How to reduce employee turnover rate

If employees are the heart of an organization, retaining your top talent should be a priority for HR teams. Businesses that prioritize employee retention reduce HR hiring costs, enhance employee satisfaction, and improve revenue.

While a low employee turnover rate is desirable, it’s far from average in many organizations. According to Bankrate’s 2023 job seeker survey, over half of the workforce will likely look for a new job in the next 12 months. 

Maintaining a low employee turnover rate comes with understanding and providing what employees want from their jobs. In this article, we’ll explore employee turnover, why turnover rates may increase, and outline core strategies your company can use to lower employee turnover rates. 

Employee turnover is the total number of workers who leave a company over a set period of time, both voluntarily and involuntarily. Typically, employee turnover appears as a percentage.

A high employee turnover rate suggests that many employees leave the company yearly. On the other hand, a low employee turnover rate means that only a small percentage of employees leave the company each year.

Having a low turnover rate is definitely beneficial, but it’s highly unlikely for a business to have a 0% turnover rate. Change is normal; employees may transition to new roles, explore different fields, or retire. Employee turnover isn't always an indicator of a problem. As long as you don't have a high turnover rate, it's normal for employees to leave your company occasionally.

Companies will typically invest in employee retention strategies to reduce employee turnover. These strategies often improve the employee experience, understand employees' pain points, and find solutions to make their journey with your business as seamless as possible. 

Not all employee turnover happens for the same reason. There are two distinct forms of employee turnover, both of which have different connotations:

Both voluntary and involuntary turnover are part of your organization’s employee turnover rate.

To calculate the employee turnover rate, you’ll use the employee turnover rate formula: divide the number of employee separations by the average number of employees, then multiply by 100. 

To find the average number of employees for the year, add the number of employees the company employed at the start of the year to those still with the company at the end of the year. Then, divide that number by two. 

For example, if you started the year with 200 employees and ended the year with 300, your average number of employees for the year is 250 (200 + 300 = 500 / 2 = 250.) 

If 10 employees separate from the company during that year, your employee turnover rate is 4% (10/250 = 0.04 x 100 = 4%).

Here’s how we would calculate the total employee turnover rate over a month:

It’s important to note that temporary or seasonal workers don’t factor into your employee turnover rate. These temporary jobs won’t last more than a set period, so they would increase your turnover rate figure without adding insight to the story. 

The normal employee turnover rate varies greatly depending on industry, company size, location, and job type. 

The US Bureau of Statistics publishes regular updates on average employee turnover rates. In February 2024, the average employee turnover rate across all industries was 3.5%. This rate included turnover from quitting, layoffs, discharges, and other separations.

Yet, within each industry, this average greatly varies. For example, in February 2024, the average employee turnover in Leisure and Hospitality was 8.0%, while in Finance and Insurance, it was only 1.8%.

While looking at industry averages can give you an employee turnover benchmark to work toward, collecting your own data over time can be more beneficial. By monitoring your employee turnover, you can determine whether your employee experience management positively impacts employee turnover rates.

Related reading: Enhancing the employee lifecycle: Strategies & insights for EX success

Most of the time, there isn’t any one single cause that makes an employee leave a business. A range of factors could contribute to their desire to leave, including: 

Running exit surveys and monitoring your employees during their time at your business will help you identify which factors contribute to employee churn. 

A high employee turnover rate is never a good sign. Pinpointing why employees decide to leave your company and then fixing these problems will result in a happier, more stable workplace.

Reducing employee turnover and enhancing retention rates have several benefits for an organization: 

Hiring, onboarding, development, and unfilled time cost your business money. The more employees you lose, the more you’ll have to hire and undergo this costly process. Reducing employee churn removes this HR cost burden and keeps your business running smoothly. 

According to McKinsey, worker disengagement can cost leading companies around $282 million annually. Identifying pain points in your employee experience and improving them can enhance job satisfaction and boost employee engagement.

Engaged employees are much more motivated, leading to productivity and profit gains for your business. 

By working on lowering your employee turnover, you’ll find ways to improve your employee experience and keep everyone as happy as possible. Survey your workforce with employee engagement surveys to capture feedback.

Over time, you can act on employee feedback to refine your experience and enhance employee satisfaction.

Related reading: Build a more productive workplace with employee engagement surveys

When employees leave their positions, they also leave a gap in their team that others typically have to cover until HR fills the position. This extra strain can reduce job satisfaction in the workplace and lead to project disruptions.

When the employee turnover rate is low, it gives employees time to build connections with one another, forge workplace relationships, and improve team rapport. Teams that spend years working together will find a heightened sense of purpose and work more effectively. 

