Work Life
August 21, 2023

Understanding Employee Turnover Rates (And How to Improve Them)

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The Great Resignation may be old news by 2023, but employee turnover rates are still higher than normal. With over 50 million people quitting their jobs in 2022 (which is more than 2021), we see that the turnover trend is still a problem. Because of this mass exodus, the question on many HR leaders’ minds is how to retain talent and thrive through 2023 and beyond.

In this post, we’ll talk about the average employee turnover rate over the past few years (and industry turnover statistics), what a good employee retention rate is in today’s work environment, how to calculate your own turnover rate, and how to improve your retention strategy for the future.

Average Employee Turnover Rates by Industry

To fully understand the situation we find ourselves in now, we have to understand the average turnover rates of the recent past. Let’s start with 2020's turnover rate, back when the pandemic was disrupting every aspect of business and life.

2022 Turnover Rates

Average turnover rate: 47%

Turnover rate by industry:
  • Construction: 53%
  • Manufacturing: 39%
  • Trade, Transportation, and Utilities: 54%
  • Information: 37%
  • Financial activities: 29%
  • Professional and Business services: 63%
  • Educations and Health services: 38%
  • Leisure and Hospitality: 82%
  • Government: 20%

Judging by these stats, it looks like most industries are getting better, right? Well, remember, 47.4 million people quit in 2021, and over 50 million people quit in 2022! Employee turnover, when just looking at voluntary quits, is still on the rise.

2021 Turnover Rates

Average turnover rate: 47%

Turnover rate by industry:
  • Construction: 57%
  • Manufacturing: 40%
  • Trade, Transportation, and Utilities: 55%
  • Information: 39%
  • Financial activities: 29%
  • Professional and Business services: 64%
  • Education and Health services: 37%
  • Leisure and Hospitality: 85%
  • Government: 18%

In 2021, the pandemic started winding down, and businesses got better and better at handling hybrid workplaces, work from home, and healthy practices. That reflects in the lower overall turnover rates.

However, turnover rates count every employee who left a company over the year, including retiring, firing, and discharges. Looking specifically at voluntary quits, though, 2021 actually holds the record. A whopping 47.4 million people quit their jobs throughout 2021, the highest number in years.

2020 Turnover Rates

Average turnover rate: 57%

Turnover rate by industry:
  • Construction: 63%
  • Manufacturing: 44%
  • Trade, transportation, and utilities: 61%
  • Information: 45%
  • Financial activities: 31%
  • Professional and business services: 69%
  • Education and health: 45%
  • Leisure and hospitality: 131%
  • Government: 24%

In 2020, every industry saw a sizable jump in turnover rates (leisure and hospitality jumped by over 51%!). You probably saw this in your own experience. With the pandemic kicking off and many companies either closing their doors, downsizing, or trying to transition to remote work, these statistics are understandable.

Why Worry About This?

Despite the fact that the world is almost back to normal, employees are still leaving in record numbers as they look for better opportunities. Every time an employee quits, the hiring process costs you at least one half of that employee’s annual salary (at most, this process can cost you 2X the salary of the employee who quit!). Not to mention that as more people quit, your company culture suffers as others deal with stress and extra work.

Some turnover is natural—no matter what you do, employees are going to leave for various reasons. However, you should aim for a turnover rate of 10% and, according to SHRM, most companies have a rate closer to 20% (and your target turnover rate will depend on different factors, such as your industry and your internal promotion rate.

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How You Can Improve Retention Rates

The first thing you need to keep in mind is that your employees are people. They’re not numbers, and they’re not a resource to be used. You can’t force them to behave with the perfect algorithm of retention. The best you can do is create a culture that makes them feel valued, seen, and cared for so that they want to stay.

In order to create said culture, take a look at some specific tips you can incorporate into your retention strategy:

1. Support Employee Advancement

Did you know that 88% of people rank professional development and career growth opportunities as important when they’re looking for a new company? That’s nearly nine employees out of ten! These types of learning opportunities not only create more skilled and confident employees, they also show your workforce that you care about their continued improvement and success.

