Employee Turnover Rates by Industry: Trends and Solutions

The work environment seems to have settled down after a few years of unpredictability. And after 2022 had the highest number of voluntary quits in recorded history with over 50 million, 2023 saw a drop to 44.5 million quits. However, economic uncertainty, inflation, and layoffs are still constant threats that make employees nervous and potentially dissatisfied with jobs they used to view as good enough.

This post is all about employee turnover. We’ll talk about the average employee turnover rate over the past few years (and industry turnover statistics), what a good employee retention rate is in today’s work environment, how to calculate your own turnover rate, and how to improve your retention strategy for the future.

We don’t want to bury the lead here: turnover has dropped over the past few years, but engagement and satisfaction haven’t gone up. Which is why it's more important than ever to engage and retain your best talent.

‍

How to Calculate Employee Turnover

There’s actually a simple equation to figure out what your staff turnover rate is. First, choose a range of time to calculate, such as turnover over the past year or quarter. Then follow this equation:

[(Number of Employees How Left ÷ Average Number of Employees) x 100]

For example, if a company had 20 people quit in the past year, and they had an average headcount of 200, they would divide 20 by 200, which equals 0.1. Then they’d times 0.1 by 100, which equals 12.2. So their turnover rate is 12.2%.

Now that you know how to calculate employee turnover, what are the industry benchmarks over the past few years?

Average Employee Turnover Rates by Industry

Turnover skyrocketed in 2020, remained high in 2021, increased again in 2022, and dipped in 2023. Let's look at the Bureau of Labor Statistics' data from the past three years to get an idea of the recent employee turnover rates.

(Disclaimer: the BLS changed how they reported turnover in 2022. However, by using their old formula found at footnote (1) here, we are able to pull accurate turnover data for 2022. To use that formula, we found the average annual employment here and the annual total separations here.)

2023 Turnover Rates

Average Turnover Rate: 41%

Turnover Rate By Industry:

• Construction: 54%
• Manufacturing: 37%
• Trade, Transportation, and Utilities: 49%
• Information: 32%
• Financial activities: 29%
• Professional & Business Services: 57%
• Education & Health Services: 39%
• Leisure & Hospitality: 79%
• Government: 18%

Nearly every industry rate dropped a few percentage points, showing that employees are losing confidence in the job market and are a little more willing to hang around. However, according to a study by Gallup, 68% of employees were disengaged in 2023. So while retention is still vital, organizations need to start improving their engagement efforts, too.

2022 Turnover Rates

Average turnover rate: 47%

Turnover rate by industry:

• Construction: 53%
• Manufacturing: 39%
• Trade, Transportation, and Utilities: 54%
• Information: 37%
• Financial activities: 29%
• Professional and Business services: 63%
• Educations and Health services: 38%
• Leisure and Hospitality: 82%
• Government: 20%

Judging by these stats, it looks like most industries are getting better, right? Well, remember, 47.4 million people quit in 2021, and over 50 million people quit in 2022! Employee turnover, when just looking at voluntary quits, is still on the rise.

2021 Turnover Rates

Average turnover rate: 47%

Turnover rate by industry:

• Construction: 57%
• Manufacturing: 40%
• Trade, Transportation, and Utilities: 55%
• Information: 39%
• Financial activities: 29%
• Professional and Business services: 64%
• Education and Health services: 37%
• Leisure and Hospitality: 85%
• Government: 18%

In 2021, the pandemic started winding down, and businesses got better and better at handling hybrid workplaces, work from home, and healthy practices. That reflects in the lower overall turnover rates.

However, turnover rates count every employee who left a company over the year, including retiring, firing, and discharges. Looking specifically at voluntary quits, though, 2021 actually holds the record. A whopping 47.4 million people quit their jobs throughout 2021, the highest number in years.

Understanding the Drivers of Employee Turnover

Knowing the numbers of people leaving doesn’t provide enough information about employee turnover. The most important question is: why do employees quit? What are the reasons for turnover?

