Employee turnover: Insights & tips to help increase retention

Employee turnover is a major concern for today’s businesses with labour shortages and unfilled vacancies filling the headlines. In this article, we’ll explore the consequences of employee turnover and what businesses can do to encourage employees to stay longer. 

One of the main reasons your company may be looking for ways to reduce employee turnover is the sheer cost involved. Research from Oxford Economics and Unum found that replacing an employee (with a salary of £25,000 per year) costs on average £30,614. 

While employee turnover varies massively by sector, the UK average turnover rate sits at 15%.  Data from the Office of National Statistics highlights the sectors that suffer the most from employee turnover. These include:

• Retail
• Catering
• Telesales and call centres
• Healthcare 

These figures reveal that retail (33%) and healthcare (30%) experience the highest rates of employee turnover. 

From a long-term perspective, these rates of turnover are unsustainable. This is especially true in the health sector where a lack of resources literally puts lives at risk. 

Without taking action to reduce employee turnover, the financial (and often wider) impact in these sectors will only continue to grow. 

Employee turnover: Reasons employees leave

There are a multitude of reasons why employees leave their jobs. Knowing which of these reasons are most prominent among your ex-employees is key to addressing the issue of turnover. 

Although turnover by sector varies, there are still clear patterns across industries. One report suggests that the top reasons for employees leaving have hardly changed over the last nine years. 

The top causes of employee turnover are: 

1. Limited career opportunities 
2. Poor work-life balance
3. Lack of flexibility

Let’s delve deeper into these reasons and others. 

Limited career opportunities 

Career-driven employees are hungry for opportunities to develop their skills and progress through the company. Understanding your employees’ motivations when it comes to their career goals means you can provide them with opportunities that will satisfy them.

If your company has a rigid organisational structure and managers who aren’t willing to help their employees progress, then you risk losing your most motivated employees and driving up your rate of turnover.  

Poor work-life balance

Achieving a good work-life balance tops many employees’ lists when it comes to what they want from their job. 

Happier employees are more productive. But even more importantly, employees who have the time and energy for hobbies, relaxing with family, and to pursue other passions are generally in better health, both physically and mentally. 

Employees who feel like they lack control over their work, have to meet unrealistic demands, and are stressed are less likely to achieve a healthy work-life balance. These employees are at risk of finding another company that does help them achieve the life they want to live.  

Lack of flexibility 

More than ever, employees value flexibility when it comes to their job. This means that they appreciate a company that offers flexibility in terms of time off, working hours, and even flexible pay (also called on-demand pay). 

Those companies that offer a good level of flexibility are likely to have lower rates of employee turnover.

COVID-19 led to millions of previously office-bound employees enjoying a sense of flexibility by working at home. While many are now heading back to the office, there are still employees who prefer the flexibility of their home office and to avoid a daily commute.  

Dissatisfaction with benefits 

It’s very common for employees to compare benefits packages of companies and they’ll use this information to guide their career decisions. 

The most sought-after employee benefits include flexible working, a good pension, sick pay and free eye tests, surprisingly.

For detailed insights into which perks are most popular among employees, take a look at Employee Benefits’ article Jobseekers’ most sought after perks ranked. 

Not being paid enough 

While not right at the top of the reasons why employees leave, pay is still a big one. Employees are in a prime position to demand the rate of pay they want, and many of them are. 

Employees who feel underpaid are more likely to feel undervalued by their employer. This can become a breeding ground for low morale which can have a wider impact on their teammates too. 

Companies paying below-average rates for their sector may find their rate of turnover is higher than average. It’s worth bench-marking pay rates in your sector or according to specific job roles to see how your company fairs with others. 

Manager behaviour 

The type and personality of an employee’s manager dictates whether an employee feels supported, valued, and trusted to do their job. 

Bad managers can cause turnover rates to sky-rocket. The tell-tale signs are when multiple employees from the same team consistently leave the company within a short space of time. 

To address this, it’s vital to have managers who treat their employees with respect. Some management skills need to be learnt, and so training can help with this. Equally, companies need to ensure they’re hiring managers capable of leading teams in a positive way. 

Poor leadership and management will often trickle down into the workforce as a whole. This can lead to a toxic culture and one that, understandably, employees won’t put up with for long. 

Employee turnover negatively impacts your business 

Besides the financial cost of replacing employees, there are other indirect costs that make it clear why addressing high rates of turnover should be prioritised. 

• Increased pressure on your teams 
• Negative impact on your employer brand
• Decreased team morale 

Understand your business’ turnover triggers then act on them

With the effects of employee turnover a reality for many companies, addressing this issue often becomes a strategic priority. Let’s look at some of the ways that employers can help reduce the number of employees choosing to leave:

Employee retention tip 1: Benchmark your levels of employee turnover

The first step is to find out whether your retention rates are higher than normal or about average for your sector. To do this, HR teams need to track employee turnover levels and assess where their company sits when compared to others in their sector.

If your figures reveal that your turnover levels are around 15% or less, then that’s about average for a business in the UK. If your figures are significantly above this, then it’s a clear sign that you need to take action to remedy the issue. 

Employee retention tip 2: Use exit interviews to get honest feedback

The next step is to find out what’s causing your employees to leave faster and more often than you’d like. 

Information from exit interviews can be hugely valuable to your business in terms of knowing what areas to address. But getting honest feedback from leavers can be tricky. These must-ask exit interview questions from Glassdoor may help. 

Employee retention tip 3: Act on what your employees are telling you 

Once you have honest feedback from employees leaving your business, you’ll hopefully start to spot patterns. 

You may not get the full story from feedback alone. You may need to join the dots up and use your gut instinct to identify turnover triggers in your organisation.

While every organisation will tell a different story when it comes to what’s causing employees to leave, there are some common causes as we’ve discussed above. 

Employee retention tip 4: (Continuously) work on your culture 

Achieving the right culture isn’t easy and it certainly isn’t an instant process. Culture requires a combined effort too, and everyone has an important role in forming it. 

Neither HR teams nor managers alone should be responsible for creating the desired culture, but they can of course lead by example. 

Employee retention tip 5: Re-think your benefits package

When was the last time that your business reviewed its benefits package? The trend towards remote and hybrid working means than the needs of employees have changed. Now is a great time to take stock of what you’re offering.  

Many companies tend to offer employee benefits that align most closely with their goals and ethos. For example, if allowing your employees to live their best possible life is important to your company, then offering them benefits that give them flexibility is a great place to start. 

A new, flexible benefit worth exploring is on-demand pay (often referred to as a salary advance or flexible pay). This is a financial wellbeing benefit that’s experiencing a boom. Crucially, on-demand pay delivers positive gains for both employers and employees.

Target employee turnover from multiple angles for the best results 

It’s unlikely that there will be a silver bullet to reshaping your turnover curve. Improvements in multiple areas of your business will give you the best chance of seeing an upward turn in retention, with specific focus on the areas you know are most problematic for your company.