According to Northern Illinois University, companies with high employee turnover are 4 times less profitable. In addition, the company may experience the consequences of losing vital employees for up to two years — that’s exactly how long it takes a specialist to adapt to a new workplace.
We’ve highlighted the main reasons for high staff turnover, when to sound the alarm, and how to prevent high personnel turnover. Anna Paraskeeva, Technical Recruiter at ITExpert, helped us understand the issues of staff turnover. She has successfully filled Python, Node.js, React, Java, DevOps Engineer, and other technical vacancies in various domains and industries, and therefore, she knows first-hand the reasons for candidates changing jobs.
Let’s discuss:
- Definition of staff turnover
- Turnover benchmarks for the IT field
- Reasons for turnover
- Employee turnover formula
- Tips on how to reduce turnover
What Is Employee Turnover and Why High Employee Turnover Is (Extremely) Bad
Overall employee turnover and attrition during probation are important metrics to track in companies.
High staff turnover negatively affects business financial performance since:
- the costs of searching, training, and adaptation of new employees are increasing;
- the likelihood of a snowball effect increases, when losing one employee (especially a vital one) can lead to losing others;
- losing skilled IT specialists can reduce service quality and sales volume;
- it can negatively impact your HR brand.
Anna Paraskeeva
Technical Recruiter at ITExpert
“Staff turnover always entails considerable costs for the business. The company has to spend resources on finding a new employee, onboarding, and at the same time, be prepared that the new team member will spend the first weeks or even months getting acquainted with the project and won’t likely bring much quality results or benefits to your business.
It also happens that the quitting specialists were responsible for some specific part of the product or code, in which no one else was involved except them. Therefore, offboarding and the next onboarding may take even more time.
With high staff turnover, the general atmosphere in the team is also disrupted, since everyone gets used to working together. QA engineers often contact software developers, developers can ask for advice from each other, and so on.
If you do not work on staff retention, specialists are unlikely to come to their colleagues for advice (after all, team members are constantly changing and are basically strangers to each other). Moreover, it takes a certain amount of time to get to know each other and get used to your new teammates. This affects the speed of releases and bug fixing.”
An IT Benchmark To Assess the Landscape and Your IT Efforts
A LinkedIn study has found that turnover rates are highest in the professional services, tech, media, and entertainment, as well as in the accommodation, and retail industries.
Industries with high employee turnover. LinkedIn Research
Normal annual staff turnover rate for the year (regardless of business):
- less than 3% — stagnation;
- 3–5% — normal indicator;
- 5–9% — relative stability;
- over 50% — high turnover.
The turnover rate depends on the business field and employee job categories. For example, the normal coefficient in IT companies is 8–10%.
Moreover, in young companies, the coefficient can reach up to 20% per year while in organizations that have been operating for several years, it is lower. The indicator also differs greatly depending on the company size: for businesses with a team of 50–100 people, it is lower than for a company with 1,000–3,000 employees.
Top managers and executives quit less often, their turnover rate is 0–2%.
Employees during the probationary period quit jobs more often than those who have completed it. Last but not least, turnover rates depend on the global agenda. During the pandemic, many employees were laid off, therefore, the turnover rate has increased.
At the same time, even in a crisis, it is worth maintaining the team as much as possible. This way, you will avoid failures in processes and reputational damage.
The Main Causes & Reasons for High Employee Turnover in the IT Sector
According to a Bridge Group consulting company, professionals used to stay in a company for about five years on average. Nowadays, the period has been reduced and is only 1.8 years. What are the main reasons why employees quit and how to deal with staff turnover when the rates are too high?
1. Boredom at work
Lack of interest and challenges at work is one of the reasons why specialists leave the company. In 2021, 20% of job seekers cited boredom as the main reason for low engagement.
🫣 In 2016, Frédéric Denard, a worker from Interparfums, France was awarded €50,000 because he was left bored with nothing to do with his employers in a landmark ruling. He claimed he suffered from bore-out and described his condition as a “descent into hell”. As a result, he was left to carry out tasks that had nothing to do with his job.
2. Low salary
The bitter truth is that people tend to change jobs because of the salary. This is far from the main factor that forces IT specialists to work for you, but oh well, Maslow’s hierarchy of needs does exist.
On average, salaries grow by an average of 5–20% annually in the IT field, and tech specialists often quit to more favorable conditions. To retain employees and avoid counteroffers, you need to pay them at or above the market level.
3. Lack of sense of belonging in the workplace
Researchers at the coaching platform BetterUp have found that when a team lacks a sense of belonging at work, employee turnover increases by 50%. A sense of belonging increases productivity by 56% and reduces sick leaves by 75%. An additional bonus: employees with a strong sense of belonging are 2.7 times more likely to recommend the company to others.
4. Lack of career opportunities and advancement
Company management wants dedicated and ambitious employees. However, managers do not always provide specialists with growth opportunities. Only 34% of companies invest in employee development. At the same time, according to SHRM, approximately every fifth person leaves the company because they don’t see career prospects.
