What is Employee Turnover? A Comprehensive Guide

People move on to new pastures all the time, but your company shouldn’t hold the door open or shoo them out. Let’s explore how to keep your employee turnover rate as low as possible.

Employee turnover is an unavoidable part of the working world, but that doesn't make it any less frustrating.

While there's no magic solution, there are some steps you can take to reduce turnover and create a workplace employees want to be a part of. Let’s dive into why employees leave organizations and what HR pros can do to reduce high turnover rates.

What is Employee Turnover?

Employee turnover is the rate at which employees leave an organization and are replaced with new people.

High staff turnover rates can have significant impacts on your organization, like:

• Increased recruitment and training costs
• Reduced productivity
• Staffing shortages
• Decreased morale among remaining employees

Conversely, low staff turnover rates generally mean a stable and satisfied workforce.

HR departments analyze employee turnover data to identify patterns, address issues, and retain top talent. A healthy turnover balance brings in fresh perspectives and skills while minimizing the negative effects mentioned above.

To find this balance, first understand turnover comes in two different forms: voluntary and involuntary.

Voluntary Turnover

Voluntary turnover is the rate employees willingly leave their jobs or resign from an organization.

Employees decide to leave for different reasons, like career opportunities, dissatisfaction with their job role, or a poor work-life balance. Whatever the driving force, voluntary turnover is an employee’s own choice.

Involuntary Turnover

Involuntary turnover is when employees are terminated or laid off by a business.

This type of turnover also occurs for various reasons, like poor job performance, company restructuring, budget constraints, and disciplinary issues. Regardless, employers always initiate involuntary turnover.

Keeping involuntary turnover minimal where possible can help avoid negative impacts on employee morale and productivity.

Learn More: How to Calculate (And Analyze) Employee Turnover Rate

Why is High Turnover So Costly?

Although employee turnover is natural across all industries, higher employee turnover can cause significant challenges for any business.

• Cost: HR professionals know how much money, time, and energy it takes to find new workers. You have to advertise job openings, conduct interviews, and onboard new hires. All of this adds up — replacing an employee can cost one-half to two times their annual salary.
• Productivity: Even with all the motivation in the world, a new employee will rarely be as effective right away as their predecessor. New employees take time to get up to speed, which can dent your productivity — especially if you’re losing and replacing people at a high rate.
• Morale: Nobody likes being left behind. It’s difficult enough when one of your work friends leaves. But if a company’s employee turnover rate is high and you’re losing people left and right, those who remain might start feeling completely abandoned and also look elsewhere.

Morale and employee engagement may be harder to quantify than the financial bottom line, but you shouldn’t underestimate them. Negative feelings affect overall team performance, innovation, and creativity. A high employee turnover rate can also impact your organization’s reputation, making it harder for you to attract and retain top talent.

What Causes Employee Turnover?

Employees leave for many reasons, and it’s important to note that not all of them are negative or even avoidable. However, there are preventative measures you can take to avoid a high turnover rate.

Burnout

With 65% of U.S. workers claiming to experience significant stress levels at work, the likelihood of burnout is real. Especially if those employees consistently face any of the following:

• Excessive workloads
• Long hours
• Minimal support
• Poor work-life balance

Burnout is a state of emotional, mental, and physical exhaustion that can lead to disengagement, reduced productivity, and ultimately, the decision to leave a job.

To combat this, prioritize employee well-being, promote work-life balance, and implement strategies to effectively manage workload and stress. Support employees' mental health by providing the resources they need to thrive in their roles.

Learn More: Employee Burnout: Symptoms, Causes, and Solutions

Limited Development Opportunities

People crave variety, and employees may leave a job if they feel stuck in a routine. Especially if they think there are no opportunities for growth or advancement.

Limited chances to learn new skills or advance in their careers can lead to disengaged workers, which can spark the desire to move on.

Negative Work Environment

Poor management. Lack of support. A toxic culture.

.... You just thought of a previous job, didn’t you?

Sadly, many of us have experienced a negative work environment. It’s no surprise these factors significantly contribute to a high turnover of staff. Employees who feel undervalued, experience managerial conflicts, or face constant pressure are more likely to seek other employment options.

Feeling Underappreciated

Few things are worse than working relentlessly on something and not getting even a pat on the back. Employees who believe their efforts and contributions go unnoticed or unrewarded can become disengaged from their work — and who can blame them?

Lack of recognition and appreciation can lead employees to seek validation and acknowledgment somewhere else. Implement recognition programs and seek regular feedback to create a culture that values and celebrates employees’ efforts. Demonstrate appreciation for their hard work and dedication to improve job satisfaction and retention.

Poor Work/Life Balance

It can be a challenge for employees to juggle their professional responsibilities alongside their personal commitments. Worse, imbalances can negatively impact their overall well-being and quality of life. They may look for different jobs that offer a better balance between work and personal life.

Dissatisfied with Wages

Money talks — 20% of U.S. employees voluntarily left their companies in 2022 because they felt underpaid.

