Staff Turnover

Turnover Trends in Australia

In the year to February 2019, 8.5% of the Australian workforce changed their employer or the business they operated. This is up from a record low of 7.7% in the year to February 2017. Across industries, hospitality workers were the most likely to change jobs, with 17.9% changing their employer or business, followed by workers in rental & real estate (11.7%) and administrative services (11.3%).

Reports have been quick to blame Millennials for the increase in turnover, citing the fact that more than half of Millennial aged employees (57%) leave their employer every year. However, the turnover rate is still much lower than in the 1970’s and 1980’s when more than 15% of the workforce typically changed employer in each 12-month period.

Businesses have to consider whether they have a bigger part to play in turnover than mere generational trends, as the single most common reason for job separation was “wanting to obtain better job conditions”. One quarter of job separations were for this reason. Businesses with a high turnover rate are unnecessarily footing far heftier bills than they may realise, and dismissing the increase in turnover as an accepted part of doing business in the modern world can lead to organisations ignoring the serious systemic causes of their employees leaving.

Cost of Staff Turnover

Recent data from Work Institute’s 2017 Retention Report estimates that it costs as much as 33% of a worker’s annual salary to replace them. When the formula is applied to the median employee’s salary of $45,000, the average cost of turnover per employee comes out to $15,000. The study of 34,000 respondents concluded that 75% of the causes of employee turnover are preventable.

Direct costs associated with replacing an employee can quickly balloon out when you consider the cost of advertising for the position, the cost of interviewing, onboarding and training. In some industries the direct cost can also include lost revenue, and loss of clients or regular customers.

Calculating the direct costs of employee turnover is usually quite straightforward, but there are many indirect costs that need to be taken into consideration. Staff turnover can also cause significant setbacks for a business through lost productivity, and flow on effects including low staff morale.

Indirect costs stem from knowledge lost when employees leave, the time spent finding a replacement and the time new hires need to become fully functional. Depending on the role, employees generally need five to nine months to reach their full productivity. This can create a productivity drag for managers and fellow team members, which adds significantly to the cost of turnover. This productivity drag can also create a negative ripple effect through the remaining staff, lowering morale and leading to resentment among the rest of the team, especially if employees feel they aren’t being supported by the organisation or compensated for the extra workload.

What Can Businesses Do to Improve Employee Retention?

The first step to reducing turnover is to invest in the future of your current employees. A company that lacks career development as its core focus will have a hard time retaining a good new employee in the long term. A 2017 study by Robert Half surveyed 460 hiring managers from companies across Australia and found that more than half of organisations (53%) don’t offer any training and development programs or regularly review salaries (58%). Whenever someone enters a new job, advancement is going to be on their mind and organisations need to be prepared to not only allow, but to facilitate growth opportunities for staff. Developing employees skills by giving them access to further training is a great way to make them feel competent, valued and assured that you’re investing in their future within the company.

Departing employees who leave soon after recruitment have often had an unrealistic view of the job during the recruitment process. This can be partly solved by improving the language of job listings. Descriptions need to accurately reflect the nature of the role, rather than just listing benefits or spouting praise about the company.Cost of Employee Turnover

Part of maximising retention involves paying better attention to employees who are leaving. Formal, consistent exit interviews can help organisations understand the reasons employees are leaving and discover areas they need to improve. Finding out why people leave is key to finding ways to encourage top performers to stay.

Ensuring employees leave on good terms can lead to talent pipelines by allowing employees to create networks and make referrals, which narrows the recruiting and hiring time needed to find replacements when workers do leave. A well conducted exit interview can help manage staff expectations and prevent the negative side-effects of disgruntled ex-employees, who may dissuade new candidates from taking a position or spread resentment among the remaining employees.

Companies need to not only secure a steady pipeline of skilled talent but also make employee retention policies a crucial business priority. While research shows that most businesses have basic retention strategies in place like employee wellness and engagement policies, increasing turnover rates suggest that these alone have not been effective in retaining employees. A more detailed and long-term approach should be taken, with employee retention front of mind from the job description all the way to the exit interview.