Employee turnover is a reality for every company, but what about when employees quietly quit without notice? Or it´s not sudden as it might seem?
Imagine a software development company working on a new project for months. The team is skilled and experienced, and the project is on track to meet its deadline. One of the key members of the team, let´s call him Alex, began to lose interest in the project. Although he continued to work on the project, he tried his best to deliver good results. Still, there were too many issues – high management turnover, dissatisfaction with salary, Alex didn´t see the growth opportunities, and the company didn´t take care of these aspects. All these issues, month by month, led Alex to burnout.
Therefore, after several months of working for salary below market value, he announced his departure. For HR managers, his departure might seem like a sudden one. In fact, his quiet quitting was not a spontaneous resignation but rather the result of several months during which he realized the problem, consequently, his enthusiasm dwindled, ultimately leading to his resignation. It is a clear example of “quiet quitting,” which negatively impacts a software development company.
So, what are the consequences of employee turnover? What are the hidden causes of staff turnover? What is the turnover rate in the IT industry typically? Let’s delve into the following topics and see how to address employee turnover issues. Brace yourself for an informative and engaging discussion.
What is employee turnover?
Employee turnover is a common phenomenon in the workplace, which refers to the rate at which employees leave a company and get replaced by new hires. There exist two categories of employee turnover – voluntary and involuntary.
- Voluntary turnover pertains to situations where employees leave their jobs based on their own decision.
- Involuntary turnover refers to instances where the company initiates a separation, such as layoffs or terminations.
In recent years, high employee turnover rates have steadily risen. As reported by Remote, the typical employee turnover rate in 2022 was 38.9%. Moreover, Remote predicts that the average turnover rate in 2023 in the US and the UK will be 41.4%. a 2.5% increase compared to 2022 data. However, for younger generations, the turnover rate is even higher. Specifically, 47% of millennials and a similar number of Gen Z workers plan to leave their current jobs within the next two years.
Companies implementing hybrid and remote work models tend to have higher employee retention rates. It is anticipated that fully remote positions will have the most effective retention rate of 39.3% in 2023, slightly lower than the 39.9% predicted for hybrid jobs. Compared to office jobs, which are estimated to have a 43.7% turnover rate, fully remote roles offer numerous benefits to employees and employers. These benefits include cost savings on commuting, increased time for personal activities, and the ability to attract talent from all over the globe.
What is the turnover rate in the IT industry?
In 2022, the technology industry experienced a higher employee turnover rate – 18.3% compared to many other industries. The primary reason for this tendency is the high demand for top talent in the tech sector. Yet not all companies can successfully attract and retain such talent. A recent survey conducted by Gartner found that most IT workers (71%) have low intentions to remain with their current employer. Specifically, only 29% of IT workers reported having high intent to stay with their current company.
Logically, comes a common question: what is normal turnover rate for a tech company? It is difficult to determine a “normal” turnover rate for a tech company, as the turnover rate in IT depends on the specific segment of the industry, particularly the company size, the company culture, the geographical location in case it´s not a remote position and other factors. However, the most recent Bureau of Labor Statistics reports that software developers have an average turnover rate of 57.3%. It means that many employees leave their jobs during a specific period. The report also reveals that 29% of these departures were involuntary, while 25% were voluntary.
What are the consequences of employee turnover?
While employee turnover is a common issue many companies face, the consequences of software developers turnover can be meaningful and have far-reaching effects. In this response, we’ll explore some of the negative consequences of software developers turnover and why companies must address these issues.
- Financial loss for a company, mainly if it’s a high-performing employee. According to turnover and retention experts, the cost of replacing an employee can amount to 150% of his base salary. Companies can incur substantial costs in recruitment, hiring, and training new employees to fill the vacant position.
- Creating bottlenecks. Losing an employee means losing their valuable knowledge and expertise, causing significant obstacles for a company. Filling the knowledge gap left by a departing employee can take up to two months, creating bottlenecks in the company’s operations. To mitigate these issues, companies need to assign additional responsibilities to their existing employees, which can lead to burnout and decreased productivity.
