Jobs and Talent — 8 min
Benefits & Leave — 26 min
How to reduce employee turnover with a strong talent retention strategy
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Employee retention is key to a thriving business, but this seems to be where many struggle, with employee turnover rates rising year on year. Retaining top talent has never been more crucial for businesses as high turnover rates cost companies thousands each year.
With the way we work constantly changing and developing, employers need to stay innovative with their approach to attract and retain new and top-performing talent. The work doesn’t stop once you’ve attracted talent though, as businesses need to work to create an environment where employees can thrive. Introducing flexible working practices and offering value-based company benefits are just two of the easily achievable (and cost-effective) ways to attract and retain elite employees.
Jump straight to a key chapter
- Why employee retention is a success metric you need to track
- Employee turnover rates have increased by 8.7% since 2019
- Businesses with hybrid and remote work models have higher employee retention rates
- The business functions with the highest employee turnover
- The job levels with the highest employee turnover
- What causes high employee turnover rates
- The negative impacts of high employee turnover rates
- How businesses can reduce employee turnover rates
- Buck the trend of high turnover with stronger retention strategies
With this in mind, Remote has conducted a study to help you understand the importance of employee retention, why turnover rates may be high, and what you can do to keep your best people.
To do this, we surveyed employers in the UK and US to investigate how turnover rates have changed in the last few years, the negative impacts of high turnover, and the job functions and levels struggling to retain top talent.
Why employee retention is a success metric you need to track
Having a low turnover rate will keep your business running successfully and smoothly, saving you time, money, and effort. Almost two-thirds (63%) of employers agree that having low turnover rates increases motivation within the company. Higher levels of motivation across your team will help you maximize productivity and sustain success over a long period of time.
A further 61% of employers said that low turnover rates improve several other aspects of workplace performance:
Increased morale within the company
Enhanced employee experience
Strengthened loyalty to the team
Enables deeper connections to be made among workers
Better job satisfaction for employees
Businesses that invest in intentional tactics to retain existing employees also spend significantly less time and money in the recruitment and training of new employees.
Six in 10 of the employers we spoke to said low turnover rates decrease operational costs, with a further 59% stating that time spent on training is reduced when the turnover rate is low, highlighting how cost effective employee retention can be in the ongoing cost of living crisis.
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The top 10 benefits of low turnover rates, according to employers:
Rank | Benefit | % of employers which agree |
1 | Increase motivation | 63% |
2 | Improve morale | 61% |
3 | Increase employee loyalty | 61% |
4 | Improve employee experience | 61% |
5 | Allows deeper connections among employees | 61% |
6 | Improve company culture | 60% |
7 | Reduce costs | 60% |
8 | Reduce time spent on training | 59% |
9 | Lead to employee-driven innovation | 59% |
10 | Improve communication | 59% |
Employee turnover rates have increased by 8.7% since 2019
With trends like ‘The Great Resignation’ and ‘Quiet Quitting’ still making headlines, employee turnover rates are continuing to rise around the world. Similarly, the rise in remote and globally distributed work means that employees have more options to seek new roles for international employers.
We surveyed employers across the UK and US to investigate how turnover rates have changed since 2019.
The average company turnover rate in UK and US from 2019 to 2023
Year | UK | US | Average |
|---|---|---|---|
2019 | 25.8% | 34.3% | 30.3% |
2020 | 29.7% | 36.9% | 33.4% |
2021 | 31.6% | 40.3% | 36.1% |
2022 | 33.6% | 43.9% | 38.9% |
2023 (estimated) | 35.6% | 46.8% | 41.4% |
On average, employee turnover rates have increased by 8.7% since 2019. The rates in the US have been higher every year, seeing an increase of 9.6% since 2019. The UK rates, while lower, have still increased by 7.7% in the last four years.
In 2023, company turnover rates are set to increase further with a predicted 35.6% turnover rate in the UK and 46.8% in the US.
Businesses with hybrid and remote work models have higher employee retention rates
Flexible work models can have a direct impact on retention rates. To investigate, we asked the owners of office-only, hybrid, and remote businesses to report on their turnover rates throughout the years to see how they compare.
