Author: Florence Mbali Tshabalala
Employee turnover is the rate at which employees leave a company and are replaced by new employees. It is usually shown as a percentage of the total workforce over a certain period, such as a year.
Turnover occurs when employees leave a company, either by choice or because the employer lets them go through processes such as layoffs, redundancy, or retrenchment. Voluntary turnover is when employees leave for reasons like a new job, personal reasons, or a career change. While some turnover is normal, having too many employees leave can be costly and disruptive. These costs go beyond just hiring and training new people – they can also affect productivity, employee morale, and customer relationships.
By understanding why employees leave and the hidden costs involved, companies can put strategies in place to keep their people around and build a more engaged team. Prioritising employee retention and making it a key business goal helps to keep turnover rates as low as possible.
Some of the direct and indirect costs of turnover include:
- Recruitment and hiring: Advertising jobs through sites such as LinkedIn, conducting interviews, and undergoing the onboarding process is costly in terms of money, time, and resources.
- Training: Training new hires also takes time and money. Managers and staff may need to spend hours or days helping them get up to speed, taking precious time away from their own tasks.
- Lost productivity: When employees leave, an organisation finds itself minus a team player. Current employees will have to fill this gap, substantially slowing down productivity.
- Lower morale: When employees leave an organisation it can affect overall workplace morale, contributing to a cycle of dissatisfaction.
- Customer impact: In jobs that involve direct client contact, high turnover can impact customer service and relationships, leading to lower customer satisfaction and even the loss of clients.
Employees leave organisations for a number of reasons. These include:
- Lack of career growth: Limited opportunities for career growth or development will result in boredom, lack of morale, and ultimately resignation.
- Inadequate compensation: Employees may leave for better pay if they feel underpaid.
- Poor work-life balance: Lack of flexibility, such as working from home, working long hours or working too much, can cause burnout, which encourages employees to seek better work-life balance elsewhere.
- Management issues: Poor leadership or a lack of support from management can make employees seek out more supportive work environments.
- Toxic culture: An unhealthy work culture marked by disrespect, discrimination, or harassment, will drive employees to seek a better workplace environment.
High employee turnover is particularly costly in certain sectors, like fund administration, where continuity and expertise are key. Retaining experienced staff is crucial, as it directly impacts:
- Client confidence and relationship stability: Clients prefer familiarity, and high staff turnover can disrupt this and damage trust and customer satisfaction.
- Institutional knowledge: Long-term employees hold valuable knowledge about company processes, client needs, and systems. Losing them means losing this expertise.
- Efficiency and productivity: Long-tenured employees are more efficient, need less supervision, and mentor new staff, boosting operations and productivity.
High turnover – especially in sectors like retail and finance – is expensive, costing companies up to 30-50% of an employee’s annual salary. To reduce turnover and foster a more engaged workforce, organisations can implement different strategies depending on what suits their organisation:
- Competitive compensation: Ensure salary and benefits are competitive and updated regularly to keep employees from looking for better opportunities.
- Career development: Offer clear career paths, mentorship, and skill development opportunities to boost satisfaction and reduce turnover.
- Promote work-life balance: Provide flexible hours, remote work opportunities, and encourage time off. Supporting a healthy work-life balance helps retain employees and keeps them motivated for longer.
- Invest in leadership: Strong leadership is crucial for retention. Train managers in communication and people skills to foster a supportive environment where employees feel valued.
- Recognition: Recognising and appreciating the efforts of your employees makes them feel valued and motivated, improving retention.
Employee retention in action
There are many examples of South African organisations who have implemented the above strategies to improve staff retention. Here are just a couple of examples:
Employee surveys: Conducting regular employee surveys to gather feedback can help identify key reasons behind turnover, such as workload issues, compensation, or leadership concerns. SAB Miller (now AB InBev) used employee feedback to tailor engagement strategies and improve retention.
- Wellness programmes: Offering wellness programmes, mental health support, and flexible work arrangements can significantly improve retention, especially in countries like South Africa where post-pandemic stress is high. Nedbank, for example, provides extensive mental health resources, helping employees maintain their general health and mental wellbeing.
- Exit interviews: By conducting exit interviews, companies such as MTN South Africa gain valuable insights into why employees are leaving, and use that data to address recurring issues.
- Tracking turnover by region: Understanding turnover trends within specific regions or departments can help identify underlying causes. Shoprite Group tackled high turnover in lower-wage stores by improving recruitment processes, offering employee discounts, and providing better career mobility.
- Industry-specific retention: Industries like retail and call centres in South Africa experience higher turnover rates due to factors like low wages and long working hours. Companies in these sectors should ideally then focus on offering competitive salaries and fostering a positive work environment to retain employees.
- Leadership training: In South Africa, where leadership plays a key role in retention, Capitec Bank has reduced turnover by offering leadership and interpersonal skills training, helping to build stronger teams and better management practices.
- Team-building initiatives: Organisations such as Discovery Health, invest in team-building exercises to build a culture of inclusion and maintain cohesion and morale.
Employee turnover can be a big challenge for businesses, but with the right strategies in place, companies can reduce its effects and keep their employees longer. By offering fair pay, growth opportunities, work-life balance, and good leadership, companies can build a more loyal and productive workforce. Retention strategies help save costs and drive long-term success by promoting stability, valuable knowledge, and high service quality within the company.
If you have any concerns about staff turnover please reach out, our experienced HR team is on hand to assist.