A powerful aspect of your employee value proposition that top talent will look for is a company with low employee turnover rates. Low turnover shows the world that you likely provide an engaging and supportive workplace.

Creating a brand that people know for its commitment to making a positive employee experience can be a great way to enhance your brand reputation and land top talent. 

Here are several strategies your business can use to improve employee retention and lower turnover rates.

Benchmarking your employee turnover rate and continuously measuring monthly changes will help indicate whether your employee experience strategy has a positive impact. 

Without constantly measuring its turnover rate, your business will not have a benchmark against which to track its change over time. Your HR team should use your employee turnover rate as a core employee experience KPI.

The more data you have on turnover rates in your organization, the more informed you’ll be when creating a strategy to lower these rates. 

Employee retention relies on several different factors. All of these closely relate to the overall experience you offer employees during their life cycle with your company.

Here are the six pillars of employee retention and how they impact turnover rates:

Building an employee engagement action plan starts with understanding the retention pillars and working on meeting each one. 

Recognition shows employees that you appreciate their hard work. According to SurveyMonkey research, 63% of employees recognized at work are unlikely to look for a new job in the next six months. Creating an employee recognition program is one strategy to get a complete picture of employee performance. 

As part of your feedback culture, a recognition program helps celebrate your employees' work. Over time, recognition and appreciation for employees can lower burnout, boost productivity, and reduce your employee turnover rate.

Employee feedback can be one of the most effective ways of motivating your teams and improving the employee experience. 

Your business could also use employee engagement surveys across every stage of the employee life cycle to collect feedback and better understand what your employees feel at any moment. Feedback can point you toward areas of the employee experience that you could improve upon or iterate. 

You can collect employee feedback in performance reviews, 1:1 interviews, or feedback surveys. 

Here are the best employee experience surveys to use at each stage of the employee life cycle:  

The best survey to collect employee feedback in the recruitment stage is the candidate experience survey. This survey template allows businesses to monitor how the recruitment experience runs from a candidate’s perspective.

A candidate experience survey will ask questions like how satisfied someone was with the recruitment process, using the Likert scale of responses. 

There are four helpful employee experience surveys that you can use to collect feedback during onboarding:

These surveys help measure the efficacy of your onboarding processes and determine if employees need extra support. 

At the development stage of the employee life cycle, your employees have settled into their roles and will look for ways to take on more work and expand their presence in your business.

Here are three helpful employee feedback surveys to monitor satisfaction at the development stage and look for ways to reduce employee turnover rates:

Considering only 27% of employees believe that their opportunities to grow in their company are excellent, using the surveys above will help your business work on becoming an education-first organization. 

The retention phase of the employee life cycle is an opportunity for your company to solicit feedback from your seasoned employees to determine what you could do better. 

The following surveys will help reveal how satisfied your employees are and point toward opportunities to hone your employee experience:

Implementing employee feedback can help keep employees in the retention phase for longer, reduce employee turnover, and create a happier workforce. 

Don’t overlook the power of effective offboarding. When employees leave, you can use this to launch an exit interview. 

In an exit interview, you’ll discover why an employee is leaving. By pinpointing the significant reasons behind turnover, you can create strategies to combat them.

Over time, you can turn exit interviews into a treasure trove of helpful employee feedback. While it’s sad when employees leave us, their experiences can become a driving force for better worker conditions down the line.

By creating structures where managers can give feedback and recognition to employees, you ensure that everyone feels valued at your organization.

One leading factor contributing to high employee turnover is employees feeling stuck in their roles. Without the ability to learn, grow, and evolve in a role, they may feel like there isn’t a clear path for them at a company. 

Investing in employee training materials, courses, or self-learning modules will help provide employees with the professional development opportunities they need to thrive. You could:

When you provide skills training and career development opportunities, you show your employees you’re ready to invest in them. Not only does this lower employee turnover rates, but you’ll also create a more skillful team of workers. 

You might have the most amazing workplace, company culture, and managers in the world, but it won't make much of a difference if you're not fairly compensating and paying your employees well for their work. Building a comprehensive benefits package with competitive compensation is the most effective way to reduce your employee turnover rate.

Here are a few aspects of a competitive offer that you should aim to include:

Companies with the lowest turnover rates meet these additional perks, often having many more than just this. The better your offer to employees is, the longer you’ll retain top talent.

Monitoring and regularly calculating employee turnover rates will help your business monitor employee churn. High turnover rates could be a symptom of a poor employee experience.

Using strategies to reduce employee turnover can create a better employee experience and enhance your value proposition. Learn how SurveyMonkey can help you track and improve employee engagement.