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How to Manage Staff Turnover in a Competitive Market

Let's look at what staff turnover really means, how you can calculate it and what to do with the results.
Published 17 Sep 2020
10 min read

Staff turnover affects even the most successful of businesses. It can be for a wide range of reasons; following their partners across the country, wanting to spend more time at home with children, looking into a major change in career, following a career promotion, or going back to study.

Those reasons are tough to address by an employer because they involve life events in the employee’s world outside of work. But, there are many reasons employees leave jobs that aren’t related to big life events – and that’s where employers have an opportunity to strategise in the hope of retaining top talent.

As the ‘Great Resignation‘ begins to sweep across workplaces, we’re taking a look at what staff turnover really means, how you can calculate it and what to do with the results.

 

What is staff turnover?

Staff or employee turnover is the measurement of the number of employees who leave your business during a specified time period (usually one year). There are two types of staff turnover, voluntary and involuntary;

Voluntary turnover

Refers to any instance in which an employee actively chooses to leave a business.

Involuntary turnover

Occurs whenever an employer chooses to terminate an employee.

Within every business, low employee turnover is the goal. The industry standard can, of course, change. For example, industries such as retail and hospitality have a much higher average turnover rate than, say, finance or insurance companies.

The average staff turnover rate in Australia in 2019 was 8.5%. The highest contributor was hospitality with 17.9% turnover, whereas the lowest was public administration at 5.3%. To see how you compare, view the full list of employee turnover rates by industry in Australia here.

A high turnover rate is one that is significantly above the average for the relevant industry. When creating targets for your business, make sure to be realistic by measuring against the industry average rather than the national average.

 

What are the causes of high employee turnover?

You should regularly review your employee turnover rate. Look at who the departed employees were, when they left, and the reason for leaving.

Make sure to track changes in staff turnover rates against changes you make to the business. You may start noticing trends across teams or the whole business that you can then work on.

1. Lack of career path

In a professional setting, it’s only natural that people want to climb the corporate ladder and get more out of their roles. How do we know? In our recent Employee Movement and Retention Report, we uncovered that 48% of workers are planning on looking for a new role within the next year and the main reason explains why.

statistics - are you looking for a new role in the next year - employment hero

The most prominent reason for changing roles? A lack of career progression, with 31% stating this as their top reason.

Whether you’re ready to put your head down and climb the corporate ladder or upskill and make that career shift, you want to be in a role where you have the opportunity to do so. At the end of the day, you’re the one in the drivers’ seat determining how your career progresses. And if there’s no opportunity to grow, you might find yourself thinking of greener pastures – and we don’t blame you.

graph showing the top reason for leaving a role is no career path

2. Toxic culture

When we think of high employee turnover, we often think straight to the culture of the workplace. We’ve all heard of toxic workplace cultures, or worse yet, experienced working in one – and it can make anyone run for the door.

A recent article by the Harvard Business Review – ‘Creating the Best Workplace on Earth’, described the key ingredients for superior organisational health – i.e. a positive workplace culture.

In a nutshell, it’s a culture that celebrates differences, allows for information to flow freely, provides meaningful work and values employees. Unfortunately, we still often hear just one word to describe current organisational cultures – and that word is: toxic.

Prolonged exposure to toxic workplace cultures can foster not only lacklustre performance but also be the reason for your business’ undoing. In today’s highly competitive market, employees won’t hesitate to jump ship when faced with an unhealthy working environment. The worst part? It’s usually your star performers who will opt to leave first.

Too many skilled and experienced people choose to leave their jobs not because of the role itself but because they can no longer bear the heaviness of toxic workplace culture.

“People don’t leave jobs. They leave toxic work cultures.” – Dr Amina Aitsi-Selmi

3. Lack of meaning or purpose in the workplace

Everyone wants to complete meaningful work, and it’s no secret that the Covid-19 pandemic has caused many people to reflect on their career path. When your team doesn’t feel a sense of purpose in the workplace, chances are they already have one foot out the door.

