Employee turnover has always been a major concern for businesses, and that’s especially true as the pandemic winds down. Summer 2021 saw a surge of resignations as employees switched jobs in droves once they perceived it as safe again. In 2021, U.S. companies had an average 57.3% turnover rate. Fortunately for business leaders, 50% of employees intend to stay permanently at their next job.
People leave jobs for a number of reasons, such as retirement or relocation. It may also be directly related to your business. Your company culture or relationships with co-workers go a long way to retaining talent. Regardless of the reason, losing talented employees can have a negative impact on your business in a number of ways.
Organizations are losing their top performers and it's having a serious impact on their bottom line. Employee turnover currently costs companies in the U.S. over $630 billion as of 2020, and replacing employees costs organizations 33% of an employee’s annual salary. That is a huge cost to employers and taking measures to improve employee satisfaction helps to reduce its cost to you.
Beyond the additional costs of replacing an employee, turnover can also cause productivity loss among your staff. A top performer can deliver over 400% greater productivity than an average performer. Losing even one-star employee can make it difficult to maintain the same level of output, affecting your revenue and profitability. Furthermore, remaining employees may be responsible for filling in the gap, which may affect their productivity.
Constantly replacing employees not only leads to lower productivity, but it can also lead to poor quality of work. This is usually due to lack of training or a heavy workload brought on by those who left. Providing sub-par products and services can cause you to lose customers and customer referrals, impacting your business and bottom line.
High turnover can cause employees to question your business practices - regardless of the reasons behind it - leading to low morale. This is a common byproduct of turnover, as employees may feel insecure about their own jobs or become overworked from taking on additional duties. The effects of low morale include reduced productivity, less motivation, dissatisfaction and even more turnover.
The time to fill an open position depends on a number of factors such as the industry, the level in the organization and the specialization of the position. Talent acquisition teams are really feeling the strain of high turnover. Worse, turnover tends to take time away from focusing on critical business initiatives and driving strategy forward. The lack of continuity in key positions, for example, can easily set a project back by several months.
High employee turnover can have damaging effects on your business. Beyond costs, it can affect employee morale, productivity and their quality of service. Protect your business from these negative effects by partnering with a PEO, which bring the benefits of lower turnover rates and a higher likelihood of long-term success.
With a team of professionals available to support your human resources needs, you'll have access to a broad array of services that may otherwise be outside your grasp. With a well-managed HR department, your business is much more likely to thrive and remain competitive in the marketplace - giving your employees more incentive to stick around for the long haul.