Many companies want to reduce employee turnover. In fact, 87% of employers agree that improving retention and reducing turnover are critical priorities. However, it’s not always a straightforward task.
Let’s take a hard look at turnover in the workplace, including impacts, employee turnover rates and more. Then, we’ll get into how to reduce turnover with 15 proven tactics for increasing retention.
Voluntary vs. Involuntary Turnover
It’s important to know there are two types of turnover: voluntary turnover and involuntary turnover. Both cost companies money and time, but they have very different causes and solutions.
There are a variety of reasons for voluntary turnover. SHRM lists the following as the most common reasons people quit:
- Career Development (22.2%)
- Work-Life Balance (12.0%)
- Manager Behavior (11.3%)
- Relocation (10.2%)
- Compensation and Benefits (9.6%)
- Well-Being (8.4%)
- Job Characteristics (8.1%)
- Retirement (6.3%)
- Work Environment (5.2 %)
Involuntary Turnover is responsible for the remaining 6.7%.
Involuntary turnovers include terminations and layoffs. There are several reasons for involuntary turnover, including unsatisfactory performance, culture fit issues, terminable offenses, company bankruptcy and more.
Average Turnover Rate by Industry
Some trades are more susceptible to turnover than others. Here are the industries with the highest average turnover rate (based on the Bureau of Labor Statistics 2019 Report).
Average Turnover Rate by Industry In 2019 (sorted from highest to lowest):
- Arts, entertainment and recreation (79.9%)
- Leisure and hospitality (78.8%)
- Accommodation and food services (78.6%)
- Construction (64.8%)
- Professional and business services (63.3%)
- Trade, transportation and utilities (49.4%)
- Mining and Logging (47%)
- Other services (42.8%)
- Information (38.4%)
- Education and health services (33.3%)
- Manufacturing (31.3%)
- Financial activities (28.7%)
- Government (18.7%)
No matter the industry or turnover type, the impacts of high employee turnover rates can be disastrous.
Harmful Impacts of Employee Turnover
High turnover rates can be costly. Poor employee retention negatively impacts a company in myriad ways, and one such way is the strain put on recruiters to constantly re-fill positions vacated by turnover. Not only is the added workload problematic, but a tarnished employer brand due to high turnover makes recruiting exceedingly difficult.
No one wants to work for a company that keeps losing its employees. High turnover signals to prospective talent (and the world) that employees are not being treated well. However, there’s more to the problem than public perception and attracting new talent.
Research from the Society for Human Resource Management shows that every time an employee leaves, it costs a company about one-third of that employee’s annual income.
In hard numbers, it costs around $15,000 every time a company loses an employee who makes a $45,000 salary.
It’s not merely hard costs. There’s also a loss in productivity. Every time a company loses an employee who knows how to do their job, they have to spend significant time finding and training a replacement. These productivity losses are much harder to quantify, but they can be devastating to a company’s bottom line.
Each time a business loses an employee, it must replace, retrain and graft the new employee into the company’s culture. This constant disruption can severely impact company morale. If employees routinely see people coming and going, they’re less likely to get close to new hires and engage, less likely to trust in the company and its leaders, leading to more turnover and less productivity.
It should come as no surprise that companies strive to improve retention and avoid these many negative impacts. Here are 15 solutions proven to decrease employee turnover.
15 Tactics to Reduce Employee Turnover
These tactics are based on extensive employee turnover analysis. If you’re wondering how to decrease employee turnover or how to prevent employee turnover altogether, start here.
1. Hire the Right Talent From the Start
Low turnover starts with the hiring process. Companies must look for people who aren’t just skilled but who also fit the culture as well. If new employees don’t share in the company’s values, they won’t last long.
Beyond that, if prospective people don’t have the hard (or soft) skills they need for their job, they’re going to get frustrated and find employment elsewhere — or worse, they’ll have to be fired because they can’t do the job they were hired to do. Businesses can avoid the headache by attracting, recruiting and hiring the right people from the beginning.
2. Don’t Underthink the Onboarding Process
If people aren’t onboarded and adequately trained, they’re being set up for failure. Expectations about the company and position should be set during the onboarding process. However, if a company’s onboarding process isn’t well-thought-out, new employees will struggle to thrive in their roles.
According to Glassdoor’s research, a positive onboarding experience can increase retention rates by as much as 82%. So, businesses that want to reduce employee turnover should make sure their onboarding process is ironclad.
3. Pay Generously and Provide Great Benefits
Paying attractive salaries and offering competitive benefits packages are some of the primary methods for preventing turnover. If a company doesn’t pay its people the same rate (or better) as someone else can for the same job, then it should come as no surprise when their employees seek opportunities elsewhere.
When it comes to employee happiness, however, cash isn’t always king. In fact, 80%+ of employees would prefer more benefits to extra pay. This is why many businesses focus on offering competitive benefits packages, including the basics like health, disability, life and retirement.
4. Offer Job Flexibility
Almost 80% of workers want a customizable work environment. Job flexibility includes everything from allowing ample time off to flexible work hours to remote work opportunities and more.
Employees today want to be able to work how they want and when they want, so people are looking for companies that offer them the freedom and autonomy to work in a way that suits their lifestyle. Companies should consider allowing as much flexibility as possible to increase retention.
5. Allow a Work-From-Home (WFH) Option
Studies have shown that having a WFH option can result in a 25% lower turnover rate. For many businesses, if a WFH option is a possibility, it’s worth considering. Even just having one remote day per week can improve employee happiness.
6. Recognize and Reward Great Work
70% of employees agree that their morale and motivation would be significantly improved if managers simply said “thank you” more often. Appreciation for a job-well-done is incredibly important, especially to millennials.
