The retention rate for an organisation is the number of employees who stay with the organisation for a specified period, usually a year or more, as a proportion of the overall number of employees. Sometimes removing some categories of leaver such as those made redundant or dismissed and focussing on resignations will give a more useful picture.
Turnover and retention patterns in the UK
Turnover levels vary widely between occupations and industries, with typically high turnover found in retail, hotels, hospitality and leisure, call centres and among other lower paid, private sector services groups.
Levels of turnover also vary across regions, with higher turnover rates where unemployment is lowest and where it is relatively easy for people to secure alternative employment.
When does employee turnover become as issue?
Some turnover is regarded as healthy in order to introduce new ideas and perspectives to the organisation and there is no set point at which employee turnover starts to have a negative impact on an organisation’s performance.
When it is easy to find and train new employees at a relatively low cost turnover is not as much of a problem as when demand is high and supply low.
Where skills are relatively scarce, where recruitment is costly or where employers have hard-to-fill vacancies, turnover is likely to be problematic. Employees who hold more in-demand or specialist skills or have developed strong relationships with customers, will be more valuable to employers and therefore more damaging for the business to lose, particularly if they move to a direct competitor.
It is sensible to monitor employee turnover and understand how it affects your organisation’s performance and ability to achieve its strategic goals.
Turnover may also highlight workplace issues such as dissatisfaction with career progression opportunities or below market pay and conditions (a lack of flexible working may be a factor). Employee retention is underpinned by effective recruitment, induction, the psychological contract and employee value proposition.
The cost of employee turnover
The costs associated with employee turnover related to resignations may be estimated by calculating the average cost of replacing each leaver within the organisation – this can be broken down by employment type (e.g. full-time v part-time or open ended v fixed term contract). Then multiple this figure by the relevant turnover rate for that staff group to calculate the total annual cost of turnover.
The major costs are:
- Recruitment and selection costs.
- Covering the post during the period in which there is a vacancy.
- Induction training for the new employee.
- Time taken to manage the process.
Several of these costs are made up of indirect management or administrative staff time, but direct costs can also be substantial where advertisements, agencies or assessment centres are used in recruitment.
Other hidden costs may include, for example, the reduced productivity of new employees and that of resignees during the period of their notice (both likely to have lower productivity levels of established employees).
Why do people leave?
Reasons can be broken down into ‘pull’ and ‘push’ reasons.
Pull factors may include the offer of a new role or the opportunity for full time study leading to a new career – more common in 2023 with many changing careers at later points in life than ever before.
On other occasions people are pushed to seek an alternative because they are dissatisfied in their present job. These ‘push’ factors range from a lack of career opportunities to organisational changes. The move might also be prompted by a combination of both ‘pull’ and ‘push’ factors.
One key reason for an individual’s decision to leave may be a poor relationship with their line manager, leading to disengagement. Research has also found some groups, for example for example women and LGBTQ+ people are more likely to be disproportionately subject to ‘push’ factors such as discrimination, exclusion and barriers at work.
It is often said that people join an organisation but leave a manager.
Investigating why people leave
It’s important to understand why people leave, but getting accurate information can be difficult as the reasons given for resignation can differ from employees’ genuine reason for leaving. Individuals may be reluctant to voice criticism of their managers, colleagues, or the organisation generally and give less contentious reasons for their departure.
Where exit interviews are used to investigate the reasons for leaving, it may be better to use an external provider to conduct the interview rather than a manager who may be involved in future reference writing. Confidentiality should be assured and the purpose of the interview explained. Individuals are usually more willing to be honest when there is reassurance of anonymity.
Alternative approaches to collecting exit data could involve confidential attitude surveys for employees including questions on intentions to leave, or confidential questionnaires sent to former employees on exit or after their departure.
It’s also important to consider the experiences of employees within the organisation, as information from current employees will identify potential retention issues before they lead to people leaving and help to minimise negative outcomes of turnover.
The first steps in developing an employee retention strategy are to find out:
- Why are employees leaving?
- Who is leaving? For example, are employees from a particular team or demographic group?
- The impact and cost that employee turnover has on the organisation.
This data can develop a retention strategy that focuses on the issues and causes of turnover within the organisation.
As well as basic pay and benefits, organisations should consider the following strategies to improve retention:
- Consult employees – Ensure that employees have a chance to provide their views through regular 1:1’s, attitude surveys and group discussions.
- Be flexible – Wherever possible, accommodate individual preferences on working hours and times. It’s also important to monitor workload and ensure it’s manageable within working hours.
- Treat people fairly – A perception of unfairness, whatever the management view of the issue, is a major cause of voluntary resignations. For example, perceived unfairness in working arrangements is likely to lead to resignations.
- Employee well-being – Support managers to help their teams thrive and manage issues such as workplace stress and the loneliness of home working. Recently, employee resilience has become prominent and an important part of wellbeing.
- Enable career development – Maximise opportunities for employees to develop skills and careers and understand and manage people’s career expectations. Where promotions are not feasible, look for sideways moves that allow employees to gain different development experiences. This can also benefit an organisations succession planning.
Speak to Employee Retention Specialists in London and South East
The Bedrock HR team have extensive experience of helping clients to develop effective retention strategies and we would be very happy to discuss your needs and ways of retaining your people – usually your biggest investment