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What Factors Affect Employee Turnover Rates?

Morale can affect turnover rates.
Events such as office parties may contribute to employee satisfaction.
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  • Written By: Maggie Worth
  • Edited By: Jenn Walker
  • Last Modified Date: 05 April 2014
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A turnover rate is the rate at which something or someone leaves and must be replaced with something or someone new. Employee turnover rates are always a concern for businesses, small and large. High rates can lead to interruptions in service and customer dissatisfaction, and it can be expensive to constantly recruit, hire and train new employees. A number of factors can affect employee turnover. These include low morale and poor job matching as well as stressful or dangerous working conditions and inadequate pay or benefits packages.

Certain types of businesses and positions have traditionally high turnover rates. These include childcare, retail, food service and telemarketing. Other segments, such as clinical healthcare workers and attorneys, traditionally have very low turnover rates. Most other businesses work to keep turnover rates in check, both to control hiring expenses and also to ensure consistency of service.

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One common cause of high employee turnover rates is low pay and benefits packages. When a worker is employed in a low-wage position with limited benefits, there is little incentive to stay if a similar employer offers even a slightly higher rate of pay. Workers who make more, but whose salaries fall short of the going market rate, may feel undervalued at their current companies and look for a company that will pay them what they're worth. Highly skilled workers often can be lured from a well-paying position by a higher offer from a company that desperately needs the employee's skills. Benefits such as insurance, leave time and child care also contribute to employee satisfaction.

Poor job matching is another common cause of high employee turnover rates. Workers who are employed in jobs for which they are over- or under-qualified, or for which they have not received adequate training, may feel frustrated and be inclined to look for other work. Even those working in jobs for which they are properly qualified may leave if their personal style conflicts with either their manager's style or with the corporate culture of the company.

Working conditions can also drastically affect employee turnover rates. Workers employed by companies with strong employee retention programs, low accident rates, and open communications policies are often happier at work and may even be content with lower salaries. On the other hand, employees of companies that do not provide adequate safety measures or fail to appreciate the value of employees may be more likely to seek employment with companies that offer more stable, comfortable environments.

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Discuss this Article

bluespirit
Post 13

@Tomislav - I understand your frustration, as I know when I opened my small business the *only* thing that didn't have me calling out "uncle!" and leaving the business was the fact I owned it!

I will take those beginning stressors into account when I open my next business and hire employees. As a businessman I find employee turnover fiscally dismal sign.

Tomislav
Post 12

There was a chain restaurant that I felt needed to take a class on how to calculate employee turnover!

There were people quitting left and right because of how ridiculously poorly trained we were, but the kicker was getting talked to as if we should have known better!

Also the restaurant was initially popular because it opened in a small town where a new restaurant is big news, so it was stressful in the beginning secondary to the degree of how quickly we must work while still trying to learn the work.

I definitely think how new a business is should take such factors into account to keep its employees, especially considering a new business has enough to worry about without adding employee turnover to the matters!

Has anybody else found this to be true - that employees that help to open a new business are not rewarded for the initial growing pains that they endure through?

honeybees
Post 11

It is no surprise that those companies who have low turnover rate, are also known for the great benefits they offer their employees.

I have read several times how low the Google employee turnover rate is, and how they offer many perks and benefits for their employees.

I have gone to the same dentist for 25 years and he does not have any turnover in his office. He has the same receptionist and most of the same staff members for as long as I can remember. Everyone is also very friendly and you can tell this is a good environment to work in.

This is on a much smaller scale as compared to a company like Google, but the effects are still the same.

sunshined
Post 10

My husband worked for a local manufacturing company that had very low turnover. When most people retired from this company, they had been working there for 30 - 40 years.

They offered great benefits for their employees. There was a large fitness area for all employees with personal trainers and free child care when you were working out. You earned points for fitness that you could use toward a free trip. We earned a free trip to St Johns this way.

I am sure that calculating the employee turnover rate for a company like this is much different than a retail store or fast food restaurant where they have huge amounts of turnover every year.

myharley
Post 9

Many years ago I worked for an insurance company that was ahead of its time in many areas. They have had people who worked from their homes long before it was common for other companies to offer this.

They were also great at giving you flex time so you could choose what time of day you wanted to begin. This made it ideal for people with young children who are at home and need to get to school in the morning.

Another one of their great benefits was that we were done working at noon every Friday. Every weekend we looked forward to this extra time. We did not take scheduled breaks, but were able to get up from our desks at any time to go to the vending machines.