Almost 50% of people surveyed said they would leave a company if they didn’t feel appreciated for their work. Businesses should strive to cultivate an environment of gratitude, making sure their managers and supervisors recognize and reward great effort. Companies can further acknowledge their people’s efforts with things like public praise or lifestyle benefits — our specialty.
7. Hire Enough People
Overworked employees are unhappy employees. There are some studies that indicate burnout can be responsible for up to 50% of annual turnover. Companies with high retention rates always hire enough people so their people don’t have to overwork, leading to burnout at worse, poor performance at best.
However, it’s also important not to over-hire. Too many employees can make people feel overshadowed or unclear about their role within the organization. Companies must identify the sweet spot, so employees have ample opportunity to shine without being overwhelmed by their responsibilities.
8. Create an Engaging Environment
An astonishing 43% of employees are disengaged and bored at work, and those bored employees are likely to leave for more exciting opportunities. Companies must keep their people engaged to increase retention.
The best way to do this is by adequately utilizing their people’s strengths. If people aren’t using their talents, they’re much more likely to find a job that provides them the opportunity to show off their skills and reach their highest potential. Companies should also cultivate a collaborative environment that encourages engagement among their team. Otherwise, they might face losing employees to organizations that are more willing to emphasize engagement.
9. Include Development Opportunities
Another way to retain employees lies in providing development opportunities. Studies show 46% of people report being unsatisfied at work because they aren’t given enough opportunities to learn new skills. Moreover, 70% of employees express interest in leaving their current company for a company that invests in their learning and development. Some companies are paying tuition, while others offer on-the-job development. Both of these strategies can be effective means to support employees in developing and enhancing their skills.
10. Offer Advancement Opportunities
Providing clear career paths is another way to reduce employee turnover. 82% of employees say they’ll leave a job if there isn’t an opportunity for advancement.
Companies should consider paving a career path for employees who want to take advantage of the opportunity. They can even encourage them to take that path with development and on-the-job training. By investing in their employees’ futures, companies help make their employees feel appreciated.
11. Show Respect
A study by Georgetown University showed employees worldwide rank respect as the most important factor of leadership. However, what most businesses (and leaders) don’t realize is that there are two types of respect that are important to people: owed respect and earned respect.
Owed respect is given to all people, regardless of rank or work; it’s universally given. Earned respect is given to individuals based on performance and behavior. While owed respect is important, a lack of earned respect could lead to employees leaving the company, either (1) voluntarily because they don’t feel their work is valued or (2) involuntarily as they are fired for poor performance. After all, why work hard if you are ‘given’ respect no matter what level of effort you give?
It’s also important to acknowledge that earned and owed respect goes both ways. While employees should give owed respect to supervisors, supervisors need to show both owed and earned respect to their people, ensuring they feel wanted, valued and appreciated.
12. Encourage Workplace Friendships
Research shows that people who are friends with their coworkers are happier. People who have close friends at work are seven times more likely to be engaged, productive and satisfied than those who don’t. The majority of people who have six or more work friends say they “love their company.”
Instead of being focused purely on productivity, companies should encourage employees to invest in relationships with each other — whether they work in person or remotely. Companies can encourage remote employees to utilize messaging software such as Slack for more casual communication, or set up a routine virtual event that can be held once a week where employees can ‘hang out.’ No matter the method, meaningful and lasting friendships are essential to retention, even in a remote environment.
13. Cultivate a Culture of Trust
No one likes being micromanaged. Employees thrive when they feel that their leaders trust them and give them space to work autonomously. Building this type of culture is difficult and takes patience. Employees must feel the freedom to fail; otherwise, they can’t grow and can’t take ownership of their work.
Employees need to know they can trust their supervisors and vice versa. This is especially true for millennials, who are twenty-two times more likely to stay with a company with a culture full of trust.
14. Ask for and Listen to Feedback About Management
One Gallup poll found that 50% of employees left their company to get away from a manager. It’s no secret that bad managers can poison a work environment and demotivate talented employees.
Companies should anonymously survey their people regarding their supervisors and take the feedback seriously. If companies ask for feedback and don’t make any changes, employees will lose faith in their leaders. This breach of trust could be catastrophic to retention efforts.
15. Offer Fringe Benefits
A secret weapon to employee retention is making employees feel cared for and supported. One effective way to do that is by offering Fringe benefits. Fringe benefits allow employees to choose the benefits that make the most significant impact in their lives.
Fringe benefits are great tools to support employees in a truly beneficial way. Too many companies offer one-size-fits-all benefits, like monogrammed mugs for every birthday. While some people might appreciate a mug, others might prefer a more personalized benefit, such as a coffee subscription or grocery delivery. Offering flexible lifestyle benefits helps keep employees engaged and allows companies to provide them with benefits that are truly valuable to them.
Keep Employees Happy With Fringe
In reality, there will always be some employee turnover. But, what’s a healthy employee turnover rate? As discussed, the average voluntary turnover rate by industry varies dramatically, but the average rate across all sectors sits between 12 – 15%.
Top companies have their sights set on improving this metric on a daily basis. Using the above tactics, companies will enjoy low employee turnover, reduced costs and a happier workforce.
When it comes to reducing employee turnover, the truth is that there’s no one right answer. Companies should take time to survey people as they leave to find out what isn’t working, and then take time to fix those issues using these 15 tactics for retention.
While data and analytics are immensely helpful in business, those that wish to keep their people must remember that it’s the people that truly matter. When employees feel cared about and appreciated, they simply don’t want to leave.
Learn more about how Fringe Benefits work to help companies retain employees.