Here are some of the top reasons employees quit their jobs:

• Toxic work culture. 62% of employees said poor work culture led them to quitting their jobs. When employees don’t feel supported or trusted, when they feel too much stress, when they don’t feel recognized, or when there is any kind of harassment going on, employees are likely to leave.
• Insufficient compensation. 63% of employees quoted low pay as a reason they quit their jobs in 2021. Employees have to feel that they’re being fairly compensated for the work they put in.
• Lack of development opportunities. More than 70% of employees who are considering quitting say that they aren’t given opportunities to learn new skills and grow in their position.
• Lack of flexibility. 49% of employees stated that lack of work-life balance led them to quit, and 43% said no opportunities for remote work did the same. Employees want to feel empowered to take care of themselves and their personal lives.
• Bad manager. 50% of employees have quit a job to get away from a bad manager before. Employees need managers who they trust to support them and help them grow.

In a nutshell, employees quit when they don’t feel supported, valued, and trusted by the company in both their work and personal lives.

Why Worry About This?

Every time an employee quits, the hiring process costs you at least one half of that employee’s annual salary (at most, this process can cost you 2X their salary!). Not to mention that as more people quit, your company culture suffers as others deal with stress and extra work.

Here are some other facts to consider:

• According to Gallup, it costs U.S. businesses $1 trillion per year to replace employees who voluntarily leave.
• High turnover affects employee performance and morale. When workers leave, other team members must work to compensate for the labor loss, which can cause them to feel overworked, less engaged, and less productive. U.S. Companies lose up to $550 billion every year because of disengaged employees.

But there are hidden costs of employee turnover, too—costs that aren’t apparent when only looking at budgets:

• Low morale as friends and colleagues leave.
• High stress as remaining employees are forced to fill gaps.
• Higher turnover as other employees ask themselves why did so-and-so quit? Remaining employees may get curious as to what other options are out there.
• Reduced productivity as people with specialities and specific knowledge leave.

Some turnover is natural—no matter what you do, employees are going to leave for various reasons. However, you should aim for a turnover rate of 10% and, according to SHRM, most companies have a rate closer to 20% (and your target turnover rate will depend on different factors, such as your industry and your internal promotion rate.

6 Strategies to Improve Turnover in the Workplace

The first thing you need to keep in mind is that employees are people. They’re not numbers, and they’re not a resource to be used. It’s impossible to force them to behave with the perfect algorithm of retention. The best strategy is to create a culture that makes them feel valued, seen, and cared for so that they want to stay.

In order to create said culture, take a look at some specific tips you can incorporate into your retention strategy:

1. Ensure a Positive Onboarding Experience

Onboarding should not be simply new-hire paperwork and compliance training. An employee’s first day is their first impression of your business, and the opinions they form during their first day, week, or month will shape their future mindset of your company.

Good onboarding can increase retention by 50%—however, only 12% of employees say that their onboarding process was good. And to top it off, 69% of employees will stay at a company for at least three years if their onboarding experience was positive.

Start employees off on the right foot, and they’ll stay at the company for longer—it’s that simple. Here are some ways you can consider to improve your onboarding:

• Make the first day smooth and stress-free by clearly communicating where to park, where orientation is, and where employees will sit. Ensure they have all of the equipment and knowledge they need to do their job from day one.
• Ensure each new hire understands what is expected of them. Employees need to have clarity for their role and responsibilities.
• Communicate the mission of your organization by sharing your company values and reinforcing them through your actions.
• Encourage team bonding and inclusivity by assigning each new hire a buddy to help them on their new team.
• Recognize each new hire at least once in their first week to show that they are seen and valued from the very start.

2. Prioritize Employee Engagement

Employees who are engaged are much less likely to leave the company. In fact, high levels of engagement can lead to 43% lower turnover. 

To top it off a Gallup study states that if an employee is engaged, it will take more than a 20% raise to lure them to another company. That shows that engaging work and an engaging workplace can be more impactful to retention than salary!

Improving engagement levels at your company is easier than you may think. Here are some strategies to consider:

1. Create value-driven work for all employees
2. Recognize and reward employees for professional efforts and personal milestones
3. Offer feedback for employees through one-on-ones and regular conversations
4. Show trust by not micromanaging

3. Support Employee Advancement

Did you know that 88% of people rank professional development and career growth opportunities as important when they’re looking for a new company? That’s nearly nine employees out of ten! These types of learning opportunities not only create more skilled and confident employees, they also show your workforce that you care about their continued improvement and success.

Whether you host a class focusing on soft skills, such as communication or teamwork, or you pay for interested employees to sign up for a class in hard skills, such as coding or business management, you need to show each employee that you care for their growth.