This company had low turn over rates because of these extra perks that were appealing to a lot of people.

suntan12
Post 8

@Sunny27 - I agree that that is smart because sometimes employee retention is based on the fringe benefits that the company offers. For example, there is a local hospital in my town that was rated one of the best places to work for women because it offered an onsite daycare, flexible schedules, in fact it even allowed working moms to take summers off to be with their kids without losing their jobs.

It also offered full health care benefits and a number of other benefits that really left the turnover rate to an almost nonexistent level because no one wanted to leave such a company.

This company focused on things that were important to their employees and this made it a great place to work. It was not the salary because most of the employees of this hospital were paid average salaries.

Sunny27
Post 7

@Latte31- I agree and I think that companies factor in terminations along with people leaving for personal reasons in their turnover definition. I think that a lot of human resources departments want to learn what cause an employee to voluntarily leave a company.

Sometimes people leave for more opportunities and a higher salary. Other times they leave because of a boss that they could not work with. I think that this information really helps companies lower their turnover rate.

I know that sometimes companies offer employee satisfaction surveys to employees in efforts to see what is working with the employees and what the employees would like in the future. I think it is smart when companies do this because they are being proactive and trying to retain as many employees as possible because employee turnover rate statistics are a concern for a lot of companies because of the increased costs that it brings.

latte31
Post 6

@Bhutan -I understand what you are saying because many people believe that this is a job with few prospects, but some of these employees that stay do go on to management positions and some even own franchises so this position can lead to other things.

I wanted to add that people in high stress jobs really raise the national employee turnover rates. I think that jobs in the sales field tend to have a high levels of turnover because not everyone can deal with the rejection that comes with sales.

People that take rejection personally in sales will never be able to sell anything because rejection is part of the job. You really have to let things roll off your back and like to deal with people because in sales if you don’t meet your quota you will be terminated which also adds to the employee turnover rate calculation.

People that are stressed about their sales quota won’t last because in order to sell to a prospect you have to be totally relaxed and confident.

Bhutan
Post 5

I think that there is a lot of employee turnover in jobs that offer little pay with repetitive functions. For example it is easier to understand the McDonald's employee turnover rate because these jobs pay closer to minimum wage and they have a lot of repetitive functions.

If you work in the drive through for example, you really give the same greeting to all of the customers and ring them up on the register and handle every transaction the same way.

Some people get burned out by having to perform the same functions everyday and decide to look for more fulfilling work. I think that this is why the turnover is high in the fast food industry in general.

sunnySkys
Post 4

@JaneAir - My experience in the restaurant industry was pretty much the same as yours: a few "lifers" and then the other staff members would only be there for a few months.

I think corporate culture has changed in the US and increased turnover. Thirty years ago, most people would work for the same company until they retired. However, that isn't possible anymore. People get laid off or fired. Also, job hopping is considered the norm and sometimes people have to get a different job to advance their careers.

I don't think turnover is always the fault of the company. There are many other factors that could influence someones decision to leave their job.

JaneAir
Post 3

I think places like restaurants and bars have a high turnover rate because they aren't "real" jobs for most people. For example, most waitresses aren't looking to make a career out of waitressing. They are often working their way through school or something like that.

Even if the working conditions are good, if the workers aren't dedicated to the job I can see why the turnover rate would be high. I know when I worked in the bar industry people often went to work at other places out of boredom or because they heard the tips were slightly better. It was experience that most places I worked at had a few dedicated employees that had been there for a few years and the rest of the staff would sort of rotate through every few months!

manykitties2
Post 2

What never ceases to amaze me is businesses that wonder why there employees are constantly quitting on them. High employee turnover rates are certainly a sign of a problem within the company structure itself, and not the fault of the employees leaving.

There are some bosses I've worked for that have amazing and others that have made me wince. I once had a boss who would go through a secretary at least every two to three weeks. She was always complaining about how lazy workers were and how no one could do the job properly. I think if you've gone through a few dozen people there is only one common denominator in the situation, you.

I really think it's those in charge that need to be fixed when it comes to high employee turnover rates.

wander
Post 1

I have spent a great deal of time working in private language schools in Asia and the employee turnover rates here can be staggering. It is amazing how many places excel at alienating their workers through micromanaging and through less than legal cost cutting measures.

First, from my own experience the thing I think that affects employee turnover rates the most include taking away an individual worker's ability to do their own job, by nitpicking and controlling everything they do. It makes the worker feel like they are incompetent and no one wants to stick around for that.

Secondly, shaving funds off of employee benefits or not following a contract to the letter are huge gripes for employees. This is especially true when the employer does it because the employee can't fight back due to flimsy labor laws for foreign workers.

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