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Reduce Your Employee Turnover Rate and Improve Employee Retention

Reduce Your Employee Turnover Rate and Improve Employee Retention

Reduce Your Employee Turnover Rate and Improve Employee Retention

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The only HR Software without Limitations

Companies must look beyond traditional methods and create an environment that truly values its employees to ensure long-term success and staff retention.

However, it seems that many managers still fail to recognize the warning signs regarding their employee’s satisfaction and the overall risk of resignation. A recent Capgemini survey among non-supervisory employees revealed that only 28% of respondents are satisfied with their job. In stark contrast, 80% of leaders believe that their employees are satisfied, according to the same survey.

To prevent a high employee turnover rate, companies need to focus on enhancing their work culture and improving employee engagement. In this blog post, you will find some of the top causes of employee turnover and how you can reduce the risk of good employees leaving your company. Additionally, understanding the Payback Period associated with employee investments can contribute to long-term retention strategies.

The Difference Between Voluntary and Involuntary Turnover

First, it’s important to know the difference between the two main types of employee turnover: voluntary and involuntary. Voluntary turnover includes all employees who leave your organization by choice, either through resignation or retirement.

Involuntary turnover, on the other hand, refers to employees who were dismissed or laid off by your company. Depending on your needs, you might only include voluntary resignations when calculating turnover, as retirements and layoffs do not accurately reflect whether employees are leaving your company due to the employee experience.

Staff attrition is another term for the rate at which employees leave your company. However, while the turnover rate describes positions that you intend to replace, the attrition rate only includes vacancies that you are not planning to fill.

How To Calculate Your Turnover Rate

The employee turnover rate is an important metric that determines the percentage of employees who leave a company over a period of time. It usually takes into account employees who have voluntarily resigned, entered retirement, or been dismissed or made redundant. It does not include employees on temporary leave or employees who have been promoted or transferred within your organization.

There are different ways to calculate your employee turnover rate. The most common method takes into account your total headcount, the average number of employees over a specific period, and the total number of separations (both involuntary and voluntary). You can calculate it using the following formula:

Turnover rate (%) = Number of employees who left / average number of employees x 100.

To calculate your average number of employees, simply take the number of employees at the start of a given period, add it to the number of employees at the end of that period, and divide the total by 2.

For example, if you have 70 employees at the start of the year and 80 at the end of the year, your average number of employees for the year is 75.

Let’s say 10 employees left your company during that year. In that case, your annual turnover rate for the year would be 10 / 75 x 100 = 13.3%

To calculate your employee retention rate, simply subtract your turnover rate from 100. So in the previous example, your retention rate would be 86.7%.

Reasons for High Staff Turnover

The most common reason why employees leave a company is voluntary resignation. This includes employees who leave to start a new job at a different company, to study, or for personal reasons such as caring for family or retiring.

Turnover rates vary considerably from industry to industry. For example, the accommodation and catering sectors have a particularly high rate of turnover compared to other industries. This can be put down to many factors including the relatively young workforce in these sectors and staff being hired on a short-term basis.

The best way to improve employee retention is to counteract the reasons for employee resignation. You first need to identify the reasons why staff leave so you can then form a clear strategy to retain your top talent.

Reasons for resignation include:

  • Finding a new position at a different company that offers a better company culture and employee experience
  • A high-pressure work environment with little or no work-life balance. Employees are overwhelmed by work and at risk of burnout. This leads to dissatisfaction, poor performance, and low motivation.
  • A lack of personal and career development opportunities can cause employees to look elsewhere. Companies should bear in mind that every employee follows their own career path. Providing support and development opportunities can help improve retention while improving skills within the organization.
  • Growing dissatisfaction among the workforce due to insufficient HR support, a lack of communication, and too little or no feedback within the organization
  • Not receiving the level of pay increment that the employee believes their work deserves. Wages should be in line with or above industry benchmarks to give employees a good reason to stay in the long term.
  • The corona pandemic has also had an impact on staff turnover, particularly in small businesses. Employees at companies affected by short-time work and layoffs may have already decided to move on once the economic situation has calmed down. They may be looking for job security and a higher wage to counteract money lost during the pandemic.
  • Workplace culture can be a major factor in employees resigning. A lack of recognition and appreciation can be the reason why an employee leaves. The absence of meaningful work combined with poor management can negatively impact motivation.
  • Lack of proper tools and resources. Insufficient access to the right tools needed to perform their tasks efficiently can drive employees to seek opportunities elsewhere. Let’s say, for example, that you’re the owner of a subscription-based business. Do your employees have the ability to manage recurring payments on the customer’s behalf? If not, this is going to hinder their ability to carry out their responsibilities effectively.

What Problems Can a High Turnover Rate Cause?

  • Businesses in many industries are experiencing skills shortages. High staff turnover is intensifying the competition for top talent. This makes it all the more important to keep your existing workforce happy and do everything you can to retain your high performers.
  • Staff turnover can negatively affect your bottom line. According to a survey by the Society for Human Resource Management, when an employee leaves it can cost the equivalent of six to nine months' salary to find and train a replacement.
  • It is particularly problematic if a skilled employee leaves your company for a competitor. It’s essential to keep your top talent happy so that their skills benefit your company and not other competing companies in your sector.
  • Onboarding new employees takes time and can be costly. Having to train a regular flow of new hires only to see them leave shortly after can take resources away from other areas and slow down other important processes.
  • High staff turnover can complicate knowledge management in an organization. In some cases, certain skills and knowledge can even disappear if turnover is too high.

