Job Turnover Rates: Understanding the Causes

It's no secret that high employee turnover rates can seriously impact a company's bottom line.

In this post, we'll examine the key factors influencing turnover rates across industries and provide actionable strategies for HR professionals to improve retention.

You'll understand what drives turnover at different companies, learn techniques to benchmark turnover rates, and discover proven ways to strengthen your organizational culture and talent development opportunities to keep great employees onboard.

Introduction

Understanding Job Turnover Rates

Job turnover rate refers to the percentage of employees who leave an organization during a certain period of time, usually a year. It is calculated by dividing the number of total separations in a period by the average number of employees in that period.

A high turnover rate indicates that an organization is losing employees faster than it can hire replacements. This can negatively impact productivity, profitability, and organizational culture.

The Impact of Turnover Rates on the Bottom Line

High turnover rates directly impact an organization's bottom line in several ways:

• Recruitment and hiring costs - The costs of recruiting, interviewing, hiring, and training replacements can be substantial, especially for positions requiring specialized skills.
• Lost productivity - New hires take time to reach full productivity. Losing experienced employees means losing their institutional knowledge and expertise.
• Customer service and quality issues - Turnover can lead to declines in service quality and customer satisfaction as new hires learn the ropes.

Reducing turnover is key for organizations looking to maximize productivity and profitability.

Benchmarking Turnover: Average Turnover Rate by Industry

According to the Bureau of Labor Statistics, the average turnover rate across all industries in 2022 was 57.3%. However, rates vary significantly by sector:

• Leisure and hospitality had the highest turnover rate at 93.5%
• Information services had the lowest rate at 21.7%
• The tech industry turnover rate was around 13.2%

Understanding average turnover rates by industry provides helpful benchmarking for HR professionals to gauge their organization's turnover relative to their sector.

What is a good job turnover rate?

For starters, there's no magic number when it comes to employee turnover. According to Gallup, 10% turnover is healthy, but every industry and every organization is different.

Here are some key things to consider regarding healthy employee turnover rates:

• The average turnover rate across all industries is around 15-20%. Technology and hospitality tend to be on the higher end, while government and education are usually lower.

• Turnover is costly - losing an employee means losing their institutional knowledge and productivity, plus the expenses of hiring and training a replacement. However, some turnover can bring in fresh perspectives.

• It's important to analyze turnover rates by department and employee segment (tenure, performance rating, etc). If high performers are leaving at a disproportionate rate, that's a red flag.

• The costs and impacts of turnover also depend on the job role. Turnover in customer-facing or revenue-generating roles generally has a bigger effect.

• External factors like the job market, industry trends, etc can impact turnover rates from year to year. Track trends over time.

• Set goals based on benchmarks, but don't solely focus on a single metric. Supplement with qualitative data from exit interviews and

What job has the highest turnover rate?

The jobs with the highest turnover rates tend to be lower-paying roles that require little formal education or training. According to the Bureau of Labor Statistics (BLS), the occupations with the highest turnover in 2022 included:

• Retail Salespersons: 59.6% turnover rate
• Fast Food Workers: 109.7% turnover rate
• Home Health Aides: 47.9% turnover rate

In contrast, jobs requiring advanced degrees and professional certifications tend to have much lower turnover rates. For example:

• Physicians and Surgeons: 15.1%
• Lawyers: 10.5%
• Engineers: 7.3%

The high turnover rates for low-paying, low-skill jobs reflects the fact that these roles generally have less attractive working conditions, few opportunities for career advancement, and place greater strains on work-life balance. Employees often take these jobs out of necessity and move on quickly when better opportunities arise.

However, high turnover presents substantial costs and productivity challenges for employers. Replacing departed staff takes significant time and money. Building an engaged, committed workforce requires competitive compensation and benefits, opportunities for development, and a positive work culture. Investing in retention measures for critical roles can pay dividends.

What is the average turnover rate for 2023?

