man working on laptop employee turnover rate

Employee Turnover Rate: The Negative Impact Of A High Rate

It’s no secret that employees are one of the most  –  if not the most  –  important factor in the success or failure of a company. Your employees are the ones who are responsible for getting the work done and keeping your customers happy.

Think about it, who are the people responsible for the day-to-day running of the business? Who is it that customers interact with? Who does the majority of the groundwork?

It’s pretty simple then  –  happy employees lead to a successful business. Conversely, unhappy employees will have a negative impact on the business.

They may do a bad job, which will reflect badly on the company, or they may leave, taking their knowledge and experience with them.

This is why it’s crucial to keep tabs on your employee turnover rate. In this article, we will discuss what an employee turnover rate is, the negative impacts of a high employee turnover rate, and steps you can take to prevent a high employee turnover rate from being the norm.

Let’s get started!

What Is An Employee Turnover Rate?

The employee turnover rate is the percentage of employees who leave a company over a certain period. This number can be calculated for different timeframes, such as monthly, quarterly, or annually.

This particular metric is important because it is an indicator of how well a company is retaining its employees. A high employee turnover rate can be costly for a company, both in terms of finances and productivity.

In terms of what qualifies as a high employee turnover rate, this is generally considered to be anything above 20%. This means that for every 5 employees you have, 1 will leave within the year. While this may not seem like a lot, it can quickly add up  – especially if you have a large workforce.

employee turnover rate employees handshake

Negative Impacts Of A High Employee Turnover Rate

Now that we’ve understood what a high employee turnover rate and what qualifies as a high employee turnover rate, let’s discuss some of the negative impacts associated with it.

Here are 8 of the main negative impacts of a high employee turnover rate:

1. High Recruitment & Training Costs

If you have a high employee turnover rate, it’s likely that you’ll also have high recruitment and training costs. This is because you’ll constantly be having to bring in new employees to replace the ones who are leaving.

Not only do you have to spend money on advertising and other recruitment fees, but you also have to spend time and resources training the new employees.

This can be a huge drain on company finances and resources and can result in a lot of lost productivity, with a significant impact on the company’s bottom line.

2. Loss Of Knowledge & Experience

When an employee leaves a company, they take their knowledge and experience with them. This can be a big problem for the company, particularly if the employee was in a senior or specialist role.

It can take months or even years to replace that level of expertise and knowledge. In the meantime, the company is at a disadvantage, having to make do with less experienced employees.

This can lead to a loss of productivity and quality, which can be damaging for the company’s reputation and could result in the company losing key clientele who had good relationships with the exiting employee.

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3. Negative Impact On Morale

A high employee turnover rate can have a negative impact on morale, both for the employees who are leaving and the ones who are staying.

When employees see their colleagues leaving on a regular basis, it can make them feel like they’re not valued or appreciated. They may start to question their own future with the company and whether it’s worth sticking around.

The result is a drop in productivity as employees become disengaged and demotivated. Additionally, it can be hard to maintain a positive company culture when the turnover rate is high, as new employees may not share the same values as the rest of the team.

4. Difficulty Maintaining Continuity

If you have a high employee turnover rate, it can be difficult to maintain continuity within the company.

This is because there are always new employees starting and old ones leaving, which can disrupt the flow of work and make it difficult to maintain relationships with clients and customers.

This could result in a loss of business as clients become frustrated with the lack of continuity and consistency.

angry employee on phone employee turnover rate

5. Increased Risk Of Making Poor Hiring Decisions

When you’re constantly having to recruit new employees, there is an increased risk of making poor hiring decisions. When there is a constant outflow of employees, you may be tempted to hire someone quickly, without taking the time to properly vet them and assess whether they’re a good fit for the company.

This can lead to a lot of wasted time and money as you end up with employees who are not up to the job and who don’t last long in the company.

Ironically, hiring quickly can increase the employee turnover rate even further, as the new employees will likely not work out and have to be replaced.

