7 Ways to Reduce Employee Turnover in Your Business

Andrew Buck's avatar Andrew Buck December 5, 2023

A high rate of employee turnover can be incredibly damaging. High turnover means you’re consistently having to hire new people to fill open positions, which is disruptive to productivity and comes at a huge cost to your business.

You don’t need to cut out turnover completely. But if you can reduce employee turnover below the average for your industry, it’s likely you’ll see positive results on profitability, employee morale, productivity and company culture.

Average employee turnover rate by industry

Keep reading for some ideas on how to reduce employee turnover and build a more cohesive and sustainable team.

Hire the Right People for the Right Jobs

If you have a turnover problem, the first place to look is your hiring process.

High turnover is often caused by hiring employees who aren’t a good fit, for your business or for the role.

The reason this is the first place to look is that, if you’re hiring people who aren’t a fit, you shouldn’t want to retain them anyway. It’s no use paying more to reduce turnover of people who don’t add value to your business in the first place (or at least, not as much value as you’d like).

Don’t rush to hire someone as soon as possible, especially for important roles. Spending more time, effort and money on your hiring process can save you in the long run.

Improve Onboarding

Though you may have an issue with hiring, the problem might actually be how your new employees are being introduced to the business.

The onboarding process is a key period for your employees, and can have a big impact on turnover. By some accounts, 20% of employee turnover happens within the first 45 days of employment. And 10 times as many employees quit after one year of employment vs five years of employment.

If you train employees correctly, get them ingrained in your company culture, and get them invested in their job, there’s a much better chance they’ll stick around and perform for longer.

On the flip side, poor or incomplete onboarding results in a terrible first impression for the employee, which will inevitably lead them to look for another job before long.

Offer Competitive Compensation and Benefits

We didn’t put this at number one on the list, because you shouldn’t automatically throw money at the problem, if it could instead be solved by hiring people who are a better fit, and training them correctly.

However, this is also one of the most straightforward ways to increase retention and reduce employee turnover.

Everyone is motivated by money to some degree. We come to work to get paid and provide for our needs and our family’s needs. And while it may not be everything, a better paycheck is a clear incentive for someone to switch jobs.

Similarly, the carrot to encourage someone to stay with you instead of taking another job could be better fringe benefits, not just salary. Consider if you can offer your top performers better healthcare, PTO, wellness benefits, or other perks outside of a pay rise.

Learn More: All you need to know about the most valued Employee Benefits today

Help Your Employees Maintain a Healthy Work-Life Balance

Another common reason for employees becoming disengaged and eventually leaving is that they are overworked and burnt out.

Poor work-life balance is a significant contributor to burnout. This is when someone’s life is fully consumed by work, and they have no time or energy for activities or relationships outside work.

The kicker is that those at risk of work-life balance issues are often your best, most dedicated team members, those who are willing to go the extra mile and put in extra hours at work.

You need to take steps to ensure your employees have the opportunity to live a life outside of work. Steer clear of heavy overtime and long working hours, let your employees switch off properly when they’re not at work, and provide enough PTO so that they can take regular breaks to refresh and recharge.

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Recognize and Reward Great Performance

A lack of recognition can lead to poor morale, low engagement, and a desire for employees to leave and find a new opportunity.

In too many workplaces, employee feedback always comes when something’s wrong – e.g. we made a mistake or performed poorly.

Yet we don’t hear anything when we do well. It makes us feel underappreciated and dissatisfied.

Set up a system to ensure that you recognize the good, not just the bad. This could mean celebrating wins (big and small) in a dedicated Slack channel or using an app that allows team members to recognize others for their good work.

This will have a positive impact on morale and overall job satisfaction and employee engagement.

Give Employees the Opportunity to Learn and Grow

We have a natural desire to learn new things, improve our skills and advance in our careers. When that doesn’t happen, employees will likely feel “stuck” at work, and eventually look for a new opportunity, one that’s more stimulating.

Nearly two thirds of people feel that gaining new skills and advancing their career is of moderate or high priority when it comes to their wellbeing at work. If this need is not met, employees are much more likely to feel burnt out and dissatisfied, which leads to turnover.

Providing growth pathways in your business is a no-brainer. Not only will it help reduce turnover and increase engagement, but it also leads to a team of more skilled and talented individuals.

Prioritize Constructive Candor

We could say something generic here like “build a positive company culture” or “reduce toxicity in your working environment”. Both will have a positive impact when it comes to reducing employee turnover, but we’d rather provide more actionable advice to help you increase positivity and reduce toxicity in your workplace.

One of the best ways to do that is to make candor the norm in your workplace.

Candor means being open and honest – essentially, sharing what you think and feel, instead of keeping it locked away, talking behind peoples’ backs, or putting a spin on the truth.

These actions, though they may be intended in a positive way, generally lead to a negative, political working environment, with little trust.

That in turn leads to high turnover.

But on the other hand, if everyone is open and honest with each other, trust is much easier to achieve, which results in a more positive environment.

“Radical candor” is one of the core tenets of Netflix’s company culture, as described in the book No Rules Rules: Netflix and the Culture of Reinvention. This book, co-written by CEO Reed Hastings, goes into great detail on the benefits of candor and openness in the workplace.

The one caveat is you should encourage “constructive” candor. Make sure there’s a constructive reason to share your thoughts. Personal attacks and unconstructive criticism will have the opposite effect you’re looking for.

Bonus: When High Turnover is a Good Thing

Generally, high employee turnover is a problem you want to deal with, or prevent.

But don’t fall into the trap of blindly chasing a low turnover rate. If you do this, you could end up keeping a lot of low-performing, ill-fitting employees in your team, which will reduce hiring costs but hurt your business.

If someone isn’t a good fit for your team, or for their role, them leaving the job is a good thing. Not just for the business, as you have a chance to hire a new person who is a better fit, but for the employee as well, as they can find a new job they’re better suited for, where they’ll likely be more engaged.

Touching on Netflix again as an example, their culture features the “keeper test”, in which managers are encouraged to let go of “good” employees in order to hire “great” ones.

This is a good kind of turnover. It’s proven to be a sustainable strategy at Netflix as well, as even with their somewhat radical approach to retention, their turnover rate is still below average for the tech industry. 

The Effect of Reducing Employee Turnover

Reducing turnover has many positive effects on your business (assuming you do it the right way, and not by holding on to poor performers and problem employees).

For one, you’ll have lower operating costs. The cost of replacing an employee ranges from 33% to 200% of the employee’s annual salary. If you’re constantly replacing your staff, this cost adds up.

It will also have a positive impact on productivity and collaboration. Less turnover means employees will be more familiar with their job, with your business, and with each other. Increased continuity, as long as you’ve got the right people in the right roles, is a good thing for the team.

A lower turnover rate also provides stability for your team, which makes it easier to build and execute a long-term plan to grow the business.

If you have a high turnover rate, do what you can do to improve it, by following the tips above.

The best part is that most of the time, improving employee retention also has a positive effect on employee engagement, satisfaction, company culture, and overall performance of your team.

Andrew Buck's avatar

Andrew Buck

Andrew is the content manager at Flamingo. He has managed teams in multiple industries, for both physical and remote businesses, and has experience dealing with the ins and outs of HR and leave management on a daily basis.

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