- Productivity loss. Did you know that, on average, it takes about 35 days to recruit and hire a software engineer? This extended period can result in a significant loss of productivity, lasting over a month, and doesn’t even include the time needed for onboarding. This delay can have a substantial impact on the company’s bottom line.
- Employee morale is a key factor for any business to succeed. Employees who feel good about their work environment tend to be more productive and more likely to remain with the company. Conversely, high turnover rates can harm morale as the employees who stay in the organization are often burdened with additional responsibilities and may feel undervalued. As a result, this can contribute to a toxic work culture, where employees feel disgruntled and resentful towards their employer.
- Corporate Reputation. A company with a high employee turnover rate may deter potential new hires as it raises concerns about the work environment. If a business cannot retain its staff, the question arises: Is the workplace culture toxic? Are the rewards insufficient for the amount of work required?
What are the hidden causes of employee turnover?
So, what are the real hidden causes of software developers turnover? Is the office coffee machine outdated and doesn´t brew the perfect cup? Or are the company’s snacks not to their liking?
Aren’t employees satisfied with the air conditioning temperature, or do company emails lack appropriate emojis? There are certainly more profound and influential factors to consider. Let’s delve into the concealed reasons that contribute to it.
- Poor management. According to recent statistics, 50% of employees leave their jobs to escape from their managers. Poor management can manifest in different ways, such as micromanagement, lack of communication, unrealistic expectations, or failure to provide constructive feedback.
- Compensation. Employees who feel underpaid may look for other opportunities that offer better compensation. In fact, 70% of employees are willing to leave their current job for a higher-paying one. This figure highlights the importance of fair compensation practices in retaining employees.
- Lack of recognition. Feeling appreciated is essential for job satisfaction, and the lack of recognition is one of the top reasons employees leave their jobs. According to recent statistics, 79% of employees cited a lack of praise and gratitude as a significant factor for quitting their jobs.
- Toxic environment. When a company’s culture is negative or weak, employees feel discontent with their work, leading to a higher likelihood of quitting. 77% of US adults consider a company’s working environment before applying.
- Lack of growth opportunities. The lack of career growth opportunities is a significant factor that leads to employee turnover, with almost half of the employees (46%) who quit their job citing it as a reason. When employees do not see any opportunities for advancement or professional development within their current position, they feel stuck at one point in their career and don´t see any salary growth.
How do you control employee turnover?
Whether you are CEO or HR manager, controlling software developers turnover is a complex and multifaceted challenge. First, it’s crucial to understand and address the underlying causes of turnover discussed above. Here are some steps you can take to address the employee turnover issues:
- Companies must prioritize developing strong leadership and management skills to address poor management and reduce employee turnover. It can include providing leadership training and development programs, encouraging open communication and feedback, setting clear and realistic expectations, and empowering managers to delegate tasks and responsibilities effectively. Additionally, companies should regularly solicit employee feedback on their management practices and use this feedback to make necessary changes and improvements.
- Companies should secure fair compensation to reduce software developers turnover. Offer your employees regular salary and benefits, performance-based bonuses and motivations, and the possibility of pay advance (when the employee receives a portion of his paycheck before the scheduled payday). Additionally, organizations should communicate transparently about their compensation and the value they place on their employees. Remember to monitor the market to ensure your employees are paid competitively.
- Provide regular feedback (for instance, a once-a-week meeting) where you talk about the achieved results and plans. Praise your employees, preferably each of them individually, and thank them for their hard work by highlighting personal achievements. Create a culture that values and celebrates employee contributions.
- Provide your employees with a clear path for growth. It might be a Roadmap, a plan designed to help your employee achieve personal and professional goals. Assist them in achieving it. By offering growth opportunities, you increase the chances of retaining your employees. Some companies also incentivize employee growth by providing compensation for professional courses, which benefits the employee and invests in their potential for promotion and overall company growth.
Bottom line
In summary, the impact of employee turnover on organizational profit is weighty. High turnover rates lead to increased recruitment and training costs, decreased productivity, and adverse effects on company culture. All of these factors can ultimately contribute to lower profitability for the organization.