Whether you host a class focusing on soft skills, such as communication or teamwork, or you pay for interested employees to sign up for a class in hard skills, such as coding or business management, you need to show each employee that you care for their growth.

2. Offer Awesome Compensation

Yes, you knew this one was coming. As the saying goes, money makes the world go round, and it should also be a vital part of your retention strategy. Ensure that each position in your company has a competitive and fair salary, and leaders should always seriously listen to requests for raises. You could also think about adding a small amount of extra cash (or points on our platform) to each employee’s bi-weekly paycheck—just as a way to say thanks!

However, the salaries you offer aren’t the only part of your compensation package that you need to look closely at. Benefits are an integral aspect that you absolutely need to consider. Do you offer good health insurance (with a range of coverage options for single people and families)? Do you include vision and dental insurance? What about retirement savings?

Creative benefits are growing in popularity as well. Think about offering free healthy snacks, catered lunch, or monthly massages for your employees. Offering reimbursement for transportation or bus passes can be helpful, too. The best way to find which benefits your employees actually want is to ask them. Send out a survey and then actually implement the benefits that are the most popular..

3. Create a Culture of Care

Your employees, both current and future, need to see that you care about them. One of the best (and most expected) things you can do is offer flexible work. 51% of employees wish their employer offered more flexible options, and 84% of working parents said flexibility is the number one most important thing when looking for a job.

Flexibility could be unlimited PTO, flexible work hours, or flexible work locations. Find the option that works best for your company, and then make sure your employees know you support them and their work-life balance.

One other way you can create an amazing culture is with employee rewards and recognition. Recognition can lower voluntary turnover by 31% by itself (and a lack of recognition is the number one reason employees leave), which is what this post is all about! Recognition programs, such as service awards, spot recognitions, and wellness programs, make your employees feel valued and appreciated.

Awardco is all about genuine, effective employee recognition. We can help you build a program that’s easy to manage and that employees will love on our employee rewards and recognition platform.

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Improve Retention in Your Organization

Employees are still surrounded by nearly unlimited options when it comes to employment. In order to improve your employee retention rate, you need to invest time, effort, and money into making your employees feel like they’re valued parts of a team, not invisible parts of a machine. By supporting career development, enhancing your compensation, and evolving your culture, you will show your loyalty to your employees, which, in turn, will make them more loyal to your company.

Employee Turnover FAQs

What is an employee turnover rate?

The employee turnover rate is a measure of the number of employees who leave a company within a specific period, typically calculated annually. This rate serves as a crucial indicator of a company's work environment health and its effectiveness at retaining employees.

How to You Calculate Your Turnover Rate

If you wan to get a good idea of your own turnover rate, it's pretty easy to work out. Here are the numbers you need to know to calculate your own turnover rate:

  • Number of employees who left the company during the specific time period
  • Number of employees at the start of the time period
  • Number of employees at the end of the time period

Once you know those numbers, you just need to figure out the average number of people in your company. Then, the equation itself is simple:

  1. Dive the number of employees who left by the average number of people in the company
  2. Multiply that number by 100
  3. The answer is your turnover rate

Once you know your own turnover rate, you'll know where you stand. The best part is, even if your rate is higher than it should be, you can follow some strategies to turn this trend around.

What is a good turnover rate?

Pinpointing a good turnover rate isn't as straightforward as you might think. It's a bit of a moving target, shifting with the ebb and flow of industry trends and the unique circumstances of each company. That said, a ballpark figure that many companies shoot for is a retention rate of 90%, which translates to a turnover rate of about 10%. But remember, this isn't a one-size-fits-all number. It can bob and weave based on a variety of factors, like the norms in your industry, the pulse of the economy, and even your company's rate of internal promotions. So, while 10% is a good starting point, it's essential to keep your finger on the pulse of these other elements too.

What is a High Turnover Rate?

When we talk about a high turnover rate, we're usually referring to anything that exceeds the industry average. So, let's say the average turnover rate in your industry is sitting around 10%, and your company's rate is double that at 20%—that's when alarm bells should start ringing. A high turnover rate can be a red flag, signaling a host of potential issues within your company.