Leaders and human resource professionals know the statistics around the cost of employee turnover. Estimates indicate that the cost to a business of replacing an employee is around 1.5 times the annual salary of that employee. These costs are made up of the obvious, direct costs, such as recruitment, onboarding and training, but these direct costs mask the indirect costs to other employees and overall productivity – burnout from overwork and the stress of covering vacant roles as well as their own, and these stressors often extend beyond the point at which the new recruit comes along. Estimates suggest that it can take up to 12 months for a new recruit to become fully productive in their role.
There are cultural risks from high turnover also – when those who remain are struggling with the workload in the wake of the departure of a trusted and valued employee, dissatisfaction and disengagement can grow, along with destructive gossip and plummeting morale.
We also know that in the wake of return to office mandates, employees in many organisations and industries have voted with their feet. Stats from the United States indicated that the turnover rate increased by 14% as a result of such mandates.
According to the ABS, around 8% (or 1.1 million people) changed jobs in the year to February 2024, with professionals accounting for almost 24% of those people changing jobs. Average turnover rates vary from industry to industry and have different drivers.
Given the cost of turnover to employee wellbeing and productivity is high, it may be tempting to think that the goal should be to keep turnover as low as possible. But should it? What happens when turnover is very low? Is it okay, or does very low turnover cause problems too?
The challenges of low turnover seem to be less clear than those associated with high turnover, and it can be harder to identify whether low turnover is an indicator that all is well, or not.
Low turnover may be an indicator of underlying problems, so it is useful to consider other employee feedback data to build a more comprehensive picture of what is going on. For example, if a team engagement survey indicates that while employees are satisfied with factors such as salary and conditions, their engagement is low. This may mean the team overall is complacent, unmotivated, and focuses on established routines and maintaining a status quo.
Such a culture is of course, anathema to innovation and change. But worse, in certain professions, such as healthcare, professional complacency can be dangerous.
Nor is it enough to review headline turnover rates only. While an overall turnover rate in an organisation might be 10% – what if 90% of that turnover is occurring in a particular group, or gender? That is clearly indicative that all may not be well, and needs further interrogation.
These contrasting pictures show us that monitoring turnover rates alone is not enough – we need to understand a range of indicators before we decide whether the turnover being experienced in an organisation is appropriate, or not.
Join me and my colleagues Jodie Fox (Director) and Storm Carnie (Practice Leader) at our upcoming Webinar- Workplace Turnover: What is it saying about culture? on Tuesday 29th April, 2025, 12:30pm (AEST) where we will discuss these issues and explore what turnover rates can tell us about the health of workplace culture.
