The Cost of Employee Turnover: 4 Steps on How to Reduce It

Written by
Nicky Hoyland

Employee turnover is natural — within limits. High turnover rates can have a significant impact on businesses of all sizes, as the average cost of employee turnover is estimated at £30,614 per person.¹ Alongside the financial impact, a high turnover rate can affect your company’s productivity, morale, and service quality.

9.4 million people across the UK plan to change their jobs in 2022² as the Great Resignation continues. Today, if businesses don’t offer employees what they want, employees quit after a short period of time and businesses fail to attract suitable candidates.

Hybrid and remote working have changed what employees are looking for. Priorities have shifted from a good annual salary and a good office location to a positive company culture, flexible working options and personal development.³ To keep employee turnover down and attract top talent, companies need to accommodate the “new normal” and create digital work environments that provide consistent employee experiences whether at home or in the office.

Here, we’re going to look at four strategies that can help you retain employees and reduce employee turnover. Let’s get started.

The cost of employee turnover

Annual staff resignations in the UK have an immediate cost impact of around £42 billion per year.⁴ The process of finding the right people and training them on the job has direct and indirect costs.

Direct costs

Finding and hiring people isn’t a cheap process. Recruitment companies are usually paid on commission and often charge up to 30% of the employee’s salary. This takes the estimated cost of finding the right candidate on the average UK salary with a recruitment consultant to £3,000.⁵ And it doesn’t end there.

New hires have productivity rates as low as 25% in the first month after completing their training, with most hitting the 75% productivity benchmark in their third month as they get up to speed and start to become confident in their role.⁶

That’s why small and medium-sized enterprises (SMEs) spend, on average, £12,000 to replace an employee. And the average cost of recruiting and training new employees goes up for highly skilled positions, with corporations spending up to £213,000 to replace a CEO. ⁷

Indirect costs

The costs of losing an employee can also be less clear-cut yet just as hard-hitting. Staff turnover involves indirect costs, such as:

Loss of experience: Even though your business may have detailed employee exit policies, you may still suffer from knowledge loss when people leave. Every employee accumulates a wealth of knowledge and experiences while working at your organisation. When the employee leaves, you replace an experienced individual with someone who needs time and training to reach a similar level of proficiency.
Loss of productivity: Trainees or individuals working under a seasoned manager may be completely dependent on their senior to deliver their work. Thus, the productivity of an entire team or department decreases when the manager leaves. Lost productivity costs UK businesses £143 billion every year.⁸
Overstretched employees: As an employee leaves, your team might be temporarily short-staffed. This means that people will have to pick up the slack for leavers until new employees are hired. Taking on more work can mean less focus on their own roles, and a higher risk of employee burnout.
Loss of morale: Employee morale is the fuel that drives your organisation’s productivity forward. Team members who work together for a long time learn to trust each other, share their responsibilities, and are confident that they can achieve meaningful goals. When a team member leaves, this may lead to a loss of morale and decreased performance.⁹
Lower product or service quality: Inexperienced employees may find it difficult to provide the same product or service quality, despite completing their onboarding process.

Nowadays, websites like Glassdoor, CareerLeak, or Vault let people know what to expect in terms of salary, employee experience, and company culture. Negative reviews from former employees might increase employee turnover, making it even more difficult and expensive to attract job seekers — while putting potential new employees off applying.

With employee turnover costing you money, morale and productivity, it’s crucial to create effective retention strategies and reduce your voluntary turnover rate.

How to reduce employee turnover

High employee turnover can be caused by many factors. To reduce it, you have to implement a thorough retention strategy. Here are some things that can help:

Step 1: Focus on employee experience

If employees have a good experience at work, they’re less likely to leave. It’s simple but true. From the recruitment process, through to their last day, employee experience is shaped by factors like company culture, the work environment (physical and digital), learning opportunities and leadership.

In short, all the elements that make up your workplace creates the employee experience. Employee engagement represents the feelings your employees have when all the elements come together. Offering a superior employee experience increases engagement and lowers employee turnover by up to 31%.¹⁰

And today, hybrid and remote working is increasingly popular — and necessary. As many people want to work away from the office, embracing this so that employees can work wherever they want in an easy, joined up way, helps improve their experience and their engagement.

As a result, companies that allow remote working have a 25% lower turnover rate.¹¹ But it’s important that remote or hybrid working is done right…

Suggested Reading: For more details on how to enhance the employee experience you offer, check out our eBook — Solving the Employee Experience Crisis.

