Back to business as usual - labour turnover on the rise

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Labour turnover is on the rise, according to latest figures from EEF, with the turnover rate up to 16.1% in 2015 – the highest is has been since 2009.

There are a whole host of indicators that companies keep a close eye on to benchmark business performance, especially when it comes to their workforce. Labour turnover is such important metric and one which EEF measures across manufacturing sectors.

The latest data collected from EEF members shows an increase in turnover in 2015, with a return to levels last seen in 2009.  

The level of turnover can be affected by economic factors, such as a healthy labour market outlook offering confidence amongst employees to look for new opportunities, creating some churn across businesses and sectors. Or indeed – the opposite, if economic conditions deteriorate we’ve seen that companies try to hold on to employees and the movement of individuals between companies becomes less frequent.

Additionally, there might be company-specific factors – labour turnover rates may be impacted by conditions in the workplace, with good reward and recognition structures resulting in lower turnover rates. And, of course, vice versa.

labourturnover  

 

What is labour turnover? It’s a fairly simple calculation which looks at the ratio of people leaving an organisation (for a variety of reasons that include retirement, redundancy or moving onwards and upwards for their careers), relative to the total headcount over the year. 

Lee Hopley Says EEF Chief Economist Lee Hopley:

“Turnover rates have been creeping up over the past few years, as the economy has moved back into recovery and labour market conditions have normalised.

We’ve seen a similar picture in official data which points to the number of vacancies in manufacturing creeping back to pre-recession levels.

Labour turnover rates seem to be highest in mid-size businesses (with between 101-250 employees) and lowest amongst the larger companies (251-500 employees).

But more striking are some of the variations across sectors. The lowest turnover rates are in the machinery and equipment sector. Companies in this industry have seen persistently weak demand conditions over the past 18 months – a consequence of the low oil price and the slowdown in investment globally. The lower turnover rates could be a sign that companies are holding on to key people and employees are staying put.

Respondents to our survey in sectors outside manufacturing have a notably higher turnover rate – potentially a sign that there is higher levels of skills transferability or indicative of higher levels of churn in non-manufacturing companies.”

Our new infographics on labour turnover rates give breakdowns of turnover by region, sector and company size. It also looks at difference between the manual and non-manual workforce. Benchmark your company performance to see how you compare. Click here to download.

Is employee turnover a real issue?

JacquiTutin EEF’s Senior HR Consultant Jacqui Tutin says:

“As with most things there are advantages and disadvantages of employee turnover, it is the balance which is important.  Too much turnover and you could be losing key knowledge and experience, too little and you may get entrenched conflict, little innovation and an aging workforce.  Then there are the costs of recruiting and training which generally costs significantly more than retaining.

To know if employee turnover is a real issue for you, it is recommended that you benchmark your organisation to see how you compare.  Then you need to know who you are losing and why.  Are you keeping the desirable employees and losing the undesirable ones?  If so that’s great, if not why are desirable employees leaving or undesirable ones staying?”

What can be done to reduce employee turnover?

Recruit

If your employees are resigning or being dismissed in the first year usually poor recruitment and selection decisions, both on the part of the employee and employer, are usually to blame, along with poorly designed or non-existent induction programs. If this is the case get feedback from your recent starters about their experience of the recruitment and induction process.  Was the job what they expected, did they get the support they required during the recruitment process and once they started?  Then you can review your job descriptions and person specifications, as well as your shortlisting, interview and induction processes.

Train

If your employees are leaving for better job opportunities, or employees are being dismissed for capability (Skills & Knowledge), then you need to maximise opportunities for employees to develop skills and move on in their careers. Understand and manage people’s skills, knowledge and career expectations. Where promotions are not feasible, look for sideways moves that vary experience and make the work more interesting.

Motivate

If your employees are critical of the company or managers when they leave, do your managers recognise the importance of recognition and appreciation?  Yes compensation and remuneration are important to people, especially when taking on a new role, but once in a role employees are motivated by much more.  The way they are treated by their manager and senior management.  The way they are treated by their colleagues.  Whether they feel they have a 'voice' and whether they feel they contribute to the success of the department/company.  An employee survey may help you identify some of these issues within your business.

Need more help with retention? Our team of HR consultants are on-hand to offer advice guidance and support along every step of the journey, from on-boarding to performance management to employee surveys. For an informal discussion on how we can help you achieve the outcome you need, get in touch with our team of experts at 0808 168 5874.

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