This summer, Gallup Research published survey results with the headline “42% of employee turnover is preventable but often ignored,” noting that “employee turnover risk is at its highest point since 2015.” In a time where labor shortages are considered “the new normal” and the labor market is tight, let’s talk about employee retention and turnover and how it impacts businesses.
Quantifying the cost
Jack Altman wrote in the Huffington Post that employee turnover “is generally understood to be bad, but there is little awareness of its quantifiable impact.” Although most companies know that employee turnover is bad for their bottom line, many are likely unaware of how much exactly it costs them each year.
In 2019, Gallup estimated that U.S. businesses were collectively losing a trillion dollars every year to voluntary turnover. A conservative estimate puts the cost of replacing a single employee at 1.5 to 2 times their annual salary, which can add up quickly. Especially considering that employee turnover can also negatively impact the employees who do stay by reducing team morale, engagement, and motivation. All of which could result in lost productivity for the company. Additionally, no amount of money can replace specific skills or knowledge that some employees possess about a company they have worked at for years.
Why employees leave
Although some level of employee turnover is inevitable – people make life choices every day that have nothing to do with their jobs – surveys show that almost half of employees who voluntarily leave their jobs report that their company could have done something to prevent them from leaving. And a pay increase was not the only option.
A 2024 survey found that 32% of those surveyed would leave their current job even if they didn’t get a bump in salary, and 47% would leave for only a 5% pay increase. This shows that although salary increases are a factor in employee retention, they are not enough on their own to keep good employees from leaving a workplace where they don’t feel respected or appreciated or who work for a toxic boss.
Similarly, a Gallup survey found that it “takes more than a 20% pay raise to lure most employees away from a manager who engages them, and next to nothing to poach most disengaged workers.”
Adding data to your stories
The Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS Program) produces data on job openings, hires, and separations, including “quits.” As a business reporter, you can use this data to see how quit rates may differ in your area compared to the rest of the nation, or how they range from sector to sector.
The latest numbers are expected to be released tomorrow, September 4, 2024.