According to Forbes, the average turnover rate across the US in 2023 is around 3.8%. Nearly two-thirds of those turnovers are attributed to quitting employees. The rest is attributed to layoffs and firings. After a rush of layoffs in late 2022 and early 2023, that burst of separations has appeared to slow.

The average turnover rate gives us a benchmark to compare against. However, it's important to analyze turnover rates by industry, company size, and other factors as well. For example, the tech industry often sees higher turnover rates around 13-15% due to high demand for tech talent. Small companies also tend to have higher turnover than large enterprises.

When examining your company's turnover rate, consider breaking it down by department, tenure, performance rating, and other dimensions. This allows you to identify patterns and risk factors. For instance, you may see particularly high turnover among recent hires, indicating issues with your onboarding program. Or certain managers may be experiencing more attrition on their teams, pointing to problems with their leadership style or communication.

Regularly monitoring turnover metrics allows you to catch issues early and intervene. If your rate creeps above the average, it's time to dig deeper through stay interviews, engagement surveys, and exit interviews. Understanding the "why" behind turnover is key to retaining top talent over the long term.

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Is 30% staff turnover high?

The SHRM Benchmarking Human Capital Report found that the average annual employee turnover rate across industries is 30%. This rate encompasses both voluntary resignations and involuntary terminations.

A 30% turnover rate is on the higher end of average. While some level of turnover is normal and allows for organizational renewal, a rate exceeding 30% annually can signal underlying issues that need to be addressed.

High turnover rates negatively impact organizations in many ways:

• Productivity declines as positions remain vacant and new hires require training. This can directly impact the bottom line.

• Service and quality can suffer, especially in roles requiring specialized skills or experience.

• Recruiting, onboarding, and training new staff is expensive - estimated to cost 1-2x an employee's salary.

• Company culture and morale declines as employees feel overworked covering open roles.

• Institutional knowledge is lost as veterans leave and take their expertise with them.

• Customer relationships can suffer without continuity of service.

While average turnover rates vary greatly by industry, any rate consistently exceeding 30% warrants further analysis into underlying root causes, such as:

• Issues with company culture fit and alignment of values
• Lack of growth opportunities or career development
• Dissatisfaction with leadership or management
• Burnout from overload or poor work/life balance
• Insufficient compensation and benefits
• Minimal flexibility around remote or hybrid work

Addressing these potential issues through surveys, stay interviews, exit interviews, and regularly soliciting employee feedback is key. Comprehensive retention strategies should focus both on attracting talent through employer branding and on nurturing talent by providing development opportunities, recognition, work flexibility, and progression.

Analyzing Turnover Rates by Industry

Delving into how turnover rates vary across different industries provides helpful context on the current landscape. Understanding the factors driving turnover in specific sectors enables organizations to be more proactive.

Tech Industry Turnover Rate in 2023

The tech industry has faced mounting turnover challenges, with the 2023 projected average hovering around 13.2%. Key drivers include:

• Remote and hybrid work models enabling tech talent to easily switch jobs without relocation. This empowers top performers to seek out the best compensation and culture fit.
• High demand for scarce skills like AI, machine learning, and data science means tech professionals often have abundant career options. Organizations must provide clear growth paths to retain talent.
• Startup competition has intensified with record VC funding, allowing early stage companies to lure talent with equity incentives. Established tech firms must highlight their stability and career development opportunities.

To curb tech turnover, organizations should invest in personalized career coaching, competitive compensation benchmarking, and flexible work policies.

Manufacturing Turnover Rate Trends in 2023

Manufacturing turnover averaged around 15.7% in 2022. Contributing factors include:

• Labor shortages forcing existing employees into overtime. This increases burnout risk. Implementing automation where possible could alleviate pressure points.
• Wage growth lagging behind inflation has strained household budgets for production workers. Regular market evaluations and adjustment of compensation helps.
• Lack of clear advancement opportunities due to narrow job families. Expanding lateral moves through cross-training and mentorships aids retention.

