Employee turnover: what is it and how to reduce it

Employee turnover rates have been on top of the news agenda for some while and it doesn’t look like it’s about to stop.

A recent survey of over 50,000 workers across several countries (by PwC) revealed that 18% of workers said they expect to switch jobs in a year. While a third said they are moderately or slightly likely to change jobs.

The Great Resignation is here to stay for now, putting managing employee turnover at the top of many businesses’ priorities.

Keep reading for more information about employee turnover and what your business can do to reduce your turnover rates.

Want to skip the content and chat to one of our employee solutions team instead? Get in touch here.

What is employee turnover?

The first thing we want to do in this article is define exactly what we mean by employee turnover. The term ‘employee turnover’ is used to refer to the total number of workers who leave an organisation over a certain time period.

There are, however two types of employee turnover:

  • Involuntary turnover refers to layoffs or reductions in force and terminating poorly performing employees.
  • Voluntary turnover is when an employee chooses to leave a job, and that could be for any number of reasons – including a new job, retirement or choosing not to return after maternity leave.

Understanding why you have employee turnover

A degree of employee turnover is inevitable and expected in all businesses. A workforce may be older and therefore, there will be a lot of people leaving for retirement. New parents may decide not to return after having a baby, and others may just be relocating. Of course, with the latter, the pandemic has changed the location barriers, proving that we can work anywhere, so this reason is becoming less prevalent over time.

The key for monitoring levels of employee turnover is understanding why people are leaving. Which is why exit interviews are invaluable when conducted appropriately and professionally.

Investing in understanding your employee turnover drivers will help your business recognise why employees are leaving and if the reasons can be avoided. Once these reasons have been identified, they must be addressed and managed to avoid further resignations.

How do you calculate employee turnover rate?

Knowing your monthly turnover rates means you can understand what percentage of employees leave a company within a certain period of time.

Calculating your monthly employee turnover rate only requires three numbers. They are:

  1. 1. the numbers of active employees at the beginning of specific periods of time
  2. 2. the numbers of active employees at the end of specific periods of time
  3. 3. the number of employees who left during the time period


In order to calculate the average turnover rate you need to divide the number of people who left by the number of employees at the start and multiply by 100.

For example:

  1. 1. = 300
  2. 2. = 200
  3. 3. = 50


50 divided by 300 x 100 = an average turnover rate of 16.6%

What is a good employee turnover rate?

It is reported that the UK average employee turnover rate is approximately 15% a year, although this will vary across different industry sectors.

An easy way to interpret whether your annual turnover rates are good, is to check what the industry average is and look at how you fare. If yours is less then you can view it as healthy. If it’s higher, it’ll need addressing.

The negative impact of high employee turnover

Managing high employee turnover is time-consuming, stressful and costly. It takes precious time away from senior management that could be spent on growing the business, it can fuel a loss of morale for other team members, and for those that choose to resign they may deliver a poor performance in the lead up to leaving.

The reputation of a business can also become quickly at risk if its name becomes associated with a high staff turnover. It fuels an assumption about a toxic company culture and an unpleasant place to work.

High employee turnover can also be extremely costly. Imagine paying a recruitment agency a 20% commission fee on a hire with a salary of £35,000. That’s £7,000 that the hire has cost you before any investment into training and inductions.

Then, a few months later they leave.

Not only are you out of pocket for the hire, but you’re back to square one – having to recruit.

This is why it’s important to check and address all of the reasons why your staff leave to prevent these scenarios and in turn, save your business time and money.

Rising cost of living and employee turnover

As the UK workforce continues to recover from the impact of the pandemic, employees are now being attacked financially, with soaring energy bills, sky-high petrol prices and food costs all on the up.

It has been reported that the UK inflation rate has hit 9.1% - the highest it has been in 40 years and the impact of these rising costs of living are being felt by everyone.

Our own research, found that employees are turning to their employer benefits to help mitigate the soaring cost of living and squeeze on household finances. Almost two-thirds (63%) of employees said they would leave their current job in order to find an opportunity that provides better financial support during the current cost-of-living crisis. 

