7 Tips to Reduce Employee Turnover

Shawn Myers | Content Strategist | March 25, 2024

Attracting and retaining high-performing employees is a top priority for every organization. This is especially true in industries facing skilled worker shortages, such as healthcare, manufacturing, transportation, and construction. The recruiting, training, and other direct costs of replacing skilled workers are high, as are the opportunity costs of missing out on or turning away business because of understaffing.

The most successful companies are proactive in their efforts to retain talent by offering competitive compensation, creating a positive workplace culture, providing training and career development services, and listening to worker concerns. Chief human resources officers and their teams need to understand the root causes of employee turnover and implement key strategies to help reduce it.

What Is Employee Turnover?

Employee turnover measures the number of employees who leave an organization over a given period, usually a year. Turnover is usually presented as a percentage rate, calculated by dividing the number of employees who left a company during that period by the average number of employees, then multiplying by 100.

Turnover covers both voluntary (resignations, retirements, relocations) and involuntary (terminations, layoffs) departures.

Consider the averages in your industry when determining whether your organization has a high or low employee turnover rate. For example, the turnover rate among hospital employees was 22.7% in 2022, according to the 2023 NSI National Health Care Retention & RN Staffing Report. The US federal government employee turnover rate is under 10%. The average turnover rate among all US businesses in 2022 was 17.3%, according to a survey by HR consultancy Mercer, down from 24.7% reported in the previous year’s survey.

How Does Turnover Affect Business?

Low employee turnover typically is a positive for an organization, high turnover a negative. Businesses with low employee turnover tend to have better employer reputations than those with high turnover. It’s no coincidence that companies high in annual rankings of the best places to work generally have low employee turnover rates.

Having enough people with the right skills is critical to achieving your business goals. Finding that talent can be challenging and costly, and having a stellar reputation can help in your efforts to attract top job candidates.

Some 51% of workers worldwide are watching for or actively seeking a new job, according to Gallup’s State of the Global Workplace: 2023 Report. Meanwhile, voluntary turnover alone costs US businesses about a trillion dollars a year, per a 2019 Gallup study. The cost of replacing an individual employee ranges from one-half to two times the employee’s annual salary.

Besides the direct cost, high turnover can hurt your ability to retain the employees who remain, given that they’re often required to take on their former colleagues’ workloads. When top performers leave a company, they take their knowledge and experience with them, reducing the quality of your products and services and tarnishing your company’s reputation.

Employee Turnover Causes

Employee turnover is unavoidable, and certain drivers are outside of an organization's control, such as when workers retire or relocate. However, in many cases, turnover is caused by negative employee experiences that employers can work to improve.

Employee exit interviews can be an effective tool in helping employers understand why their people are leaving and what they can do about it. A 2022 survey of 2,202 people by the remote job site FlexJobs revealed the four most common reasons people want to leave their jobs: toxic company culture (62%), low salary (59%), poor management (56%), and lack of healthy work-life balance (49%).

In general, most departing employees will cite one or more of the following reasons for leaving:

  • Bad company culture
  • Insufficient pay/benefits
  • Unsupportive or ineffective management
  • Poor work-life balance
  • Lack of career opportunity
  • Inadequate recognition
  • Fear of layoffs
  • Monotonous work
  • Burnout
  • Desire to relocate

How to Reduce Employee Turnover

1. Recruit the right talent

Hiring processes differ by organization, but the main goal should be to make your process thoughtful and selective. To start, you must make sure would-be employees know what they’re getting into. Recruiters must be upfront about the company culture and the role’s requirements, rather than simply selling candidates on the position. Setting clear job expectations during the hiring process can help ensure that new workers are confident and productive from day one, while reducing the risk of attrition. To set clear expectations in terms of skill set, managers and HR leaders must first have a clear understanding of the skills required to reach the company’s goals.

Hiring managers need to think not only of the skills needed for an employee to thrive on day one, but also the skills that will contribute to a long-term career within the organization. To achieve this, consider inviting existing employees who would work with the candidate into the hiring process. Having candidates interview with their potential colleagues will give them a better sense of the organization’s culture and behaviors. It will also help them make a more confident decision about whether they’re a good fit. Identifying and attracting people most likely to thrive within your organization—and, thus, stay long term—might require specialized headhunters and the support of the latest AI-based recruiting tools.

2. Reward and recognize employees

This is a simple yet often overlooked strategy for reducing turnover. Recognizing and showing appreciation for your employees’ accomplishments contributes to a happier, more productive workforce that is more likely to stay with the organization. It’s not enough to recognize employees during year-end reviews, or after a major milestone such as the completion of a year-long project. This recognition should come through formal means such as an official review process, but also through in-the-moment, peer-to-peer acknowledgment. Ultimately, it’s about creating a culture of recognition.

In a 2022 Gallup-Workhuman survey of 7,636 US workers, only about a third said their workplace had a formal employee recognition program in effect. Yet in its analysis of the survey data, Gallup concludes that companies with an engaged workforce of at least 10,000 employees stand to save up to $16.1 million in turnover costs per year “when they make recognition an important part of their culture.” In fact, survey respondents who said they had positive recognition experiences at work also rated their everyday lives more positively than employees who didn’t feel meaningfully recognized for their work.