Benchmarking turnover across functions, production lines, and locations highlights where intervention is most needed. Offering tuition reimbursement for skills training also signals investment in employee growth.

Healthcare and Retail: A Comparative Turnover Analysis

Both the healthcare and retail sectors face grueling demands, with turnover averaging around 19% and 60% respectively in 2022. However, the drivers differ:

• Healthcare turnover is largely tied to emotional fatigue from patient care, whereas retail turnover stems more from physical demands and scheduling challenges.
• Healthcare employees often have specialized skills and education, while retail work tends to have lower barriers to entry. This impacts willingness to change roles.
• Healthcare turnover also varies dramatically by function, with nurses and home health aides seeing much higher rates than administrative staff. Retail turnover is more consistent across frontline store associates.

Tailored retention strategies should account for these nuances. Retail may benefit more from wage increases, while healthcare requires a focus on mental health support and team building.

Understanding Turnover in the Service Sector

The accommodation and food services industry faced a whopping 73% turnover rate in 2022. Driving factors include:

• Low pay and limited benefits due to thin profit margins, exacerbated by labor shortages post-pandemic. Small raises can have an outsized impact.
• High physical demands combined with little downtime take a toll over months and years. Even incremental workplace enhancements help.
• Minimal training and unclear career ladders signify limited investment in growth. Mentorships, cross-training, and management apprenticeships can boost retention.

The service sector illustrates how culture and demonstration of employee value dramatically influence retention outcomes. Compensation is not the only lever - thoughtful programs for advancement, recognition, and skills development carry weight too.

Key Factors Driving Turnover

This section will analyze the primary causes influencing job turnover rates that HR professionals should be aware of.

Toxic Company Culture and Turnover

A toxic company culture characterized by poor leadership, lack of transparency, unethical practices, harassment, discrimination, and other issues can significantly increase turnover rates. Employees will not remain engaged or committed to a company with a negative culture that makes them feel unhappy, stressed, or unsafe at work.

HR professionals should regularly assess company culture through surveys and focus groups to identify problem areas. Taking active steps to foster a healthy, inclusive culture focused on employee wellbeing and ethical leadership is key to boosting retention.

The Role of Employee Engagement and Recognition

Feeling valued and recognized at work is a major driver of employee engagement and commitment to the company. Lack of engagement directly impacts the bottom line through higher absenteeism and turnover.

HR should champion initiatives like stay interviews, recognition programs, employee spotlights, and rewards to make employees feel appreciated. Giving ongoing feedback and publicly celebrating wins keeps employees engaged. This sense of belonging and appreciation makes them less likely to leave.

Navigating Career Growth: Growing Within Your Workplace

Stagnant career ladders and lack of development prospects are a common reason employees leave to find better opportunities elsewhere. Employees want a clear path to growing within their workplace.

HR should focus on creating robust development programs, mentorships, training, and stretch assignments to nurture talent. Helping employees map out their career journeys makes them more invested in the company long-term instead of looking outward.

Effective Onboarding and Its Influence on Productivity

Ineffective onboarding leads to lower productivity and higher likelihood of turnover in the critical first 6 months. The onboarding experience greatly influences new hires' ability to ramp up quickly and feel comfortable in their new roles.

HR must design and continually refine onboarding checklists that set clear expectations while making new hires feel supported. Ongoing training refreshers ensure employees have the right tools and knowledge to perform optimally. This boosts retention by setting up employees for success from day one.

Communication Breakdown: Manager-Employee Dynamics

Lack of constructive feedback, unclear expectations, and poor communication between managers and direct reports often precipitates turnover. Employees want managers who can connect with them personally while providing effective coaching.

HR should train managers on core leadership competencies like emotional intelligence, conflict resolution, coaching, and communication. Encouraging consistent 1-on-1s and soliciting employee feedback on manager relationships is key to uncovering issues early. This nurtures healthy dynamics that retain top talent.

