Keep Your Top Talent: The Importance of Low Employee Turnover Rates in the UK

Employee turnover is a reality for many businesses in the UK. No matter how great your company is, it's inevitable that some employees will leave. But what is employee turnover, and why is it important?

Employee turnover refers to the rate at which employees leave a company and are replaced by new ones. It's a crucial metric for businesses to keep track of, as high turnover can be a costly issue, both financially and for the company culture.

The turnover rate in the UK varies by industry, but on average, it's around 15%. In 2020, the overall employee turnover rate in the UK was 14.9%. This is slightly higher than the previous year, when it was 14.6%.

Cost of turnover

The cost of employee turnover in the UK can vary depending on factors such as industry, level of the employee, and the company's size. However, according to the latest estimates from the Centre for Economics and Business Research (CEBR), the cost of employee turnover in the UK in 2021 was approximately £5.5 billion.

This figure takes into account direct costs such as recruitment, training, and severance payments, as well as indirect costs such as lost productivity, decreased morale, and reduced quality of customer service. The CEBR also estimates that the average cost of replacing an employee is £30,614 for a senior executive, £16,813 for a manager, and £3,617 for an entry-level employee.

It's worth noting that these figures are only estimates and can vary depending on individual circumstances. However, they do highlight the significant impact that high employee turnover can have on a company's finances and overall success.

Types of turnover

There are two main types of employee turnover: voluntary and involuntary. Voluntary turnover occurs when employees leave on their own accord, either because they have found a better job opportunity, they are unhappy with their current role, or they are relocating. Involuntary turnover, on the other hand, occurs when employees are let go by the company due to poor performance, company restructuring, or other reasons.

While involuntary turnover can sometimes be necessary for the success of the company, voluntary turnover is often more damaging. Losing employees who are valuable to your company can be expensive and time-consuming, as you'll need to find and train a replacement. In addition, high rates of turnover can also damage morale among the remaining employees and lead to decreased productivity.

So, what can companies do to improve their turnover rates?

There are several strategies that can be effective, depending on the underlying causes of the turnover.

Firstly, it's important to understand why employees are leaving. This can be done through exit interviews, surveys, and other methods. If employees are leaving because of a toxic or unsupportive work environment, then changes need to be made to improve the company culture. This might involve increasing communication, providing training and development opportunities, and creating a more supportive work environment.

If employees are leaving because they don't feel valued or challenged, then there are several strategies that can be effective. Offering competitive compensation and benefits packages can help to retain employees. In addition, providing opportunities for career development and advancement can help employees to feel challenged and valued.

Another strategy that can be effective is improving the hiring process. Ensuring that new hires are a good fit for the company culture and the role they will be performing can help to reduce turnover rates. In addition, providing adequate training and onboarding can help new employees to feel more comfortable and confident in their role.

It's also important to recognise that some level of turnover is natural and can even be beneficial for the company. High turnover rates can sometimes be a sign that employees are leaving for better opportunities or because the company is growing rapidly. In these cases, it's important to focus on retaining the employees who are most valuable to the company, rather than trying to retain everyone.

Finally, it's important to communicate with employees about the value that they bring to the company. Recognising and rewarding employees for their hard work and contributions can help to build loyalty and reduce turnover rates. This can involve offering bonuses or incentives, providing regular feedback and recognition, and creating a culture of appreciation and respect.

Employee turnover is a reality for many businesses in the UK. While it can be costly and damaging to company culture, there are strategies that can be effective in reducing turnover rates. By understanding the underlying causes of turnover, improving the hiring process, offering competitive compensation and benefits, providing opportunities for career development, and recognising and rewarding employees for their hard work, businesses can reduce their turnover rates and create a more positive and productive work environment.

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This article was first published on 30/3/23.