How can you create meaning and purpose at work? 

Inspire your employees to engage in fulfilling work by organising group working sessions and fostering a sense of collaboration. Run a brainstorming session outside the office (or home office) space. Ask your employees to think about the deeper purpose of their work as a team and as individuals. Celebrate each person’s specific talents and encourage them to utilise them in meaningful collaborative projects. It’s the best way to fill them with inspiration and gain a new sense of joy from their current role and workload.

 

4. No employee engagement, recognition or retention strategy in place

No one likes managing employee turnover. That’s why it’s important to have a strategy in place to help prevent it from occurring – and it comes down to the way you manage your employee engagement, reward and recognition, and retention strategies.

You might be wondering how this fits into the process of preventing staff turnover. By improving employee engagement, you’ll automatically improve employee retention. How? There’s a strong link between employee engagement and being happy at work. Happy employees tend to stick around longer, meaning you have a workforce of trusted, reliable and enthusiastic employees.

As you begin to think about the future of your workforce, set aside time to strategise. Create an employee engagement plan, learn how to effectively reward and recognise your team and create a solid retention strategy to help you keep star talent on your books.

If we can guess correctly, you might have a freeze on wage growth, but you’re also under pressure to retain top talent. We know the struggle. If you’re looking for affordable ways to reward and recognise your team, we’ve got just the thing to help you show thanks. Download our in-depth guide here.

 

5.No flexibility or remote working opportunities

No one could have prepared us for what the pandemic threw our way. However, if there’s one silver lining of the past few years, it’s that remote and flexible working has been embraced by many employers around the world. So much so, that flexible and remote working is no longer considered a perk. For many workers in a wide range of occupations, it’s absolutely mandatory. If you don’t embrace remote working or demand your team goes back to the office full-time, you’ll bet your top talent will be ready to jump ship.

Flexibility can mean many things:

  • Working remotely
  • Being able to pick and choose hours or, at a minimum, preferred start and finish times
  • Job sharing
  • Opting for part-time work over full-time work, or
  • Condensing a five-day working week into three or four days.

From an HR point of view, flexibility delivers serious payback to employers. Along with higher retention levels and lower absenteeism, it’s also a key component of employee wellness. Offering flexible working arrangements allows employees to improve their work-life balance, which reduces stress levels. And so, employees with flexible work schedules typically have higher levels of job satisfaction. And while offering flexibility might take a bit of work to set up at first, for most employers, it costs absolutely nothing to offer.

If you’re not offering it already, consider how you can accommodate flexibility in your workplace. Be creative and offer job-sharing opportunities, the ability to condense the working week, as well as working remotely. You’ll be pleasantly surprised at how productive your happy, life-balanced employees are – and you’ll improve your retention rates dramatically!

 

The who, when and why of staff turnover

The who

If a lot of your top performers are leaving, then you should take immediate action. Why? Your company’s performance will begin to fall – and fast.

You want to look at what you could have done to improve the employee experience of that employee or look into any salary discrepancies that may have led them to look elsewhere. On the other hand, if your low performers are leaving, you could stand to gain by enjoying better employee engagement, productivity and profits.

If the majority of your employee leavers are low performing this may be an indication that you’re hiring the wrong people in the first place. The way you look at who leaves your business is otherwise referred to as regrettable and non-regrettable leave.

  • Regrettable leave Refers to when an employee’s departure from a company has a negative impact on the team or business. You don’t want them to leave because they are a good worker, top talent or just a great cultural fit for your business.
  • Unregrettable leave This means you don’t regret dismissing an employee. It’s a good thing. This may be because they weren’t a good fit for your business, or they weren’t performing up to standard.

The when

Be sure to track when people leave your business. Your new employee turnover rate can offer a lot of insight. For example, it can tell you whether your recruitment methods are working.