4. Offer Competitive Compensation

Yes, you knew this one was coming. As the saying goes, money makes the world go round, and it should also be a vital part of your retention strategy. Ensure that each position in your company has a competitive and fair salary, and leaders should always seriously listen to requests for raises. You could also think about adding a small amount of extra cash (or points on our platform) to each employee’s bi-weekly paycheck—just as a way to say thanks!

However, the salaries you offer aren’t the only part of your compensation package that you need to look closely at. Benefits are an integral aspect that you absolutely need to consider. Do you offer good health insurance (with a range of coverage options for single people and families)? Do you include vision and dental insurance? What about retirement savings?

Creative benefits are growing in popularity as well. Think about offering free healthy snacks, catered lunch, or monthly massages for your employees. Offering reimbursement for transportation or bus passes can be helpful, too. The best way to find which benefits your employees actually want is to ask them. Send out a survey and then actually implement the benefits that are the most popular.

5. Provide Plenty of Employee Recognition and Rewards

Nearly 50% of people have quit jobs because they feel under appreciated by managers. On the flip side, employee recognition lowers voluntary turnover by 31%, increases engagement by 40%, and increases productivity by 14%.

Your retention strategy should clearly plan out all of the recognition and reward opportunities you plan to provide to employees. Some examples of this include:

• Birthday celebrations
• Service awards
• Personal milestone recognition
• Various incentives
• On-the-spot recognition (both peer-to-peer and manager-to-employee)
• Lifestyle Spending Accounts

These are just some ideas for planning out your recognition strategy. For an example of how recognition programs like these can improve recognition, check out how Quick Quack Car Wash lowered turnover by 20%.

6. Explore Viable Flexibility Options

Your employees, both current and future, need to see that you care about them. One of the best (and most expected) things you can do is offer flexible work. 51% of employees wish their employer offered more flexible options, and 84% of working parents said flexibility is the number one most important thing when looking for a job.

Flexibility could be unlimited PTO, flexible work hours, or flexible work locations. Find the option that works best for your company, and then make sure your employees know you support them and their work-life balance.

‍Awardco is all about genuine, effective employee recognition. We can help you build a program that’s easy to manage and that employees will love on our employee rewards and recognition platform.

Improve Retention in Your Organization

To improve staff retention rate, you need to invest time, effort, and money into making your employees feel like they’re valued parts of a team, not invisible parts of a machine. By supporting career development and flexibility, enhancing your compensation and recognition efforts, and evolving your culture, you will show your loyalty to your employees, which, in turn, will make them more loyal to your company.

To get expert help in creating this type of culture, contact Awardco.

Employee Turnover FAQs

What is an employee turnover rate?

The employee turnover rate is a measure of the number of employees who leave a company within a specific period, typically calculated annually. This rate serves as a crucial indicator of a company's work environment health and its effectiveness at retaining employees.

How to You Calculate Your Turnover Rate

If you wan to get a good idea of your own turnover rate, it's pretty easy to work out. Here are the numbers you need to know to calculate your own turnover rate:

• Number of employees who left the company during the specific time period
• Number of employees at the start of the time period
• Number of employees at the end of the time period

Once you know those numbers, you just need to figure out the average number of people in your company. Then, the equation itself is simple:

1. Dive the number of employees who left by the average number of people in the company
2. Multiply that number by 100
3. The answer is your turnover rate

Once you know your own turnover rate, you'll know where you stand. The best part is, even if your rate is higher than it should be, you can follow some strategies to turn this trend around.

‍What is a good turnover rate?

Pinpointing a good turnover rate isn't as straightforward as you might think. It's a bit of a moving target, shifting with the ebb and flow of industry trends and the unique circumstances of each company. That said, a ballpark figure that many companies shoot for is a retention rate of 90%, which translates to a turnover rate of about 10%. But remember, this isn't a one-size-fits-all number. It can bob and weave based on a variety of factors, like the norms in your industry, the pulse of the economy, and even your company's rate of internal promotions. So, while 10% is a good starting point, it's essential to keep your finger on the pulse of these other elements too.

What is a High Turnover Rate?

When we talk about a high turnover rate, we're usually referring to anything that exceeds the industry average. So, let's say the average turnover rate in your industry is sitting around 10%, and your company's rate is double that at 20%—that's when alarm bells should start ringing. A high turnover rate can be a red flag, signaling a host of potential issues within your company.