Employers Retention Challenges

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As the U.S. economy continues to improve and employers begin to add employees to their payrolls, another employment metric is also increasing, i.e. voluntary turnover. For employees, a stronger economy often means they feel more confident leaving a job of their own accord. However, from an employer’s perspective an increased separation rate means they are going to need to work harder to retain existing employees as the job market improves.

As a national trend, increased voluntary turnover is moving steadily upward with a 2012 report from PriceWaterhouse Coopers documenting a 1.2% increase from 2010 to 2011, up to 8.2% (2011/2012 US Human Capital Effectiveness Report). In Northeast Ohio, the voluntary turnover rate hit double digits in 2011, with the 2012 ERC Turnover and HR Department Practices reporting an average of 12% across all industries and organizational sizes.

However, notable discrepancies in these rates are apparent when comparing manufacturers to non-manufacturers. At 9.6% manufacturers seem to have more success at retaining existing employees than their non-manufacturing counterparts who are seeing a much higher 16.7% voluntary turnover rate for 2011.

In terms of the role of HR, bringing this rate back down, may mean considering a redirection of HR funds away from Recruiting/Hiring and into areas like Training & Development or Benefits. By allocating an average of 23.1% of their total HR budget to Recruiting/Hiring, by far the highest percent allocation reported in the survey, non-manufacturers may actually be contributing to the trend towards higher turnover.

With such a strong focus on recruiting, these organizations may be missing out on opportunities to develop and incent their own existing employees.