The average turnover rate of different work models in the UK and US from 2019 to 2023
Year | Office | Hybrid | Remote |
2019 | 30.1% | 29.8% | 33.0% |
2020 | 34.9% | 31.7% | 34.8% |
2021 | 38.5% | 34.4% | 34.4% |
2022 | 41.6% | 36.6% | 38.7% |
2023 (estimated) | 43.7% | 39.9% | 39.3% |
Companies that have a hybrid or flexible work model have had the lowest overall turnover rates since 2019, peaking in 2022 with a turnover rate 5% lower than those fully office based. The opportunities for flexible working have increased dramatically in recent years, and the companies that offer flexibility are finding it much easier to retain their staff than those fully office based. Flexible working encourages trust and autonomy amongst employees, which as a result can have a positive impact on their likelihood to stay working for a business.
This trend is highlighted by the significant increase in turnover rates for companies with an on-premise business model. From 2019 to 2022, average turnover rates for office-based workers has increased by 11.5%.
Fully remote roles are predicted to have the highest retention rate in 2023 with 39.3%, just slightly lower than hybrid jobs with a predicted 39.9% rate and 4.5% lower than office jobs which are estimated to have a 43.7% turnover rate. Fully remote roles have a breadth of benefits for both employees and employers, from saving money on commute travel, having more time for activities outside of work, and also attracting talent from all across the world. These factors have a positive impact on both employees and employers as they help maintain retention and are cost-effective for both parties.
The business functions with the highest employee turnover
Employee turnover rates can vary across certain industries and job functions. Being in a competitive job market or having a role be too demanding can impact employees' life-work balance and cause them to leave.
With this in mind, we asked businesses across the UK and US to report on the average turnover rates in each of their company's departments.
The average turnover rate of business departments in the UK and US
| Job function | UK 2021 | US 2021 | Average 2021 | UK 2022 | US 2022 | Average 2022 | % Average change |
|---|---|---|---|---|---|---|---|---|
1 | Product | 30.3% | 39.1% | 34.8% | 32.2% | 40.3% | 36.4% | 1.6% |
2 | Information Technology | 28.7% | 39.2% | 34.1% | 30.2% | 41.7% | 36.0% | 2.0% |
3 | Engineering | 28.7% | 38.2% | 33.6% | 29.4% | 40.6% | 35.2% | 1.6% |
4 | Finance / Accounting | 28.2% | 37.4% | 31.9% | 30.5% | 39.5% | 35.2% | 3.3% |
5 | Sales | 31.1% | 39.9% | 35.6% | 31.0% | 38.9% | 35.1% | -0.5% |
6 | Marketing/PR | 28.3% | 38.2% | 33.4% | 29.2% | 39.1% | 34.3% | 0.9% |
7 | HR/People | 28.3% | 36.2% | 32.4% | 28.3% | 39.9% | 34.2% | 1.8% |
8 | Design | 28.2% | 38.5% | 33.5% | 30.0% | 38.1% | 34.1% | 0.6% |
9 | Customer service/support | 28.7% | 39.7% | 34.1% | 28.3% | 39.3% | 33.9% | -0.2% |
10 | Legal | 26.2% | 38.6% | 32.6% | 28.1% | 39.5% | 33.9% | 1.3% |
11 | Administration/operations | 27.7% | 38.9% | 33.5% | 28.0% | 39.1% | 33.8% | 0.3% |
In 2021, sales was the job function with the highest employee turnover in both the UK and the US, with a turnover of 31.1% and 39.9% respectively. The average turnover rate for sales has dropped since then, going from 35.6% in 2021 to 35.1% in 2022.
This changed in 2022, with jobs in ‘product’ departments having the highest turnover in the UK with a 32.2% rate. Information technology jobs came in top in the US with an average of 41.7% of employees leaving.
Finance and accounting roles have seen the biggest average increase in turnover, with a 3.3% higher rate in 2022 compared to 2021. Customer service and sales roles are the only jobs that have seen a decrease in their employee turnover, with rates falling by 0.2% and 0.5% respectively.
