The Great Resignation and quiet quitting made the headlines not long ago, and these trends are still top of mind. They both point to employee dissatisfaction, and employers need to reflect on the why.
So, what is the main cause of employee turnover in 2023? Let’s get into it! In this article, we’ll examine the following:
- What is employee turnover
- The main causes of employee turnover
- What employers can do to reduce employee turnover
What is employee turnover?
Employee turnover is the number of employees who leave an organization within a specific time period (typically a month or year).
It can be revealing to study the turnover rates among those recently hired and those who have longer tenures. Many employers today face challenges in hiring qualified applicants. That reality means it’s even more critical to retain existing talent.
The effects of employee turnover
Here are some of the common reasons why a high employee turnover rate can harm an organization:
- Higher recruitment costs: When your employee turnover rates are high, you’ll spend more money and time recruiting, interviewing, hiring, and training new employees.
- Reduced revenue: With less-experienced employees, your organization will be less productive, resulting in less revenue and lower profit margins.
- Lower employee morale: When an employee leaves, you’ll see the impact on remaining employees and the company culture. Many of those workers will need to take on additional responsibilities. They may be more stressed and question why their colleague(s) left. All these factors have a damaging impact on employee engagement and morale.
- Loss of institutional memory: If turnover rates are high among experienced employees, you’ll lose out on collective knowledge and experience.
How to calculate the employee turnover rate
To understand employee turnover, it’s important to calculate the employee turnover rate. In addition to calculating an overall rate, organizations may want to measure based on the unit, role, or tenure. Measures by manager or seniority are other factors to consider.
Most employers assign the task of managing employee turnover to the human resources (HR) department. Your organization will need to agree on several definitions to calculate the rate, including:
- Employees to cover: Will you include full-time, part-time, and seasonal employees?
- Head count: This total number of employees (based on how you define “employees to cover”) is used throughout the calculation.
- Frequency: How often will you measure the turnover rate? The Society for Human Resource Management (SHRM) suggests using a defined number of measurement periods and calculating the average.
- Separations: What events will count as separations from the company? SHRM recommends using voluntary turnover and involuntary turnover. Furloughs, temporary layoffs, and leaves of absence would not count.
To calculate the turnover rate, take the number of separations and divide it by the average number of employees. Multiply the result by 100. This gives you a percentage, which is your rate.
When measuring employee turnover, it’s important to measure over multiple time periods. Doing so allows you to spot trends and gauge the impact of preventative measures.
Turnover versus attrition
Employees leave for many reasons, several of which may be more benign than others. Attrition is one type of employee departure that may be more agreeable than turnover. The key difference between attrition and turnover is that with attrition, the positions are not replaced. Typically, this occurs when an employee leaves for retirement or for medical reasons. However, attrition may be voluntary or involuntary. For example, some employees may take an early retirement package as a result of downsizing.
Retention is related to attrition and turnover. Retention rates are the percentage of employees who remain with an organization during a period of time. High employee retention rates are usually a sign of a healthy organization.
Employee turnover rates in the United States
The U.S. Bureau of Labor Statistics (BLS) measures employee turnover in several ways. “Quits” is a term that defines employees who voluntarily separate from an employer and it is a measure of employee willingness and ability to leave a job.
“Quits” is one component of what the BLS labels as separations. Other separation types include layoffs, discharges, and those due to retirements, death, disability, or transfer within a company.
In January 2023, the total separations were 5.9 million or 3.8 percent (as a measure of total employment). Quits were a large component of that total, with 3.9 million or 2.5 percent. In 2022, the BLS reported quits totals ranging from 4.1 million to 4.4 million.
10 causes of employee turnover
The top causes of employee turnover represent a range of issues and concerns. Here is a closer look at the top 10 causes. They include:
- Poor company culture
- Lack of recognition
- Poor compensation
- Lack of benefits
- Lack of opportunity for growth
- No innovation
- Poor management
- Internal strife
1. Poor company culture
Company culture plays a significant role in employee engagement and turnover. Happiness matters to employees and toxic workplace cultures have a major impact on morale and retention.
Employees who are unhappy with the organizational culture are more likely to look for (and find) new jobs. Here are some of the key indicators of a toxic workplace:
- Persistent gossip
- Failure to address conflicts
- Poor communication
- Lack of accountability
- Inappropriate conduct
A poor company culture means that employees are not invested in the organization or its people. As a result, work output and quality tends to decline.
A toxic culture can have a cyclical impact on turnover. If more unhappy employees leave, it can inspire others to do the same.
2. Lack of recognition
Employees want their employers to recognize their professional achievements. Employee recognition acknowledges the role that an employee plays in the company’s success.
Positive recognition helps to boost productivity and reinforce the value that employers place in their employees. Building a culture of gratitude shows employees they are perceived as more than mere cogs in the wheel.
Reviewing and praising work regularly helps reduce employee turnover. When managers and peers authentically praise and recognize great work, the positive impact can be considerable.
3. Poor compensation
A recent study noted that 70 percent of respondents would take a different job due to low compensation. Employees can typically expect a roughly 1 percent to 3 percent increase in salary by staying in their current position. However, one recent study noted that nearly a third (29 percent) of job-switchers reported an increase of more than 30 percent.
The lack of adequate compensation can also make employees feel as though their work is devalued. In many circumstances, with minimal pay comes minimal effort.
