November 21, 2023
What is the Cost of Employee Turnover?
In this article, we’ll look at the cost of employee turnover, break down the direct and indirect costs asso...
In this article, we’ll look at the average employee turnover rate, by both industry and job role, to help you understand how the turnover rates in your company stack up.
If you’re running a business or a team, you need to pay attention to your employee turnover rate. But without the right context, it’s hard to know if your turnover rates are cause for concern, or par for the course.
Read through this article for all you need to know about employee turnover rates, and how to improve turnover rate in your business.
The average turnover rate is around 10.6% yearly, and around 3.5% monthly.
Keep in mind that these figures are rough estimates based on limited sample sizes, and different sources may return slightly different figures.
Turnover rates will also vary depending on industry, job role, and other supporting factors, so we’ll look at more segmented data below.
Here’s how the average employee turnover rate differs from industry to industry.
According to a Linkedin study, the industries with the highest average yearly turnover worldwide are the Professional Services and Tech and Media industries.
These industries had 13.4% and 12.9% turnover respectively in Linkedin’s study, above the overall average of 10.6%.
Conversely, Government Admin had the lowest average employee turnover rate at 8.4%.
|Industry||Average Annual Turnover Rate|
|Tech and Media||12.90%|
We can get even more extensive data from the US Bureau of Labor Statistics (BLS).
The BLS provides data on job separations in the US. Separations include all cases when an employee leaves their job, including voluntary quits, layoffs and discharges (e.g. firings).
The most recent data shows that Arts, Entertainment, and Recreation (6.9% monthly employee turnover), Leisure and Hospitality (6.6% monthly employee turnover) and Accommodation and Food Services (6.5% monthly employee turnover) are currently the industries with the highest average turnover rate.
On the other end of the scale, State and Local Education (1.2%), Government (1.3%) and Finance and Insurance (1.8%) all have much lower than average employee turnover rates.
|Industry||Sept 2022||Sept 2023||YoY Change|
|Mining and logging||3.60%||3.40%||-0.20%|
|Trade, transportation, and utilities||4.40%||4.00%||-0.40%|
|Transportation, warehousing, and utilities||4.90%||4.10%||-0.80%|
|Finance and insurance||2.10%||1.80%||-0.30%|
|Real estate and rental and leasing||3.20%||3.10%||-0.10%|
|Professional and business services||4.90%||4.60%||-0.30%|
|Education and health services||2.90%||3.00%||0.10%|
|Health care and social assistance||3%||3.20%||0.20%|
|Leisure and hospitality||6.40%||6.60%||0.20%|
|Arts, entertainment, and recreation||6%||6.90%||0.90%|
|Accommodation and food services||6.50%||6.50%||0.00%|
|State and local education||1.60%||1.20%||-0.40%|
The same Linkedin study referenced above gives us data on the types of jobs with the highest/lowest average turnover rates.
On the high end are Human Resources jobs (14.6% yearly turnover rate), Research (13.1%) and Product Management (13.0%).
Administration (7.8% yearly turnover rate), Operations (8.8%) and Accounting (9.4%) had lower than the average employee turnover rate of 10.6%.
|Role||Average Annual Turnover Rate|
Here are some more interesting data points regarding employee turnover.
According to the BLS, in 2022 there were 50.6 million quits (i.e. employees voluntarily leaving their job) out of a total of 72.3 million total separations.
That means voluntary employee turnover accounts for a hair below 70% of total turnover.
Involuntary turnover, i.e. layoffs and discharges, account for 24.3% of all employee turnover, while Other separations (which include retirement, death, disability, and transfer to different areas of the business) account for 5.7%.
Based on the data above, 72.3 million separations equals an average of just over 6 million separations per month – with 4.2 million employees voluntarily leaving their jobs each month.
A BLS report found that the median length of time a wage and salary worker had been with their current employer is 4.1 years.
This number is slightly higher for men (4.3 years) than women (3.8 years), and much higher for public sector workers (6.8 years) than private sector (3.7 years).
According to O.C Tanner, 20% of job turnover happens within the first 45 days of employment.
In addition, 10 times as many workers leave their job after one year of employment compared to after five years of employment.
According to research from Gallup, 52% of employees who voluntarily quit their jobs say that their decision to leave could have been prevented if their manager or an organization leader had done something about it.
51% reported that, in the three months before they left, neither their manager nor any other leader spoke to them about their satisfaction with the job.
Gallup says that a conservative estimate of the cost it takes to replace an employee ranges from one half to two times their annual salary.