Step 2: Invest in your digital workplace

Workplaces have changed drastically over the last few years thanks to the growing popularity of cloud computing, artificial intelligence, and the Internet of Things (IoT), while the pandemic accelerated the move to hybrid and remote working.

Hybrid working — and therefore the digital workplace — is here to stay. 38% of hybrid workers say they would look for another job if their workplace stopped offering remote options.¹² In this context, a digital workplace is not a nice-to-have — it’s vital to a good employee experience and needs to be fully integrated as part of your workplace.

And it’s a great retention strategy. Improving the digital capabilities of your workplace influences employees’ day-to-day experience, enabling them to work from wherever they want, whenever they want.

If you’re planning to adopt new workplace technology, it’s important to consider how you’ll execute your digitisation process:

Use a phased approach: Introducing new technologies in multiple phases allows your team to get used to every solution before having to learn another, so your employees do not feel overwhelmed.
Focus on employee participation: Management should inform the team about the benefits of each new technology it plans to introduce and encourage team members to try out the solutions before including them in the technology stack.

It’s crucial that your digital workplace feels aligned with your physical workplace. This means it should be as easy for employees to find and access information, complete tasks and collaborate as it is in their physical workspace. They should be able to work on their phone, tablet or desktop — picking up on tasks where they left off with ease. A consistent digital experience is vital to a successful digital workplace.

Step 3: Enable progression and invest in learning & development

40% of employees leave their jobs due to a lack of career progression opportunities.¹³ People who stagnate in the same position without a title change or an increase in their annual salary over the course of ten months are significantly more likely to leave a business.¹⁴

Providing clear progression paths for your employees and promoting them in good time improves their employee experience and increases your staff engagement.

However, the prospect of raises and promotions alone is not enough to reduce employee turnover — people also want to develop in their role. 66% of employees aged 18 — 24 rank learning and development (L&D) opportunities as the third most important perk after health insurance and disability benefits.¹⁵

Investing in L&D programs is a great way to keep your employees engaged. Taking a strategic approach to learning and development will help you improve your company’s culture and strengthen your performance.

Consider the skill gaps: Evaluate your staff’s strengths and weaknesses and identify the skills they lack. Select the skills that will help them progress professionally while also improving their productivity.
Be mindful of personal development: British employees up to 25 years old rank personal development over pay and benefits.¹⁶ Courses on leadership, public speaking, mindfulness, and communication in your L&D program can help you keep young employees engaged and lower attrition rates.
Offer personalised training: Use a range of training approaches when rolling out new technology to your team, taking into account different learning styles. Offer personalised training to your non-tech team members if necessary to ease their reservations and make the adoption process smoother.

Step 4: Get feedback and listen

Fostering a culture of good internal communication helps your employees feel valued. Listening to your staff, asking for feedback, and using that information to improve your company culture enables you to provide a better employee experience and reduce turnover.

Here are some strategies that can help you gain actionable insights from your employees:

Conduct employee surveys: Employee surveys help you understand how your team perceives your business. Conducting surveys within an employee’s first 90 days enables you to assess their satisfaction, engagement, and culture fit.
Use pulse surveys: Pulse surveys are generally shorter and easier to complete than normal surveys. They’re great tools if you want to gather feedback about a specific topic.
Conduct exit interviews: Exit interviews help you get honest opinions on what works in your organisation and what you should improve.

Employees want to feel listened to. By enabling opportunities and encouraging dialogue, you can help them feel valued and supported, keeping them at your company for longer. But it’s not enough just to listen — you need to act on feedback. Employees have to see the change they’re asking for happen to feel truly listened to, and to keep them contributing.

To get an understanding of whether your employees feel listened to, and the wider employee experience within your company, try our free employee experience health check. You can evaluate how effective the employee experience is in your company — and receive a tailored action plan.

Create people-centric experiences to reduce employee turnover

The cost of employee turnover can have a significant impact not only on your profit margins, but on your company’s culture, morale and productivity. But if you create people-centric experiences, you can help employees feel engaged, listened to and supported — and ultimately increase employee retention. In an age of digital working, this has to be done across the physical and digital workplaces.

HulerHub is an employee experience platform that allows you to transform your digital workplace. Using HulerHub, you can offer a consistent work experience across your physical and digital workplaces, enabling your staff to feel like they belong in your working community wherever they choose to work from.

Our platform enables you to customise how your employees engage with work resources, highlight personalised training and ensure information is easily accessible. It also helps your company create a culture of recognition by allowing your employees to praise and appreciate one another.

To see how you can lower your turnover with a personalised employee experience platform, book a free demo today.