The growing economy and low unemployment rate have created an unfortunate side effect for many organizations—increasing employee turnover. In July, 3.58 million Americans quit their jobs, the largest percentage in 17 years, according to Labor Department data. The proportion of workers quitting their jobs, known as the quit rate, reached 2.4%.
A recent article in the Wall Street Journal notes that the rising quit rates could stoke broader wage growth, which has been sluggish in the past decade since workers tend to get their biggest wage increases when they move from one job to another.
Those who switched jobs over the past year saw 26% larger annual pay increases than those who stayed put. The rising quit rate also indicates that more workers are confident they can score better jobs or better-paying jobs.
In this candidate-driven hiring market, people are quitting their jobs before having another job lined up because they know they can get hired elsewhere immediately.
Why Do Workers Quit?
In the manufacturing industry, workers are quitting for many reasons, including:
- Better compensation
- Growth opportunities
- More attractive work shift
- Location closer to home
- Uncertain of job/company future
Most employers are aware of the new market realities and more and more companies are willing to increase pay rates to at least the market average. Even if you look at it strictly from a financial viewpoint, it’s more cost-effective to increase pay rates by $0.50 or $1.00 per hour if the alternative is losing workers and bearing the substantial cost of rehiring and retraining replacements.
Say you have a new employee who makes $15 per hour and requires 3 weeks of training. You’re now paying $1,800 before that worker even becomes productive, and that’s not including the cost of the person doing the training. And if you haven’t addressed the underlying reasons your employees are leaving, that new employee could also quit.
What Can Employers Do to Beat the Trend?
Market rate wages: Underpaying workers is no longer a gamble, it’s a losing strategy. Ensuring competitive wages is the only way to be an employer of choice and ensure you can attract and retain employees.
Better work shifts: Look at whether you can offer better shifts to high performing employees, since that’s one way your competitors can entice your workers to switch jobs.
Opportunities for advancement: It’s important to ensure your company displays a positive environment and opportunities for advancement. Often the same elements that drive employee satisfaction also retain talent in the longer term, because employees see opportunity in the future in addition to the present.
Consistent communication: Addressing worker uncertainty is the real low-hanging fruit—it’s a source of major stress for employees, yet relatively easy for an employer to fix. Employees are looking to get feedback and know their opportunities for growth, so they can feel confident they’re in the right job. If they’re uncertain of where they stand at work, they’re far more likely to look elsewhere. Providing consistent and comprehensive performance feedback is a great way that employers can retain top talent in a job market heavily tilted toward jobseekers.
Mike Fitzgerald is the Director of Business Development at Aerotek.