Employee Turnover: Top Causes & How to Reduce It

In the post-pandemic era, acquiring and retaining talented employees is an ongoing challenge, especially in skilled trade industries like plumbing, HVAC, and electrical. The COVID-19 pandemic shook up the workforce with a wave of skilled professionals retiring early, other employees making career shifts into different industries, and pressures increasing due to the rising costs of living.

With the modern challenges of retaining talented employees, more companies are examining their rates of employee turnover and seeking ways to reduce it. In this blog, we'll take a look at what employee turnover is, the top reasons for it, and some of our tips for reducing it. 

What Is Employee Turnover?

Employee turnover is defined as the percentage of employees that leave your company over a given period, generally within a year. Having a high employee turnover rate can put significant pressure on your business because of the steep costs of training and onboarding new employees.

Plus, if you are facing staffing shortages, you may have to turn away customers or have a lengthy lead time that result in lost jobs.

How to Analyze Your Turnover Rate

Calculating your employee turnover rate is simple. First, you’ll calculate the average number of employees by adding the number of employees at the beginning of a set period and the number of employees at the end, then dividing that number by two. Then, divide the number of employees who left your organization during that period by the average number of employees, and multiply the result by 100.

This number will be your turnover percentage for the given period. The higher the number, the more your company is struggling to retain talented employees. (1)

Voluntary vs. Involuntary Turnover

When you are thinking about employee turnover, it’s important to compare voluntary and involuntary turnover. Voluntary turnover takes place when employees choose to leave an organization by resigning or retiring. Involuntary turnover is when an employee is asked to leave for because of behavioral issues, poor performance, budget cuts, or restructuring.

Keep in mind that in some cases, involuntary turnover is not always a bad sign for your business. For example, converting to automated booking software may make some administrative positions obsolete, decreasing your number of employees. But instead of downsizing the business, you're actually running it more efficiently. 

Why Employee Turnover Matters

If your business is experiencing a high rate of turnover, you're likely to feel a financial impact. What is the cost of employee turnover? According to Shane McFeely of Gallup: 

The cost of replacing an individual employee can range from one-half to two times the employee's annual salary — and that's a conservative estimate. (2)

The costs of voluntary turnover can be even higher, because you may be losing reliable, efficient team members who keep your company running. But according to research, there's a lot that employers can do to prevent this problem. First, you'll need to understand the causes. 

What Are the Top Reasons for a High Turnover Rate?

Many employers assume that the top reason for turnover is salary. But that’s not necessarily true. A 2022 study from the Society for Human Resource Management found that there are many complex reasons why employees choose to leave an organization. (3) Compensation is a factor, but the following are top causes as well:

• Lack of Career Development and Advancement – Employees who feel a sense of purpose in the workplace are more likely to stick around. Professional development opportunities and clear pathways toward career advancement contribute to that sense of purpose. 
• Workplace Flexibility – The COVID-19 pandemic made many professionals reconsider their work/life balance. While most jobs in the skilled trades are not compatible with remote or hybrid work environments (except for administrative roles), you may be able to improve employee satisfaction through more flexible scheduling.
• Uncaring or Uninspiring Leaders – Complaints about management are a top-ranking reason why employees leave organizations. Toxic or uncommunicative leaders can make employees feel disconnected and undervalued.
• Unsustainable Work Expectations – Employee burnout is another common reason for high turnover, and it can stem from unrealistic or unsustainable work expectations. Unfortunately, when a company is already experiencing high turnover, it may lean too heavily on remaining employees to carry the workload and keep the business running.

Related: Why Good Employees Leave (& How to Stop Turnover) 

Tips to Reduce Employee Turnover

For employers coping with tight budgets, workforce shortages, and low employee retention, addressing the above causes of turnover can feel impossible. But there are many strategies for reducing turnover that don't add too much additional burden to your daily operations. (4) Here are a few of the best ways: 

• Recognize employee efforts and thank them for their hard work. If there is room for financial incentives, one-time bonuses can go a long way in showing your appreciation.
• Offer pathways for professional development with certifications or continuing education opportunities. Using online courses can be a cost-effective way of providing professional development to interested employees.
• Discuss your employees’ scheduling needs one-on-one and offer flexibility where possible.
• Conduct monthly reviews involving upper level management.
• Get to know your employees on a more personal level — host quarterly cookouts or other casual employee gatherings that promote human connections between employees and management.

Building People, Supporting Service

If you run a plumbing, mechanical, or electrical business and you are seeking opportunities to grow as a leader in your local community, partner with P3 Services.

P3's partner companies have access to the resources of a national brand, but retain their local identity. We enable our partners to attract and retain more talented employees, and provide those employees with professional development and competitive benefits.

Contact us today to learn more about the benefits of becoming part of the P3 family. 

1. Shweta, Kelly Main, Employee Turnover Rate: Definition & Calculation https://www.forbes.com/advisor/business/employee-turnover-rate/
2. Shane McFeely and Ben Wigert, This Fixable Problem Costs U.S. Businesses $1 Trillion https://www.gallup.com/workplace/247391/fixable-problem-costs-businesses-trillion.aspx
3. Kathy Gurchiek, Report: HR Pros Rank Top Reasons for Turnover https://www.shrm.org/hr-today/news/hr-news/pages/report-hr-pros-rank-top-reasons-for-turnover.aspx
4.  Workhuman Editorial Team, How to Reduce Employee Turnover in 2023: 12 Strategies that Work https://www.workhuman.com/blog/how-to-reduce-employee-turnover/