Based on these estimates and industry average turnover rates, turnover could cost a company with 100 employees could be spending as much as $2.6 million per year.
Employee turnover rate is the percentage of employees that leave their job in any given period.
You could calculate turnover rate monthly, yearly, or based on any other period you think will yield significant insights.
If you were to calculate your yearly employee turnover rate, you would take the number of employees who left their job in that period, and divide it by the total number of people employed by your company in the same period. Multiply the result by 100 to get a percentage figure.
For example, if you had 200 people employed in the year 2023, and 20 of those employees left for whatever reason, your annual turnover rate would be 10% (20 / 200 = 0.10, x 100 = 10%).
If you’re comparing your turnover rate to others, make sure you do so in the same context.
The longer the period, the higher you can expect your turnover rate to be. For example, over a period of three years, you’ll expect a higher percentage of your workforce to turn over compared to a period of three months, in which you may see a turnover rate in the low single-digits.
That’s why it’s important to use consistent period lengths when assessing turnover rate and comparing it to industry averages. If you compare your annual turnover rate to the industry average monthly turnover rate, your number will likely be a lot higher.
In addition, some people will calculate turnover rate only for voluntary separations (e.g. employees who make their own decision to leave the job), whereas others will consider all separations (voluntary or involuntary, e.g. employees who are fired or laid off).
High turnover rate is generally a negative sign for a business.
It signals issues with hiring, company culture, employee engagement and/or job satisfaction, and can be disruptive and costly to the business.
In most cases, teams want to maintain a low turnover rate, with a settled workforce that doesn’t have people constantly moving in and out.
High employee turnover has several detrimental effects, such as the following:
Though high turnover is generally considered to be a negative, it’s not so in all cases.
Some businesses are just naturally linked with high turnover, such as seasonal businesses, or businesses that employ many part-time/temporary staff.
High turnover may also be necessary to remove underperforming employees from the team, or moving employees who are not a good fit for the team or their role.
In this case, you do want these roles turning over, so you can hire high-performers or employees who are a better fit.
However, if you have high turnover for these reasons, it does signal that there is an issue somewhere along the line, such as your selection process or onboarding.
You don’t want to look at your turnover rate in a vacuum, and assume that any reduction in turnover will be good for the business. Reducing turnover by retaining poor performing employees is generally not what you want.
However, high turnover is never really desirable. You may be losing employees who don’t perform or who aren’t a good fit, but a better outcome would be to not end up in this position in the first place.
Here are some things you can implement at various stages of the employee lifecycle to positively impact retention, and decrease turnover rates.
If your turnover consists of largely poor performers or poor fits, you need to look at your hiring processes.
You may want to spend more time in the hiring process to increase your chances of selecting the right people, who are more likely to provide long-term value to your team.
You may hire the “right” people – but once they start working, the employee experience may be driving them towards the door.
Onboarding is crucial for making sure new employees are clear about their role and responsibilities, and aligned with the company’s goals and vision.
Poor or incomplete onboarding can lead to a poor employee experience, or fail to give them the knowledge they need to excel in their role, resulting in their performance falling below expectations.
If you’re losing good employees to voluntary turnover, you’ll likely need to look at your compensation and benefits.
While pay is not everything, it is a significant factor in an employee’s decision on where to work. 44% of people say they’d leave their current job for another job that pays more.
Similarly, more attractive fringe benefits (such as insurance coverage, paid time off or retirement benefits) may help you hold on to more of your top performers.
Too many leaders only point out flaws or mistakes, while failing to recognize when employees perform well.
This is discouraging to the employee, and negatively impacts morale, which will lead to a high turnover rate. Small touches like highlighting small wins and recognizing employees who do a good job can go a long way to increasing employee engagement and keeping your best employees.
Turnover often comes from employees working long hours and burning out.
When work-life balance skews too far on the side of “work”, job satisfaction and employee engagement decreases, and employees start looking for a new start.
Promoting a healthy work-life balance can thus decrease turnover rates and associated costs. Encourage employees to take time off to refresh, and try to increase flexibility, such as offering flexible working hours or the option to work from home.
Flamingo can help you reduce turnover in your business, and build a happier, more engaged workforce.
Our leave tracker app makes it easier for employees to take time off, and easier for the business to manage when employees are away from work, on vacation, sick leave, etc.
This results in a happier team, better work-life balance, fewer cases of burnout, and ultimately a cohesive team with low turnover.
Improving your employee experience is the best way to achieve a long-term reduction in turnover and retain your best employees for longer.
Try Flamingo free today, and build a better company culture.
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