Improve Employee Satisfaction and Retention

One of the main aims of implementing an outstanding employee experience is to improve employee satisfaction. This involves a number of factors, such as enhancing the workplace culture. An engaging onboarding process is essential as this is when employees form their first impressions of your company.

The recruitment process and communication with candidates can be decisive in whether talented employees decide to join your company. HR software and recruitment solutions can support you from the hiring process through the entire employee lifecycle. Tools that help you to improve employee satisfaction can also help attract talented employees to your organization.

Now we’ll show you how flair can support you at every step of the employee lifecycle and help you structure and optimize your HR processes.

How To Keep Your Employee Turnover Rate Low

By improving employee satisfaction, you can achieve a low staff turnover rate. The following steps guide you through all the key processes.

Optimize Recruitment Processes

It’s important to get the recruitment process right as this is your first point of contact with potential new employees and it leaves a lasting impression. Using flair, you can create a clear and organized overview of your recruitment campaigns, create and manage job descriptions, and post your job ads on multiple job boards at the same time.

Advertising a job using flair
The flair Recruiting app gives you an overview of your active job ads.

flair also allows you to standardize and automate communication with candidates to ensure smooth and timely correspondence. This saves time and gives applicants a positive first impression of your company.

Create an Engaging Onboarding Process

The onboarding process is an essential step when helping new employees get to know their colleagues and their role, and it can prevent early resignation. During their first weeks, employees form an opinion of the company and their coworkers. This has a lasting impact on collaboration and motivation. That’s why it is important to have a structured and well-organized onboarding process.

The employee should know which tasks to start with, have access to any programs and apps they need, and be introduced to their coworkers. flair software helps you optimize, structure, and modernize the onboarding process. Managers can create onboarding workflows and share them with new team members in the Employee Hub.

An onboarding worklfow in the flair Employee Hub
Send new hires a list of onboarding tasks and track progress in the Employee Hub.

Show Appreciation

It’s important for employees to understand the meaning of the work that they do. Staff performance reviews are a good way to provide helpful feedback and show appreciation. You can also use them as an opportunity to discuss goals and expectations to ensure everyone stays on track.

A simple but effective way to recognize employees for good work is using the Cheers feature in the flair Employee Hub. You can share praise or a thank you message with employees – either privately or on a feed that can be viewed by other employees. All employees can use the feature, which improves team spirit and boosts motivation.

Sending a thank-you message in the Employee Hub
You can also send Cheers to recognize achievements and great work. 

Provide Development Opportunities

Meetings with employees are also a good time to discuss career development opportunities. If employees are not given the opportunities and rewards that they deserve, it’s likely that they will quickly start to search elsewhere. There needs to be a defined career path within your company that motivates high-performing employees and gives them a chance to grow.

Training and developing employees can boost the knowledge and skills in your organization, and this can be passed on to new employees. Using flair, you can set and visualize goals and results, giving you a fair basis for discussing promotions and pay rises with your staff. This makes expectations clear on both sides and documents progress made toward objectives.

Performance review in the flair Employee Hub
Digitizing performance appraisals improves transparency and efficiency.

Offer Hybrid Work

Hybrid and fully remote work opportunities are in high demand. They offer many benefits for employees. But they also come with their own challenges. Remote employees save time and money by commuting less, which can also help reduce your company’s carbon footprint. Hybrid work also helps reduce business costs as you can reduce the size of your office.

Flexible hours allow employees to work at the times when they are most productive. Some employees might be able to concentrate better in the afternoon. So while a mandatory 7.30 am start would result in several hours of less productive work, flexible hours can lead to better results. Flexible hours also improve work-life balance by enabling employees to better harmonize their job with their private life and spend less time traveling to and from the office.

Compensate Employees Fairly

Offering fair and competitive compensation makes employees feel appreciated and motivates them to perform at their best. There are many ways to compare wages with industry benchmarks and competitors. If your company is too far below the average, employees will start to notice and become less motivated to stay. A good salary is a strong factor in employee retention, and high performers will not hesitate to switch if they are not fairly compensated for their skills, experience, and loyalty.

Provide Non-Monetary Benefits

While money can motivate employees to a certain extent, non-monetary benefits are another good way to recognize your staff for their work. Common non-monetary benefits include discounts from partner companies, flexible hours, additional paid time off, or experiences such as team events. This leads us to our final point…

Improve the Team Spirit

A feeling of belonging is essential for a good working atmosphere, especially among remote teams. Teambuilding activities and team events are a great way to bring employees together in person. They not only give employees something fun to look forward to, but they also strengthen the relationships between team members and allow them to get to know each other personally. This enhances collaboration in the long term and improves motivation.

flair team photo
The flair team out on a company trip.

If you want to learn more about how to reduce your employee turnover rate and increase employee retention, download our free guide.

Turn Employee Turnover Into Employee Retention

Follow our step-by-step guide to reduce staff turnover and retain your best employees in the long term.


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