Retention rates: what's happening at the moment?
The past two years have seen major changes in the working world. First, we had mass layoffs with the COVID-19 pandemic as companies couldn't afford to pay many of their employees' salaries. Then, the Great Resignation emerged. For those not in the know, the Great Resignation (as it's being called) refers to people resigning from their jobs en masse. Their motivations are varied: unacceptably low pay, poor management, overextended working hours, lack of flexibility and work-life balance are some of the reasons people are quitting at extremely high rates.
Intuitively, between high rates of dismissals and resignation, one can assume that employee retention rates are currently extremely low. An employee retention rate is a measure used to determine how many workers stay with an organization and for how long. By contrast, employee turnover rate refers to statistics surrounding employees being fired or leaving their jobs.
Are extremely high turnover rates/low retention rates the current reality? And if it is, what are its implications for business owners? Let's find out:
Retention and turnover rates by the numbers
As the U.S. Bureau of Labor reports, almost 6 million employee separations occurred in July 2022, representing a 20% increase from pre-pandemic rates. Hello Team explains that as of January 2021, the national turnover average (irrespective of industry) was a few percentage points shy of 50%.
Shockingly, more than 30% of employees leave their jobs within the first six months of employment – 20% of turnover happens within the first two months. Additionally, 65% of workers believe they can get a better job elsewhere and half of them are of the opinion that they can find a new job within six months of leaving their current position.
What the statistics mean for employers
According to Legal Jobs, it's estimated that low retention rates will cost American organizations over $400 billion by 2030 if present levels remain the same or decrease. At an organizational level, replacing employees (whether they've been let go or left on their own) is a costly exercise. Onboarding costs generally add up to one-third of the leaving employee's salary but can be up to twice as much.
High overhead expenses are never good for an organization, but, as another recession looms, these costs are especially troublesome for employers. Although revenue generation has returned to normal for many industries (and even increased in some areas like commerce), low employee retention rates are still concerning.
Many employee resignations are entirely preventable, and organizations with high worker turnover rates should investigate why employees leave and make the necessary adjustments to improve employee retention. Keeping your trained and experienced talent is crucial for business success and if organizations want to stay relevant or competitive in their respective field or market, they need to ensure they stay attractive to employees.