Regular reviews of employee total compensation, with the resources to address gaps, are essential. Even the most loyal employees are likely to leave if the compensation is not competitive.
4. Lack of benefits
Benefits are a type of compensation that can play a major role in an employee’s quality of life. If employees need to pay for their own health insurance, for example, the financial burden could be significant.
Providing a robust benefits package does more than provide an organization with a competitive advantage. It also can greatly impact turnover.
It is important to assess the benefits your organization offers, and how they compare within the industry and region. Consider surveying your employees about the types of benefits that are the most important to them. Many employees are very interested in flexible work arrangements. For other employees, days off for community service, pet insurance, or education benefits may be more important.
5. Lack of opportunity for growth
Do your employees see an opportunity for growth within the organization? Growth opportunities come in many forms, including:
- Internal promotions
- Professional development
- Professional networking
- On-the-job training and certification
- Time and money for continuing education or advanced degrees
Organizations that demonstrate their commitment to career development and professional growth will engender loyalty among employees. If employees see the opportunity to advance, learn new skills, or network, they will be more likely to remain.
Providing true growth opportunities through internal promotions is particularly effective. If employees see colleagues advancing within the company, they may decide to stay with their employer. Conversely, if there are not clearly defined paths for advancement, there is less incentive to stay.
The COVID-19 pandemic forever changed the way we work. The pandemic made it the norm to work remotely, connected via Zoom and Microsoft Teams.
Employees today are looking for increased flexibility. That means working from home or in hybrid situations. There is a desire to be flexible about when an employee works, too. Whenever possible, organizations will need to provide flexible work to attract and retain the best employees.
There are some disadvantages to remote work, with many managers decrying a lack of cohesion and teamwork. However, there are ways to keep teams connected and productive no matter where they are located.
7. No innovation
Employees want to work for organizations that make a difference. They crave meaningful work, which can boost job satisfaction and employee engagement. They are more likely to become excited when companies are tackling important, complex problems.
Innovation is at the heart of many companies. They attract talented, curious employees who want to be a part of transformative work that leads to solutions that have a positive impact.
Now, consider whether your organization is committed to innovation and being a leader in the industry. Employees want to be a part of a winner and innovation is a major incentive for staying.
8. Poor management
There’s a saying that “employees don’t leave companies, they leave managers.” Incompetent, inconsistent, or poor management often leads staff to look elsewhere. Conversely, managers who care for their employees and are supportive often have staff with high retention rates.
Your organization’s managers play a significant role in employee satisfaction, performance, and retention. They are typically responsible for setting and meeting team goals. They are also responsible for giving feedback and evaluating employee performance.
Investing in management development opportunities will improve (or hone) your manager’s leadership skills, which in turn strengthens their team(s). Holding leaders accountable is important, too. If employees feel unsupported or unfairly treated, there’s a high probability of turnover.
Burnout is a major factor for leaving jobs.
A recent Deloitte survey indicated that 77 percent of respondents felt burned out at their present job. According to the survey, employees do not believe their employers are doing enough to improve with workplace stress levels.
The issue is not the occasional major project or weekend work commitment. It’s when overwork becomes persistent, pervasive, and invasive. Overwork is a sign of poor planning, understaffing, and a poor work culture.
10. Internal strife
Conflict is inherent in any workplace. Not all coworkers and managers will get along perfectly with others. However, without strategies in place to deal with workplace conflict, some employees will choose to leave. Having internal mediation tools, team work style assessments, and managerial training are necessary elements to combat turnover.
Diversity and inclusion is also key. If programs are not in place to support underrepresented employees, biases can lead to a hostile work environment.
Can you reduce employee turnover?
It is possible to reduce rates of employee turnover. A focus on employee engagement is one way to increase the likelihood that employees remain with an organization. Employee engagement is a measure of how connected employees are to the organization and its mission. It’s a way to gauge how employees reflect the ideals and values of their employer.
Highly engaged employees are more likely to be productive at their jobs and remain with their employer. Employers with higher rates of employee engagement are more likely to see the following:
- Lower employee turnover rates
- Increased efficiency
- Better customer relations and retention
- Improved work outcomes
- Stronger teams committed to shared outcomes
How do you improve employee engagement? Here are some of the top ways:
- Commit to a healthy work-life balance that values employee time away from the office
- Build a culture that’s positive and focuses on employee strengths
- Promote employees internally and provide clear professional development paths
- Create an inspirational vision that is compelling to employees
- Support professional development through training, networking, education, and certification
- Create meaningful work that inspires and innovates
- Survey employees about compensation and benefits and offer competitive packages
- Provide the right tools for employees, including technology and staff, to do their work properly
- Recognize employees frequently for work well done
- Coach managers to develop strong leadership skills and support their staff
- Be open to feedback from employees about what’s working and what needs to change to improve turnover rates
- Build teams with strategic events and training that reinforce values and the importance of teamwork
- Provide employees with items that ease their lives while at work, such as meals or snacks
- Train new hires properly during the onboarding process. Provide them with the tools they need to excel in their new role.
Employee turnover has many root causes. Disconnected employees often leave due to a lack of vision, commitment, and strong leadership. Dysfunctional work culture and a lack of competitive pay and benefits are other top reasons employees leave.
To combat high employee turnover rates, organizations need to assess their employee retention strategies and take steps to improve them. Doing so leads to more satisfied employees who stay with their employers.