Employee Turnover: Taking Steps to Reverse the Trend

Unfortunately, the era of low employee turnover and noncompetitive talent attraction and retention seems to be fading in the modern, competitive job marketplace. In a number that has been steadily rising since 2011, the amount of total employee turnover in the US in 2014 represented 15.7 percent of the workforce. [1] While this fact alone would not necessarily reflect an increase in turnover as a function of employees, the majority of turnover has been voluntary. In the first quarter of 2015, consistent with past measurements, roughly 60% of employee turnover was reported as voluntary, and 57 percent of turnover stemmed from employees who had been with their employers for less than a year. [2]

In the battle to retain talent, turnover is one of the biggest threats to stability and growth for executives and companies. In fact, according to a survey of senior management members from the American Management Association, 39 percent regarded their potential or actual turnover situation as somewhat to very urgent. [3] These concerns are not baseless; in fact, even discounting issues such as talent shortages, turnover can incur a serious cost for companies.

In data gathered by the Center for American Progress, the typical median cost of employee turnover is 21 percent of the annual salary for employees in the position being replaced. [4] This number might initially seem high, but when factoring in hiring costs, training and management time, and the costs of lost productivity, employers begin to feel severe financial penalties with increased turnover.

There are steps employers can take to reduce turnover and the costs associated with it. For one, increasing employee engagement with the company and their work can have the dual effect of reducing turnover and actually increasing productivity. Gallup reports, in fact, that companies with highly engaged workforces actually outperform their peers by 147 percent in earnings per share. [5] Typically, employees value factors such as autonomy, flexibility, compensation and benefits, and employers who outperform their peers in these factors will also begin to outperform their peers in other sectors.

Benefits have proven to be especially important on this front to increase engagement and decrease turnover, as demonstrated by how employees might react to losing benefits. When faced with the hypothetical situation of losing benefits such as employer-sponsored insurance, up to 15 percent of employees reported that they would be inclined to immediately leave their job, with 36 percent planning to leave within 12 months. [6] When examining the powerful effects of losing benefits, we can also conclude the inverse, that more effective and optimized benefits policies are likely to reduce turnover and produce employees who are more likely to want to keep their relationship with their current employer.

In the competitive talent marketplace, retaining talent is among the most important policies for employers. Pursuing practices and policies that decrease turnover reduces significant costs in replacement, and can lead to better employee engagement, and thus increased productivity. Every company goes about creating a beneficial, engaging environment in different ways, but the one thing that doesn’t change is the need for engaging benefits to fit current and future employees.

[1]: http://www.compensationforce.com/2015/03/2014-turnover-rates-by-industry.html

[2]: http://www.talx.com/benchmarks/turnover/index.asp

[3]: http://www.inc.com/suzanne-lucas/5-reasons-turnover-should-scare-you.html

[4]: https://www.americanprogress.org/wp-content/uploads/2012/11/CostofTurnover.pdf

[5]: http://www.gallup.com/services/169328/q12-employee-engagement.aspx

[6]: https://www.accenture.com/us-en/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Dualpub_18/Accenture-Employer-Beware-POV.pdf