On the flip side, legal jobs had the lowest turnover rates in both 2021 and 2022 in the UK. The US saw the lowest turnover in employees in HR jobs in 2021 and then design jobs in 2022.
The job levels with the highest employee turnover
Retaining top talent at all job levels can be a challenge for businesses to overcome and employee turnover can vary significantly.
We discovered that in 2021, director roles had the highest turnover rate with 35%, compared to 2022, which saw the highest turnover in entry-level positions with 35%.
Job Level | Average turnover as a percent of total employees 2021 | Average turnover as a percent of total employees 2022 |
Entry-level (intern, trainee, apprentice, assistant) | 34.4% | 35.0% |
Individual Contributor (representative, specialist, analyst, coordinator, administrator, consultant, associate, generalist) | 32.5% | 32.9% |
Manager | 32.9% | 33.4% |
Senior Manager | 32.8% | 34.1% |
Director | 35.1% | 34.6% |
Vice President | 34.0% | 33.7% |
CEO | 34.3% | 34.0% |
Education and healthcare have the highest turnover in higher up roles, with healthcare having the highest turnover for director level jobs in both 2021 and 2022, vice president roles in 2022, and CEO roles in 2022.
Education had the highest average turnover in vice president roles in 2021 and CEO roles in 2022.
IT and telecoms departments have the highest turnover in lower level roles, with the highest turnover in entry-level positions in 2022, manager positions in 2021, and senior manager positions in 2021 and 2022.
What causes high employee turnover rates
We asked employers what they believe causes high turnover rates amongst their staff.
Over half (54%) agreed that a poor work-life balance can lead to high turnover, and a further 53% said that lack of work flexibility can contribute to employees' decision to leave.
Overwork of employees can also lead to a high turnover rate, with 52% of employers saying this is a contributing factor. The same amount of employers said that a lack of employee benefits can also lead to high turnover rates in companies.
The top 10 causes of high employee turnover
Rank | Cause of high employee turnover rate | % of employers |
1 | Organizational restructuring | 55% |
2 | Poor work-life balance | 54% |
3 | Personal circumstances | 54% |
4 | Lack of work flexibility | 53% |
5 | Lack of employee benefits | 52% |
6 | Being overworked | 52% |
7 | Lack of innovation | 51% |
8 | Lack of employee purpose | 50% |
9 | No feedback or recognition | 50% |
10 | Poor compensation rates | 50% |
With these causes in mind, in order to reduce employee turnover rates, employers should work to support their employees' life-work balance. A simple and cost-effective solution is the introduction of a flexible working policy, which allows employees to spend less time commuting and more time in their homes and take ownership of their schedules.
Offering stronger health and wellbeing benefits is another great way employers can retain their staff by showing they care for and respect their employees. These simple tactics can make a huge difference for employers looking to retain top talent.
The negative impacts of high employee turnover rates
There are a number of areas where high employee turnover rate can create negative ripple effects. For employers, losing staff can mean losing valuable employee knowledge and experience of the company and internal processes. As a result of losing staff, employees can face a variety of pressures, such as picking up additional work during the hiring process for a replacement, low morale, overworking, decreased productivity, and even burnout.
For businesses, high turnover not only means losing knowledge, but can also mean a costly process to find and recruit new staff while maintaining morale of current employees.
The time required from multiple stakeholders to recruit, onboard, and train new starters is significant. If a fraction of this resource is redeployed into intentional retention practices to better support existing top performers, the long term productivity benefits should lead to sustained success.
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It costs businesses 35% of an employee's salary to find and hire a new worker
According to the employers we surveyed, it costs an average of 35% of an employee’s salary to find and hire a new worker for the business. This expense can spiral if multiple employees leave over time, and the costs to recruit can significantly outweigh an investment into policies designed to retain existing employees.
In the UK, it costs around 26.1% of an employee's salary to find and hire a new member of staff, that’s on average £7,729 per new employee based on the average UK annual salary.
