This is the second post in our series on high employee turnover, examining the effects it can have on a business. Learn how to spot the negative effects of a high staff turnover. Can there also be positive effects to employee turnover? To get access to a downloadable version of the whole guide, click the image below:
What is staff turnover?
Staff turnover refers to how many employees leave your organisation and need replacing within a given time period. The more staff that leave within that period, the higher your turnover rate will be. Here we'll have a look at some of the effects of high staff turnover rates - and also low turnover rates - on organisations.
The negative effects of high staff turnover
The negative effects of high employee turnover can range from the immediate and obvious to the more long-term and subtle. In the short-term, leavers can cause gaps in your staffing and the headaches associated with recruitment. In the long-term, a high turnover rate within your business may indicate to current staff and job-seekers that you’re not the best choice for them, affecting your prospects.
Here are some of the negative effects that a high turnover rate can contribute to in more depth:
1. The cost of high staff turnover
Replacing staff is an expensive process for businesses. According to an Oxford Economics study from 2014, replacing an employee costs an average of £30,614 per employee. This includes costs such as recruitment and hiring, training, and waiting for new starters to be up to maximum productivity. From this perspective, lowering staff turnover can save you quite a bit of money.
2. Access to company and brand knowledge
When a new person joins a business, people with more experience can show them the ropes. Senior staff can help them learn about unique aspects of the company, the role, and your brand. If turnover rate is high, new employees have less access to this knowledge and spend more time learning or even starting from scratch.
3. Quality and productivity
With gaps in staffing and new staff needing time to learn, the quality of your products or services can suffer. Remaining staff may also take the strain of a bigger workload, causing stress and drops in quality at the expense of productivity or vice versa.
4. Morale
When employees are leaving your organisation, this can cause other staff members to feel demoralised and even become more likely to leave themselves. Addressing the issues causing turnover rate in your organisation is crucial for avoiding this knock-on effect.
The positive effects of high employee turnover...?
It’s not all bad if you have a higher rate of turnover than you’d like! In an interesting article from Chron.com, they list a few positive effects of employee turnover, such as the potential to lose a toxic employee, getting fresh ideas from new starters, and benefiting from more diverse hiring strategies. So, it's also possible to have a positive turnover rate.
Having a low staff turnover rate
On the flip-side, having a staff turnover rate that's too low can also have a negative impact on a business. A lack of leavers can mean there are few chances for staff in junior positions to progress. Having the same employees for many years without a gradual income of new starters can also impact on the natural transfer of company knowledge from employee to employee.
This is why businesses talk about having a healthy turnover rate; this doesn't necessarily mean a low one. On either side of the equation, a business can have an unhealthy turnover rate, though the effects of a high turnover rate may seem more obvious.
The reasons behind high employee turnover
So, now you have an overview of the effects of high employee turnover – but what about the causes? It’s through examining the causes that we can understand and hopefully reduce the negative effects of staff turnover. Check out our post on the reasons for high staff turnover to find out how to address this.
You can also download our fullstaff turnover guide.
Looking for a better way to manage your staff? For a full suite of staff management features that help with scenarios such as leavers and turnover, head over to the staff management features page of myhrtoolkit.
Written by Camille Brouard
Camille is a Senior Marketing Executive for myhrtoolkit who writes on topics including HR technology, workplace culture, leave management, diversity, and mental health at work.
FAQs
When your employee turnover rate is high, you will feel its effect with reduced productivity and increased time spent recruiting, training, and onboarding new employees. High employee turnover can also lead to a decrease in employee morale, which negatively impacts your company's reputation.
What are the effects of high employee turnover rate? ›
When your employee turnover rate is high, you will feel its effect with reduced productivity and increased time spent recruiting, training, and onboarding new employees. High employee turnover can also lead to a decrease in employee morale, which negatively impacts your company's reputation.