Workers who feel their compensation doesn’t align with their skills or market value for their roles may seek better-paying careers.

Personal Reasons

In 2022, 9% of workers gave notice they were leaving for personal reasons.

Unfortunately, that can cover a wide range of diverse possibilities. Perhaps workers have family obligations or health issues, or maybe they’re considering further education or new personal goals.

Lack of Advancement Opportunities

Employers love to watch their people flourish. But limited growth prospects can prompt them to look for new challenges at other companies. Star talent may leave if they feel they’ve hit a ceiling at your organization.

Retirement

Retirement is a natural and expected cause of worker turnover, but it isn’t something employers should fear.

No company should begrudge anyone this well-earned reward. Still, it’s vital to prepare for it — particularly if key employees with valuable expertise retire without a proper succession plan in place.

How to Reduce Employee Turnover

Clearly, the examples above aren't all negative or even within your control. But you can influence many of them.

Here are some best practices for minimizing your employee turnover rate.

Listen to Current Employees

Don’t think it’s up to you alone to find the answers.

Conduct regular employee surveys and focus groups to gather feedback about everyone’s experiences, challenges, and suggestions. Create an open and supportive communication culture to make your employees feel comfortable expressing their concerns or ideas. Act on received feedback and make necessary improvements to address pain points or issues.

By valuing and incorporating their input, you demonstrate that their opinions matter.

Create a Culture of Celebration

Give employees consistent feedback and acknowledge their accomplishments or efforts, both publicly, and privately.

Recognize and reward hard work to foster a sense of appreciation and motivate commitment to your organization. Take this to the next level with peer recognition software that allows employees to recognize each other.

Use An Effective Recruitment Strategy

Make sure a thorough and thoughtful selection process is part of your employee recruitment strategies.

Identify candidates who align with your company's values, culture, and long-term goals. A clear job description and transparent interview process help set realistic expectations for both parties.

Hiring individuals who are a good organizational fit from the beginning increases the likelihood of long-term employee retention.

Perfect Your Onboarding Process

You want your new hires to walk through the door (physically or virtually) and feel like they’ve made a good choice. Organizations with a structured onboarding process see 50% greater new hire retention. Create a comprehensive onboarding program that introduces them to your company culture, policies, and responsibilities.

Provide necessary training, resources, and support to help them integrate into their roles smoothly. Employee onboarding software can help significantly with this.

A positive onboarding experience nurtures a sense of belonging and enthusiasm while making employees feel valued and invested in your company. Set a strong foundation from the beginning to foster long-term employee commitment and lower turnover rates.

Offer Flexibility

Flexibility in the workplace can be a useful tool to keep your employees from jumping ship. When your employees have the chance to take the reins on their own work, they're more likely to feel fulfilled and stay on board for the long haul.

When you hear "workplace flexibility", you might immediately think of remote or hybrid work arrangements. While this is one type of flexibility, there are a variety of strategies you can use to give your workers a little more wiggle room. Flexible work might include staggered schedules, easy shift swapping, and even financial flexibility through on demand payment.

No matter what industry you're in, there's probably a way to offer some form of flexibility to your employees. It's just a matter of finding what works for your organization.

Improve Compensation and Benefits

Evaluate your total rewards strategy to make sure it’s on par with the labor market. If employees leave for competitors because they offer better pay or benefits, you might need to up your game.

Keep tabs on more macro industry wage trends (you can do this easily with the right compensation tools) and adjust your compensation structure where you can.

You can also get creative with different types of benefits, like wellness programs, tuition reimbursement, and paid family leave to entice talent with more than just a direct pay increase.

Don’t forget to communicate your offerings with your workforce regularly — they might not be aware! Use a social communication platform to remind employees of that gym membership perk or post the number of the employee assistance hotline. You can even create personalized total rewards statements so employees can see the full value of their compensation beyond their regular paycheck.

Invest In Professional Development

Investing in employee development isn't just good for business — it’s a surefire way to combat employee turnover and build a culture of learning and growth. Provide employees with meaningful and engaging training opportunities to keep them motivated and excited about their job.

Talent development can come in a variety of forms. You can pair up mentors and mentees, whip up some individual development programs, or take a dive into the world of on-demand microlearning.

Minimize Employee Turnover with an Engaging Culture

The right HR and Payroll software gives your company all the data it needs to reduce employee turnover and more, including:

• Increased productivity
• Less stress
• Improved customer service
• Higher profitability

It’s a winning strategy for everyone.

Paylocity's employee engagement, recruiting, and onboarding features can help you keep employees happy and your turnover rates low.

Explore how you can differentiate your employee experience and culture throughout the recruiting process. Paylocity’s solutions fill your roles faster — with the right people. Harness intuitive resources like video tools, texting, and two-way email to make your talent acquisition processes.

Because Paylocity’s onboarding software fully digitizes this process from any device, anywhere, you can kickstart onboarding even before new hires start. Start new hires off on the right foot while leaving you free to focus on running your business.

Request a demo to learn more!