In the USA it costs around 42.7% of an employee’s salary to find and hire someone new, based on the average salary in the US, this costs businesses $22,814 on average to find a new staff member.
It takes businesses an average of 40 days to find and hire a new employee
Hiring someone new takes time as well as money, taking businesses an average of 40 days to find the appropriate new candidate. In the UK, it takes an average 39 days, and in the US it takes slightly longer at 40 days.
Finding a new hire takes the longest in IT and telecoms jobs, with an average of 49 days needed to replace an employee that has left. The education industry takes the second longest time to hire new staff, with an average of 44 days, followed closely by sales, media and marketing roles which take an average of 42 days.
The travel and transport industry replaces employees in the shortest amount of time, taking just 23 days.
It’s important for businesses to be mindful of the time taken to hire new employees and the impact doing so can have on current staff from a workload and morale perspective. During this period, it can be a great time to introduce benefits and policies that will allow employees to manage their work life balance more effectively and feel appreciated by the business they work for.
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How businesses can reduce employee turnover rates
Making steps to improve your business will help retain employees and create a positive and productive work environment. When speaking to employers, we asked them what has helped them reduce their company’s turnover rate.
The top 10 ways to reduce high employee turnover, according to employers
Rank | Policies that reduce turnover rate | % of employers |
1 | Developing career paths and opportunities for progression | 63% |
2 | Increasing salaries | 60% |
3 | Giving paid overtime | 58% |
4 | Asynchronous or flexible working | 58%
|
5 | Improving internal communication and transparency | 58% |
6 | Recognising and rewarding employees | 58% |
7 | Standardizing performance reviews | 58% |
8 | Remote or hybrid working | 57% |
9 | Providing private health care or covering medical insurance | 57% |
10 | Increasing the number of paid holidays | 56% |
Almost two-thirds of employers said businesses can increase employee retention rates by developing career paths and giving their employees opportunities for progression.
When team leaders provide clear opportunities for progression, employees feel like their company is investing in their future and cares about their personal development. Regular check-ins and 1-on-1s with staff will help to inspire employees and increase motivation to produce great work over a sustained period.
Six in 10 employers said increasing salaries has helped them reduce turnover.
Having competitive salaries helps prevent employees from looking elsewhere, and increasing salaries when employees are doing well can improve motivation by rewarding excellent performance.
Of course, increasing salaries across the board can be an expensive proposition. Many companies are creating global compensation plans to not only find great international talent but to develop a distributed workforce in a more sustainable way. Hiring in multiple countries is made so much easier, faster, and more secure by using an employer of record partner to manage cross-border compliance and payroll.
Offering asynchronous or flexible working helped another 58% of employers reduce turnover, along with improving internal communication and transparency within the business. With almost three in five employers saying flexible working reduces their high turnover rates, it’s clear that giving employees opportunities to work from home and at times that work best for their schedules will improve morale and productivity, creating a thriving company as a result.
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Insights from 2,500+ decision makers and employees in key markets to help you uncover the benefits your team want and need in 2023.
Buck the trend of high turnover with stronger retention strategies
The companies and leaders in this analysis revealed several key insights. Employees are indeed leaving their jobs, but they are not doing so at random. On the contrary, companies offering competitive salaries, increased flexibility, good benefits plans, and roadmaps for employee growth and development are much more likely to attract and retain the best and brightest from around the world.
How can businesses implement these plans effectively, though? And how can they know which benefits and strategies will be most effective for their own unique teams?
No matter where you hire, the secret ingredient to fostering retention is always a great employee experience — and that’s exactly what Remote can provide for companies building globally distributed teams.
We help employers onboard, pay, and manage great talent all around the world, providing the dependability in pay and benefits that employees need with the expertise in compliance that businesses depend on.
We are the top choices for thousands of companies around the world, and we would love to help you grow your global team with confidence and security.
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Methodology and sources
We surveyed over 544 employers in December 2022.
Please note, employee turnover rates refer to the turnover as a percent of total employment. This is calculated by dividing the total number of leavers in a year by your average number of employees in a year. Then, times the total by 100.
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