3. Create set career paths

Lack of career growth opportunities is a major reason that people leave organizations. Ambitious employees need to see a clearly defined career path ahead of them, one that includes some mix of higher-level responsibilities, better compensation, and, yes, a more prestigious title. Managers need to set regular meetings with their people to discuss their career goals, present opportunities, and chart a path forward. Business leaders must understand that “career paths” can look more like uncharted territory to many employees. They may not know what options exist to expand their skills and explore new opportunities within the organizations. As well as making employees aware of these options, managers must show their employees the personalized steps needed to get there—what skills they lack, the experience required, and the people, projects, and learning that will help. If organizations don’t help them understand these various career paths, employees will head toward the path that’s always clear—the path to the exit.

4. Encourage work-life balance

Work-life balance means different things to different people. For some, it’s about having a flexible work schedule that allows them to take care of personal matters as they arise. For others, it’s about a break from always being on call. And for others, it’s about more vacation time. For almost everyone, though, it’s about relieving the stresses of the job.

A 2021 survey by the Work Institute found that 11% of turnover was caused by work-life imbalance, including the stresses of work travel, commuting, and scheduling. Poor work-life balance can cause employees to leave due to burnout. It can even hurt a company’s reputation overall. Remote work opportunities, flexible scheduling, more generous vacation policies, and limits on after-hours work requirements are a few simple strategies to help employers shift the balance and reduce turnover. Ensure that your organization’s work-life balance policies aren’t just documented, but are integrated into your company culture—with full buy-in from leadership.

5. Provide learning opportunities

Employees who have access to personalized learning and development opportunities will not only strengthen or acquire skills that benefit the organization, but they’ll also be more satisfied, engaged, and less likely to leave. Consider providing job-related education reimbursement and a budget to attend in-person conferences. Since people learn in different ways, offer employees different types of training—traditional classroom, virtual, on-demand, and so on. By training employees in this way, you also have the opportunity to move them into new roles, which can benefit your business in many ways. For one thing, it can be faster and a lot less expensive to train and reskill existing workers to fill skills gaps than to recruit new ones. Keep in mind, though, that learning needs to be personalized to be relevant to each individual employee and valuable to the company as a whole. Each person has their own set of growth aspirations, skills, and projects they’re focused on, all of which feeds into the learning opportunities they need. To derive the most value for the business as a whole, companies must be able to guide people to the development opportunities that are most relevant to them.

6. Pay the market rate (or above)

Compensation, both in terms of pay and benefits, is still one of the top reasons people accept a job offer and deliver their best performance from day to day. The pursuit of better compensation is also what drives many workers to change jobs throughout their careers. Monitor what your competitors are paying their people for similar positions and offer a comparable compensation package. Regular raises and bonuses are also essential to keep top talent. Additionally, make it a priority to communicate the full investment you’re making in your employees beyond base salary and bonus, such as healthcare, memberships, learning opportunities, wellness programs, and other benefits that employees might overlook as they evaluate employers.

7. Learn from past turnover

It’s important for HR professionals to collect, analyze, and act on turnover-related data and anecdotal feedback from exit interviews. By applying analytics to the data collected in your company’s human capital management (HCM) applications, your company will be better able to interpret turnover data, identify root causes for voluntary and involuntary turnover, and identify skills gaps.

Analyze Your Trends to Reduce Future Turnover with Oracle ME

Leading organizations are implementing cloud-based applications to uncover the root causes of turnover and counter them by meaningfully engaging with employees. Oracle ME, part of the Oracle Fusion Cloud Human Capital Management suite of applications, includes features for regularly surveying employees (and responding to their concerns), sending targeted communications, building career paths, creating recognition programs, and connecting employees with one another. Oracle ME also supports effective manager communication through capabilities such as an organizer to schedule check-ins and capture the discussion topics covered. Such features can help organizations boost employee satisfaction and productivity while creating an encouraging and engaging company culture that makes employees want to stay.

Reducing Employee Turnover FAQs

Why is increasing employee retention important?
It’s important for organizations to increase employee retention since it builds their reputations as great places to work. This makes it easier to attract top talent while helping businesses save on the hefty costs of recruiting, onboarding, and developing new employees.

Can turnover be good?
A certain amount of employee turnover is healthy for an organization and can be an indicator of success. Organizations naturally evolve when their product lines and strategies change. Some employees will meet that challenge while others may feel a disconnect. In the latter situation, it can be better to let an employee go rather than pressure them to adapt to an evolving culture or vision that isn’t a good fit.

What is the cost of employee turnover?
The hard costs of employee turnover vary by industry and position, but they can range from one-half to two times the employee’s annual salary based on past research. Much harder to measure are the costs of lower employee morale, higher burnout, lost business due to staff shortages, lost institutional knowledge, and damage to an employer’s reputation.

See the features in Oracle Cloud HCM that help you improve the employee experience and reduce turnover.

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