons, clients, and customers
• Sudden changes in attitude despite lack of changes in the workplace environment
• Excessive excuses and early leave requests
• Lack of contribution and engagement during business meetings or conference calls

5 common causes of high turnover

Although there’s a wide variety of reasons for a company to have a high turnover, there are a few reasons that make up the majority of the causes. Let’s check them out:

1. Workplace changes

Sudden changes in work environments or policies is one of the most common reasons that drive employees to leave or mandates the company to lay off a portion of its workforce.

This can also include mergers, financial issues that call for downsizing, etc. Unlike other reasons on the list, this one is the easiest to forecast/expect, as it’s usually initiated by the employers rather than employees.

2. Compensation problems

When workers feel that they’re not properly compensated for their efforts, they start considering alternatives that can offer them better pay or benefits. In fact, it was the most common reason why people left their jobs in 2021, according to Pew Research Center.

3. Bad management

According to a report by GoodHire, up to 82% of employees said that they would leave their job because of a bad manager. Not only that, but another report by DDI Frontline Leader Project found that 57% of employees did leave because of bad management.

4. Negative workplace environment

Besides bad management, a survey by FlexWork found that toxic workplace culture is the main reason why workers quit their jobs.

A problematic workplace environment can take a lot of forms, such as overworking employees, lack of flexibility, pervasive fear of failure, and many more. Even having a high turnover rate itself can contribute to a negative workplace.

In fact, combined with low pay and lack of opportunities, a toxic workplace environment makes up the majority of reasons behind unexpected mass resignations and huge turnover rates, according to the same report by Pew Research Center previously mentioned.

5. Career advancement

This one is also quite common, whether the company doesn’t offer a chance for career advancement or workers find new job opportunities that allow them to take a step up in their career.

In fact, companies with career development opportunities retain their workforce by around 34%, according to Business.com.

The Gallup-Workhuman report found only 18% of employees strongly agree they can see a path to growth at their organization. When employees receive more recognition, they are more confident in their path forward. Those that receive mostly public recognition are more than 2x as likely to report seeing a development path than those receiving private recognition.

2022 Employee Turnover Trends

The COVID-19 pandemic, while the catalyst for the Great Resignation, wasn’t the root cause for mass resignations beginning in early 2021. Wage stagnation amid rising cost of living, the desire for flexible or remote work environments, and general job dissatisfaction continue to contribute to high quit levels across industries two years later.

When asked, “Do you plan to look for a new job in the next 12 months?” more than one-thirds (38%) said yes. In comparison, a December 2019 survey found nearly half as many (21%) were looking for a new job.

When Workhuman asked employees again in August of 2022, 37% of respondents were planning to leave next year.

According to a report by Gartner, the 2022 employee turnover was forecasted to jump by 5.5 million employees when compared to the pre-pandemic average (from 31.9 million to 37.4 million).

How Does High Staff Turnover Affect Business?

Now that you know more about employee turnover rates and some of the factors that can increase them, , you might be curious about their impact on business, and whether they’re a serious problem.

In the following section, we’ll take a closer look at the common effects of having a high turnover rate.

5 effects of high employee turnover

Having a high turnover rate can have some detrimental effects on your business. Let’s have a quick look at some of the most consequential impacts:

1. Disruptions of the workflow

One of the immediate results of having a high turnover rate is reducing the overall productivity of the workplace. When a company lays off a large number of employees every year, it puts a lot of pressure on the existing workforce.

This can cause noticeable disruption of the workflow while the business tries to acclimate to the new changes. In fact, even if you manage to quickly hire replacements, they’ll still need some time to adapt to their new roles.

2. Low workplace morale

If current employees are getting more and more overworked due to the extra workload, the general morale of the workers will start to deteriorate.

Besides adding more responsibilities to the current workforce, even if temporary, having a high employee turnover can also make the employees more insecure about their job stability. Low workplace morale causes anxiety, which also affects the general productivity of the workplace.

The problem is that studies found that 1 out of 4 employees will quit their job due to mental stress. In other words, having a high employee turnover can itself lead to more resignations!

3. Financial losses

Any company that has a high turnover rate is prone to lose more money than it would if it retains its workforce, which happens for a variety of reasons. For example, the company will spend more money in order to recruit new employees to replace those who left. Additionally, the new employees might cause a reduction in return customers and client satisfaction rates due to low experience.

4. Creating a negative workplace reputation

Employees also do their research while finding a new job, and one of the main deterrents that some employees will try to avoid are companies with high employee turnover. Reports from the ADP survey show that only 1 out of 5 employees feel secure at their job and consider job security a priority while seeking a new job.