Alarmingly, our research also found only a mere 5% of employees believe their employer is doing enough to support them through the crisis. Based on these figures, it’s fair to assume that there is a considerable risk of high employee turnover rates if businesses don’t step up and do more. And, with 85% of employees saying they believe that employers who do support them during the cost-of-living crisis would benefit from more loyalty from them, it’s certainly in a business’ interest to do so.

If you want to discover more results from our research, you can download the ‘Giving employees EXTRA support during a cost-of-living crisis’ eBook here.

How to reduce employee turnover?

Now we know what employee turnover is and why it’s important to understand the reasons behind it, it’s time to explore ways to reduce your employee turnover rate.

Reducing employee turnover is of utmost importance for all businesses, regardless of sector. Ensuring your business doesn’t have a high churn of staff and instead has high retention rates, means your company won’t face multiple recruitment fees and avoids negative connotations that come with a flurry of resignations. A good employee retention rate can also result in holding onto your most valued and highly-skilled team members - and we all know these people are strong assets to a business.

Here’s our advice for reducing your employee turnover rate.

1. Reward and recognise

Reward and recognition when an employee exceeds expectations and delivers quality work is important to ensure your workforce feels appreciated. If they don’t, that could end up in them handing in their notice. Putting in extra effort to meet a deadline, make a sale or deliver a particular piece of work should be recognised with reward.

2. Implement a robust selection process

The hiring process is so important. Never hire there and then – no matter how good the chemistry is - the process needs to be robust and thorough.

Hold interviews with several members of your business, invite the candidate in to spend a couple of hours with the team, ask them to do a test based on what their job will involve, and ensure you see as many of their skills as possible before asking new recruits to sign on the dotted line.

3. A good induction

A well-planned, thought through induction will mean your new employee starts with lots of positivity. It helps the employee integrate seamlessly into the business and their team.

The most effective induction programmes will run effectively, be planned, thorough, and most of all engaging. First impressions are  important, and your new hire will only get the chance to have one first day at your business – make it memorable.

4. Growth and progression opportunities

Retaining employees that are talented, loyal and good at their job is crucial. It’s those employees that will grow your business. However, when there are little or no career path progression opportunities it can end with them exploring promotions outside of your business. Career growth is incredibly important and without that, people will choose the voluntary turnover option and leave.

5. Hire the person that shares your business’ values

When an employer hires someone in haste because they desperately need someone to fill a gap, regardless of whether they fit the culture and values of a business, it’s unlikely to end well. A poor match can be unsettling for other members of the team especially when it causes a lot of change in a short period of time. In the interview process, let candidates show you whether they uphold your values. Watch them interact with team members, whether that’s in the office or on the shopfloor. Or, set up a fun task and watch how they carry it out and be clear about the importance of the values so they can decide whether they’ll fit.

6. Don’t overwork your employees

This can be quite common in a situation whereby employers make involuntary turnover decisions and announce redundancies and then, employees that keep their jobs are handed more work, without any extra increase to their salary.

Longer hours will mean less time with their families, less downtime, less sleep and, in turn, overworked employees who become disengaged. Compared to a worker who gets enough time to decompress, time away from their desk and is able to instil a healthy work/life balance, it’s the latter that will stay loyal and become part of the higher-performing employees.

7. Effective management style

It’s important to adapt your management style to suit each team member. Invest time in finding out about individual employees to understand what style of management works best for them.

Micromanagement is almost always one to avoid. Employing a management style whereby you closely control the work of your team is never going to work well. It offers no autonomy or freedom and can lead to poor performance because there is no motivation. It’s also reported that this management style can lead to anxiety, depression, fatigue, increased stress and eventually, the employee enduring it will leave.

8. Be flexible

We started this article talking about how the demand for flexible and hybrid working had been fast-tracked in the wake of the pandemic. It’s now assumed that remote, flexible and homeworking is granted and when it isn’t people look elsewhere. Workers want a better work-life balance, but they also want to follow their career path, so make sure that your business is a flexible one and make work, work for everyone.

Want support with rewarding and recognising your staff? Get in touch by filling out the contact form on the right or calling 0203 372 0669.

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