What does a high turnover in staff tell you about a company? ›
High turnover could indicate that employees are not finding enough opportunities for advancement in your company. If employees feel stuck in a dead-end job, they will look for a better position. Employees also prefer companies with career training programs that allow them to add new skills and build their resumes.
Does turnover lead to more turnover? ›
Turnover is cyclical. As mentioned above, an employee's departure impacts the company culture and the workload of their teammates. Overworked, unengaged employees are more susceptible to burnout which generally leads to additional turnover.
How productivity is affected by employee turnover? ›
Productivity decreases as new employees aren't as efficient as existing staff for quite a while after they're hired. Employee morale also suffers when people leave. Occasionally, the resignation of a key person can cause a turnover exodus as other staff members also depart.
What are the negative effects of high employee turnover? ›
Lower quality of work can be one of the negative impacts of employee turnover. If the turnover rate is high, either the company keeps functioning with a lower number of employees, or with a portion of inexperienced employees that don't have proper training. It can result in low quality work and low productivity.
Why is high staff turnover a problem? ›
It means you're losing good employees, sometimes to competitors. Causes include problems with the company's culture, its benefits and compensation structure, its career path and training, managers and much more. High voluntary turnover impacts profitability and, often, customer satisfaction.
What happens when turnover is high? ›
Higher turnover means additional work for existing employees. Often, they end up covering for employees who have left. This cuts into time spent on regular responsibilities. New hires need to go through an adaptation period in which they learn how to do their job.
What are the two major drawbacks of employee turnover? ›
Cons
- Losing engaged and hard-working staff.
- Rehiring time and expenses.
- Indicating existing staffs' dissatisfaction and unhappiness.
- Pressurising remaining staff.
- Delaying other business plans and developments.
Turnover is a problem for businesses because it can lead to lost productivity, high recruitment and training costs, and decreased morale among remaining employees. And finally, high turnover rates can reflect negatively on businesses, making it difficult to attract and retain top talent.
Effects of Employee Turnover
The impact of high staff turnover includes decreased productivity, increased recruitment costs, avoidable time spent on training new employees, and lost sales. Businesses with high staff turnover typically experience low employee morale and productivity rates.
What are the six factors that can affect turnover? ›
Employee turnover refers to how many employees leave an organization within a timeframe. Some key factors influencing employees to quit their jobs are job satisfaction, communication, colleague relation, organizational commitment, justice, politics, reputation, etc.
How does turnover affect profitability? ›
The higher the turnover of the inventory, the higher the cost which can be suppressed so that the greater the profitability of a company. Conversely, if the slower turnover of the inventory, the smaller the profit gain.
What is the leading cause of employee turnover? ›
Employee compensation is often a top reason for voluntary turnover. This is usually due to a lower-than-expected annual salary or a lack of raises. Inadequate employee benefits can also cause your talent to leave for better opportunities.
What decreases employee turnover? ›
What reduces employee turnover? Employee turnover can be reduced by implementing a combination of strategies focused on improving job satisfaction and employee engagement. This includes offering competitive compensation and benefits, promoting work-life balance, and providing opportunities for professional development.
How does staff turnover affect organizational effectiveness and employee performance? ›
Staff turnover places unnecessary pressure on staff members who are at work. The remaining staff experience an increased workload leading to low morale, high levels of stress and therefore absenteeism.
Is high turnover a red flag? ›
A consistently high turnover rate can be a significant red flag. If employees are leaving the company in flocks, it may be a sign of a toxic work environment, poor leadership, or inadequate compensation.
How do you interpret employee turnover rate? ›
Interpreting turnover rate
For example, suppose an IT company's annual turnover rate is 5.1%. If the IT industry has a 12.6% turnover rate, then the company's turnover rate is good, compared to that of the industry. Also, consider the quality of employees that left the company.
Should I work for a company with high turnover? ›
Try to evaluate the reasons for their departures and see if it's something that will actually affect you personally. If you can see an obvious reason for their departures (say, the sales and marketing departments are being combined) but it doesn't apply to you, then stay put.