Meanwhile, studies show that job security also has a major impact on employee engagement, with researchers finding out that engagement is likely to drop by more than 37% among insecure employees and those who are worried about their job stability.

5. Risking the loss of talented and experienced employees

While some jobs have relatively higher or lower employee turnover rates than average, laying off many employees puts the company at a huge risk of losing irreplaceable and highly talented ones. This doesn’t have to be through involuntary turnover, but also voluntary.

As previously mentioned, having a high turnover rate on its own is enough to push some employees to quit their job or seek other job offers.

How to Identify Employee Turnover Rate Issues

We’ve previously discussed how employee turnover rates can cause a variety of problems to a business or an organization. Luckily, there are ways to identify and then mitigate those problems.

Since high rates of employee turnover can be such an expensive problem, you want to make sure you identify issues early. Here are a few steps you can take to get started:

Step 1: Measure your monthly turnover rates

Turnover rates can vary and change depending on variables including industry, time of year, and economic trends, among other things. To identify issues, you need to calculate your monthly employee turnover rate and track it over time.

Benchmark your company’s average against your industry’s average or your organization’s desired average to see how the business is measuring up.

How do you calculate employee turnover?

To measure employee turnover rate, divide the number of employees who left by the average number of employees, then multiply by a hundred.

The average number of employees is calculated by adding the beginning and ending number of workers in the company during a certain period, then dividing the total by 2.

What is a good annual turnover rate?

Turnover rates are rarely 0%, and people leaving a company is bound to happen. Not only that, but turnover rates are not always a bad thing unless they’re too high, especially if you can’t hire people to replace those who left as fast as you should.

The average annual turnover rate varies depending on the industry, but in most cases, a healthy annual turnover rate is around 10% or lower.

According to the Bureau of Labor Statistics, the average turnover rate reached 57.3% across all industries in 2021, with 25% of them stemming from voluntary turnovers.

Step 2: Conduct exit interviews

The best way to understand why employees are leaving is to ask them. Prepare thoughtful questions soliciting advice for improvement or to better understand challenges from the employee’s perspective.

Remember that departing employees may be leaving under different circumstances, so your best bet for receiving honest and helpful feedback is to approach the conversation with an open mind.

Step 3: Use employee surveys

Using regular employee surveys like engagement or satisfaction surveys with questions about the workplace environment, work-life balance, and career development. If you identify a problem in a broader survey, customize a more specific survey to dig into the problem and possible solutions.

Surveys can also help you gauge to see if current initiatives have been working. A few questions in semi-annual or quarterly surveys can help you measure impact over time.

You can also solicit anonymous feedback to encourage employees to be more honest and open.

Step 4: Make changes

Now that you have a wider perspective on turnover rates, all that’s left is to self-evaluate, add your own vision, and try to implement solutions to improve retention rates in your company.

If you’re wondering how to reduce employee turnover, there are plenty of methods that can help you reduce turnover rates. The five most valuable retention tips are:

• Make sure that employees are well compensated
• Maintain a healthy workplace environment
• Appreciate the employee’s work
• Make sure that you have great managers
• Provide opportunities for career growth

FAQs

What are the different types of employee turnover?

There are different ways to classify the types of employee turnover. For example, the types of employee turnover can be either voluntary or involuntary, depending on who makes the decision to part ways with the other.

Turnovers can also be classified depending on their benefit to the employer as well as the workplace productivity, which is considered positive (functional) or negative (dysfunctional).

What is the difference between turnover and churn?

A company’s turnover rate describes the number of workers that leave an organization, whether by the termination of the contract, resignation, or any other reason. However, the company seeks to replace them with new employees to fill their roles.

Churn rate describes the rate at which a company part ways with its employees whether they’re going to replace them or not.

Is 20% employee turnover high?

Ideally, companies should aim for a turnover rate under 10% to maintain stability in the workplace and focus on growth rather than hiring new talents and workers.

With that being, the average turnover rate in most businesses ranges from 12% to 24%, so 20% is within average, although a healthy company should try to keep it lower than 15%.

Conclusion

There you have it! A brief guide that walks you through everything you need to know about employee turnover as well as the factors that affect its rate and tips to retain top talents in your business.

As you can see, turnovers are not always a bad thing as long as you keep it to an acceptable range and replace poor performers with top employers and talents.

What are the 3 types of turnover?

What does turnover in a job mean?

What are four types of employee turnover?

What is employee turnover example?