6. Damage To Company Reputation

A high employee turnover rate can damage the company’s reputation, both with customers and in the wider marketplace. If customers see that employees are leaving on a regular basis, they may question the stability of the company and whether it’s a good place to do business.

They may instead take their business elsewhere. In addition, when potential new employees see that the turnover rate is high, they may be put off applying for a job with the company.

This could make it harder to attract top talent to the company and result in a further decline in morale.

7. Reduced Customer Satisfaction

With a can lead to reduced customer satisfaction as there are always new employees who are not familiar with the company’s products or services. This can result in mistakes being made and customers not receiving the level of service they expect.

It may also be the case that the company is constantly having to train new employees, this can take away from the time that could be spent serving customers and providing them with a good experience.

In short, a high employee turnover rate can have a direct impact on customer satisfaction levels.

8. Difficulty Planning For The Future

When the turnover rate is high, it can be difficult to plan for the future as you’re never quite sure who will still be with the company and who will have left.

This can make it hard to invest in long-term projects and to plan for growth, as you’re never completely confident who will still be around to help with the implementation.

If senior employees are leaving on a regular basis, it can be difficult to succession plan and ensure that there is always someone with the necessary skills and experience to step into their role.

clock employee turnover rate

Steps To Prevent A High Employee Turnover Rate

Now that we’ve gone through the multitude of negative impacts of high employee turnover rates, what can we do to prevent this issue within our own firms? Here are a few steps to prevent a high employee turnover rate.

1. Improve Communication Between Management And Staff

One of the main reasons why employees leave is because they feel like they’re not being heard. If employees don’t feel like their voices are being heard or that their concerns are being addressed, they will eventually start to look for a company where they will be valued.

To improve communication, try to have regular meetings with your team where everyone can voice their opinions openly and honestly. You can also encourage two-way communication by being open to suggestions from employees on how to improve the company.

2. Invest In Your Employees

Investing in your employees shows that you are committed to their growth and development, which will make them more likely to stay with the company for the long haul. There are a few ways you can invest in your employees:

  • Offer training and development opportunities: Employees who feel like they’re constantly learning and growing are more engaged and satisfied with their jobs.
  • Offer competitive salaries and benefits: This one is pretty self-explanatory  –  if you want to attract and retain the best talent, you need to offer competitive salaries and benefits.

3. Promote A Positive Work-Life Balance

A common complaint among employees is that they don’t have enough time for their personal lives because they’re always working.

If your employees are constantly working long hours with little to no time for themselves, it’s only a matter of time before they start to look for a job that offers a better work-life balance.

To promote a positive work-life balance, try to offer flexible working arrangements where possible. This could include things like flexible hours, working from home, or taking longer breaks.

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4. Encourage Open Feedback

Employees are more likely to stay with a company if they feel like their opinions and ideas are valued. Encouraging open feedback shows employees that you’re interested in their input and that you’re willing to make changes based on their suggestions.

One way to encourage feedback is to have regular check-ins with employees where they can share their thoughts and ideas openly. You can also create an anonymous feedback system where employees can give honest feedback without fear of retaliation.

5. Create A Positive Work Environment

A positive work environment is one where employees feel like they are valued, respected, and supported. Employees who feel like they are a part of a positive work environment are more engaged and satisfied with their jobs.

There are a few things you can do to create this sort of work environment:

  • Encourage teamwork: Teamwork is important for building relationships and trust between employees. Have some fun! There are lots of team-building activities you can do to create a stronger bond with your colleagues.
  • Show appreciation: A little appreciation goes a long way in making employees feel valued. Try to show appreciation for your employees’ hard work, whether it’s through verbal praise, written recognition, or awards and bonuses.
  • Support your employees: Employees who feel like they have the support of their employer are more likely to be successful. Offer support in the form of resources, advice, and mentorship.
employee morale employee turnover rate

Final Thoughts

Now we know what an employee turnover rate is and have discussed the various negative impacts that it brings to a company, we can implement said solutions for this common problem.

By following the steps above, you can create a positive work environment where employees feel valued, respected, and supported. As a result, you will see an improvement in your employee retention rate and your business will be better off for it.