Strategies to Improve Retention and Reduce Turnover

Building a Strong Company Culture

Building a strong company culture that employees resonate with is key to improving retention and reducing turnover. Some tactics HR leaders can take include:

• Facilitating open discussions with employees at all levels to define the desired cultural values and norms. Getting broad input fosters inclusion.

• Launching culture initiatives that bring those values to life, like peer recognition programs, diversity networks, mentorship opportunities, and team building events.

• Conducting periodic culture assessments using surveys and focus groups to measure alignment between intended and actual culture. Address any gaps revealed.

• Setting clear expectations during onboarding on the company's cultural pillars. Reinforce through ongoing training.

• Leading by example - management should role model desired cultural behaviors daily.

Enhancing Employee Development Opportunities

Providing clear paths for career growth and mobility within the organization boosts retention. Tactics include:

• Formal training programs for reskilling and upskilling to qualify for lateral or promotional moves.

• Internal mobility policies listing open roles prior to external posting.

• Cross-departmental mentorship initiatives.

• “Stretch” assignments on special projects to build skills.

• Tuition assistance for external education aligned to role expansion.

• Succession planning and talent mapping to forecast growth trajectories.

Implementing Stay Interviews to Improve Retention

Conducting regular stay interviews demonstrates care about retention and identifies issues early. Best practices:

• Schedule interviews every 6-12 months. Keep informal and conversational.

• Cover engagement, development opportunities, work environment.

• Listen without judgment and take notes. Follow up on concerns quickly.

• Analyze results to spot trends and systemic retention risks to address.

• Survey participation rates show employees the company values their input.

Creating Competitive Compensation and Benefits Packages

To attract and retain top talent, rewards packages must meet/exceed industry benchmarks. Consider:

• Annual compensation benchmarking analysis to ensure market competitiveness.

• Creative perks and wellness benefits tailored to workforce demographics.

• Transparent bonus structures tied directly to performance metrics.

• Flexibility in benefits selections to meet diverse needs.

Leveraging Flexibility and Work-Life Balance

Offering work flexibility improves retention and reduces burnout. Options include:

• Hybrid remote/in-office schedules with shared spaces.

• Flexible hours outside core collaboration times.

• Cross-training for coverage during vacations/appointments.

• Occasional “recharge days” off.

• Discouraging after-hours work communications.

Conclusion & Key Takeaways

Recap of Turnover Influencers

High turnover rates can be influenced by several key factors:

• Company culture: A negative or toxic culture that lacks alignment with employees' values can drive turnover. This includes issues with leadership, lack of collaboration, and weak employer branding.

• Limited development opportunities: Employees want career growth and skills development. Insufficient training programs and lack of clear advancement paths contribute to turnover.

• Poor management relations: Nearly 50% of employees leave due to issues with their direct manager, including lack of support, recognition, and communication.

• Workplace flexibility: The ability to have flexible schedules, remote work options, and work-life balance is now expected, especially post-pandemic. Lack of flexibility can increase employee churn.

• Compensation & benefits: Pay and benefits that are not competitive within the industry or that lack transparency around how levels are set will lead employees to find better offers.

Actionable Steps for HR to Enhance Retention

HR leaders can take tangible steps to strengthen employee retention:

• Reinforce culture: Clearly define and regularly communicate organizational values. Train managers to exemplify desired behaviors.

• Offer development programs: Create mentorships, rotational assignments, continual skills training, and other growth opportunities.

• Improve manager relationships: Train managers on building trust through recognition, 1:1s, soliciting input, and active listening. Implement stay interviews.

• Support work flexibility: Provide hybrid schedules, remote work options, and sabbaticals to support work-life balance where possible.

• Benchmark & optimize compensation: Leverage industry data to regularly evaluate and adjust pay and benefits to remain competitive, including bonuses and equity.

Reflecting on the Cost of Turnover

In closing, high turnover has tangible costs in lowered productivity, loss of critical knowledge, and expenses related to hiring and onboarding. As such, investments made in enhancing retention provide real cost savings and competitive advantage over the long-term.

Related posts

• Employee Churn: Onboarding to Retain