If a significant number of your new employees leave because they found their job duties different or more complicated than what they were expecting, perhaps you should consider reviewing your job descriptions.

Investing more time and money developing your orientation process could help too if employees leave because of cultural mismatches. You could also consider offering other employee engagement programs like parental leave or flexible working hours if your employees struggle with work-life balance.

If, however, you notice that a lot of old-timers are leaving the business after years of service, you might want to look into your retention incentives. Are you offering them enough of a career path, do you offer enough rewards for their loyal service?

 

The why

When you know why your employees leave, you can change your company’s management style or policies in response.

Exit interviews are a great way to see whether people give similar reasons for leaving or whether they offer useful suggestions for how you can improve. Staff turnover rates can uncover hidden problems within your business that you didn’t know you had.

A high turnover rate is a warning sign you shouldn’t ignore. Review your recruitment processes, change your compensation and benefits plan or incorporate a succession planning policy. Ultimately, if you respond to turnover issues proactively, you will improve your company and retain great employees.

 

How do you calculate employee turnover rate?

When it comes to getting a number against employee turnover, you might be overwhelmed at the thought. However, it’s not as difficult as you might think – a simple equation can help you see how you compare.

When we talk about employee turnover rates, we’re referring to the percentage of people who leave your business, typically over a one month or quarterly period.

The calculation

Number of employees that leave your business in one month ÷ average number of employees in your business in one month x 100  = monthly employee turnover rate 

From here, you can search for industry averages to see how you stack up against others in your field and if your rates are high, make changes to curb it!

 

How to lower your employee turnover rate

1. Hire the right people

Keeping standout employees starts with hiring the right employees. You likely hire employees who have strong skills that match your open position. But, how well do your employees fit in with your business’s culture?

You want to hire those who are a behavioural and cultural add for the job. You can ask employees behavioural interview questions to find out how they react in certain situations. Also, during interviews, be sure to ask some of these great interview questions that could help reveal a toxic employee.

If employees don’t fit in with your work environment, they won’t be happy and will end up leaving the business sooner rather than later.

 

2. Offer competitive pay and benefits

People want to be compensated well. Even the most passionate of employees aren’t just working for the love of the business.

They need to cover standard expenses like housing, utilities and food. And most people want enough money for extras, too. If you don’t pay your employees well, chances are they’re already looking for another business that will.

 

3. Reward and recognition

Your employees need encouragement and recognition. It’s human nature.

Early last year, we looked at how you can set up reward and recognition initiatives that won’t cost your business the big bucks.

Reward and recognition is a huge factor in your overall employee engagement and happiness and one that can help attract and retain top talent. Employees who feel valued for the work they do will show higher levels of engagement with your business. They will contribute more effectively, be more innovative and perform strongly in their role – and that’s a fact. Companies with recognition programs that are effective at improving employee engagement have 31% lower voluntary turnover.

 

4. Career pathing

Like we shared before, building a solid career progression path is top of the list for job seekers. A lot of the time, employees will leave a business when they feel they have no future there, and might even go straight to your competitor.

With this in mind, it’s essential your employees are aware of exactly where their job is going within your business. Nurturing growth and development will help to increase their engagement, boost their productivity and potentially, save time and money on your employee turnover.

According to a survey by Robert Half Finance & Accounting, 40% of 1,200 professionals said their managers never discussed their career journey with them — but the same research revealed a whopping 93% are desperate for this type of information and management. In light of this data, bosses who are not discussing career progression with their workers are missing out on an important opportunity to engage and retain team members.

 

We’ll hold your hand through the goodbyes

Saying goodbye when turnover occurs is hard, but we’re here for you. We’ll manage your employee admin so you can have one less thing on your plate. Whether it’s offboarding checklists, exit interviews or assigning a Hero Passport, we’ll be with you every step of the way. Get in touch with one of our small business specialists and learn how we can make your onboarding and offboarding a breeze.

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