❗️ According to an EdAssist survey, 60% of employees would prefer a job with more career opportunities over a company with regular salary increases.
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5. Lack of feedback and praise
If managers don’t praise employees and don’t provide them with regular feedback, they feel like their work goes unnoticed. According to Gallup, employees who don’t feel appreciated are twice as likely to expect to quit within the next year. And vice versa: in companies where employees regularly receive feedback, staff turnover is 14.9% lower.
6. Toxic colleagues
Even if the company has an ideal management, this does not change the fact that you can have toxic specialists on the team. As a rule, they are always dissatisfied with everything, can gossip intensively, inappropriately make fun of colleagues, or even purposefully mock individual employees.
☹️ According to Career Builder, 1 in 4 employees experience bullying in the workplace, causing them to be less productive, take more sick days/time off, or quit altogether.
7. Hiring mistakes or wrong strategy
If new employees leave the company within the first six months, this may indicate hiring issues. Perhaps recruiters and department heads embellish the working conditions or make promises that they cannot keep. As a result, people quit because their expectations weren’t met.
Anna Paraskeeva
Technical Recruiter at ITExpert
“It is worth attributing to the main reasons for employee turnover the company’s ignorance of regular (every six months to a year) salary reviews and an insufficient benefits package, and especially its reduction. This has a great impact on employee loyalty as well as can cause doubts and start looking for a new job.
If a specialist, for example, is accustomed to medical insurance and the company removes it from its benefits package, it can cause thoughts that the organization has some kind of financial issues.
The reason for turnover may also be bad processes in the company:
- The absence of a team leader or a project manager: each role in IT is crucial to make the work comfortable.
- Lack of methodology and process infrastructure: for example, lack of one-to-one meetings where employees receive feedback about their work and understand that their efforts do not go unnoticed.
- A project with poor code support: if the company does not allocate enough time to work on the code quality, high-skilled specialists may start searching for a new job where code quality would be at the forefront since they want to develop a quality product.”
How to Calculate Your Employee Turnover Rate
No matter what measures you take, employee turnover is inevitable. The HR manager’s task is to reduce it as much as possible. To do this, you should first calculate the turnover rate:
Divide the number of employees who quit during X period by the average number of employees during X period. Multiply the result by 100%.
In addition, calculate the percentage of employees who left the company on their own during the probation period.
The formula for calculating staff turnover
Staff turnover should be calculated at least every quarter. You can also calculate the rate once every six months or year, especially if your company has been operating for a long time and there is data for comparison.
The team’s headcount at the beginning of the quarter was 30 people. During this period, 4 people were hired, 2 of whom did not pass the probationary period. What is the turnover rate among new employees?
Check it
How to Reduce High Employee Turnover Rate
According to a Work Institute report, companies can avoid 75% of employee turnover. Let’s consider our methods to retain employees.
Implement exit interviews
What makes people stay working at your company? What do they value most? You can obtain the answers to these questions using an exit interview. You can use the following questions to reach your goal:
- What are your reasons for leaving the company?
- What did you like most about your manager?
- What did you dislike most about your manager?
- Rate your relationship with your team on a scale of 1 to 5.
- Would you recommend working in this team to your friends? And in our company as a whole?
- What is missing in the company, in your opinion?
Try to create questions so that the answers can be formulated unambiguously. This way, the employee won’t have to spend a lot of time filling out the form.
Reconsider employee onboarding processes
👀 The first weeks determine further cooperation with the company. 31% of professionals quit within the first six months due to poor onboarding processes. In fact, 69% of employees say they are more likely to stay with a company with a strong onboarding strategy.
Introduce mentorship if your company doesn’t have one. Create a team of mentors and introduce them to employees who need onboarding or post-onboarding learning. This way, newcomers won’t feel abandoned and will quickly join the project.
Provide regular feedback
Constantly show the team its contribution to the company’s success. This is a small step for the manager, but big prospects for reducing employee turnover.
For example, you can hold a “Flash mob of gratitude”. For instance, we at ITExpert printed thank-you cards for one of our team buildings. Using them, our employees could write their gratitude to their colleagues. The cards were popular and boosted team spirit.
Help employees develop
Create a personal development plan annually and discuss how the employee will grow within the company. Launch programs and workshops to develop skills. Provide opportunities for job rotation.
For example, in the Ukrainian multi-product IT company Brainstack_ there is an available internal transition between positions, a leadership school and an internal mentoring program. In two years, the company has grown more than 17 managers and promoted its specialists 57 times.
Nowadays, companies compete mainly based on skilled specialists. Tech giants like Meta, Amazon, and Google as well as small startups in different fields and of different sizes depend on their staff’s readiness for constant innovation, as well as teamwork coherence and the absence of high staff turnover. Work on it to retain dedicated, credible, and ambitious professionals and streamline your business processes.
