Industry Report 2024: Employee Turnover and Retention Rate Trends

Employee retention is an indication of an organization’s ability to retain a stable workforce. It shows the number of employees who stay with a company for a certain period of time compared to their total number of employees over that period.

Over the last several years, employee retention has risen to the top of the business agenda in many industries. According to a Gallagher report, some companies are now prioritizing it even over revenue or sales growth.

The latest data from the Bureau of Labor Statistics indicates that turnover is trending down in many industries in 2024. This is positive news for organizations seeking to retain talent and keep their operations running smoothly. However, industry-wide low turnover doesn’t make recruiting easy when new or vacant roles need to be filled. Less mobility among employees means fewer qualified applicants.

In this article, we’ll uncover the latest trends in employee retention across different industries in the U.S. labor market and consider tactics businesses can leverage to measure and improve their retention rates.

Calculating and Measuring Employee Retention Rates

To calculate your employee turnover rate, you need to look at two different types of separation—voluntary and involuntary:

• Voluntary turnover happens when an employee chooses to leave the company on their own, including resignations and retirement.
• Involuntary turnover is when a worker is terminated from their position for any reason.

You can use different formulas to calculate your organization’s turnover rate. The most commonly used formulas calculate monthly or annual turnover.

Both these formulas require three key data points:

• The total number of employees on the first day of the month or year.
• The total number of employees on the last day of the month or year.
• The total number of separations that occurred during that period.

To calculate your monthly turnover rate, divide the number of workers who left in a month by the average number of employees you had in that month and multiply the number by 100.

To calculate the annual turnover rate:

• Determine how many workers left your organization in a given year.
• Add the number of employees you had at the beginning of the year to the number of employees at the end of the year.
• Divide that number by two.
• Divide the number of workers who left during the year by the number calculated in the previous step.
• Multiply that total by 100. The result is your annual turnover rate.

By measuring and monitoring your turnover rate, you can identify trends and patterns that will be useful in minimizing turnover risks and improving future employee retention rates.

What Are the Reasons for Low Employee Retention Rates?

According to a February 2024 report, companies that anticipate higher turnover this year cite the following factors as the primary causes:

• Better pay or benefits elsewhere (38%)
• Increased workplace demands (35%)
• Employees feel overworked (31%)
• A competitive job market (26%)

Let’s take a moment to consider what’s behind these numbers.

Shifting Employee Expectations

One notable trend is the increasing emphasis on employee satisfaction and engagement. In today’s competitive job market, people want more than just a paycheck; they’re seeking meaningful work experiences and opportunities for personal and professional growth.

Economic Conditions

Fluctuating economic scenarios, including inflation and cost-of-living, often influence employees’ decisions to seek higher-paying opportunities elsewhere.

Flexible Working Models

The surge in remote working arrangements has fundamentally reshaped the employee turnover landscape, with workers gravitating to work-from-home positions that offer them more flexibility and reduced commuting stress and costs. Similarly, the burgeoning gig economy and the growing popularity of freelance and contract work arrangements also come into play. Instead of traditional full-time employment, many people are opting for project-based or temporary positions.

Generational Dynamics

Generational dynamics are also shaping turnover trends. With the retirement of Baby Boomers and the influx of Gen Z into the workforce, some organizations haven’t yet effectively modified their approaches to meet the distinct preferences and expectations of each generation.

By staying attuned to these trends and implementing tailored strategies, companies can mitigate turnover risk and cultivate a more resilient and engaged workforce.

The Cost of Getting it Wrong

Employee turnover has significant direct and indirect cost implications for businesses. Excessive turnover can disrupt workflows, reduce productivity, and incur substantial recruitment and training costs.

A recent survey of U.S. hiring decision-makers found that the average annual turnover cost is $36,295 in lost productivity and recruitment expenses. More than 20% of respondents said this number climbs to $100,000 or more for their organization.

Turnover also takes a heavy toll on remaining employees. About 73% of respondents in the same survey said employee turnover burdens existing employees.

Overview of Average Employee Retention Rates by Industry in 2024

According to the U.S. Bureau of Labor Statistics, the average employee turnover rate across all industries in April 2024 was 3.4%—down slightly from 3.5% in February 2024.

However, some industries are experiencing persistently high turnover rates compared to others. Sectors with the highest turnover rates in 2024 include:

• Arts, entertainment, and recreation: 5.9%
• Leisure and hospitality: 5.7%
• Accommodation and food services: 5.6%
• Construction: 4.4%
• Retail trade: 4%
• Trade, transportation, and utilities: 3.6%
• Health care and social assistance: 3.3%
• Manufacturing: 3%

Future Outlook for Employee Retention Rates

At the beginning of 2024, a third of hiring managers anticipated increased turnover for the year. The earliest data from the year doesn’t quite indicate that trend, but given the persistently high cost of living, it’s very possible that some talent will explore new opportunities in the months to come.

Which makes right now the perfect time to develop retention tactics that will stabilize your turnover rates and ensure you keep your top talent.

Steps for Increasing Your Employee Retention Rate

To stabilize and reduce employee turnover rates, companies need to understand and respond to the evolving needs of their workers. Here are some tactics to boost your chances of successfully retaining your workforce.

Prioritize Employee Wellness and Work-Life Balance

Consider implementing initiatives like flexible working hours, mental health support, and recognition programs.

Investment in Employee Development

Invest in training programs and develop clear career progression paths.

Leverage Technological Advancements

Capitalize on technologies like AI to deliver hyper-personalized employee experiences and more informed HR decision-making.

Introduce Holistic Financial Wellness Programs

Consider going beyond simple financial incentives and offering your workers resources that help build their holistic financial well-being, such as Earned Wage Access (EWA)¹. EWA helps workers avoid falling into a dangerous cycle of debt when they find themselves short of cash in between paydays.

Research from Payactiv reveals that before using EWA, 30% of respondents would typically turn to high-interest payday loans, while 33% used their overdraft facilities. After taking advantage of EWA, these figures dropped to 9% and 10%, respectively.

The following case study highlights the positive impact EWA can have on employee retention rates:

JAE’s employees get paid biweekly, but because they offer EWA through Payactiv, their employees can now access their money whenever they need it. Since implementing Payactiv, JAE has seen a significant increase in employee retention and estimates that about 50% of the users are staying longer.

Read the full case study.

Reduce Your Employee Turnover in 2024 with Payactiv

As a leading EWA provider, Payactiv allows you to give employees access to pay they’ve already earned immediately. This boosts their sense of financial well-being, which will make them more inclined to stay with your organization over the longer-term.

Our EWA service is low-cost to employees and zero-cost to employers. There are no credit checks and no adverse impact on credit histories.

In addition to EWA, Payactiv provides companies with a means to put their employees on the path to financial stability and security. With our budgeting, savings, and debt support tools—all in the Payactiv app²—your people are empowered to control their financial futures.

In addition, with our handy employee communication app, you can also coordinate schedules until every shift is filled. Employees can see open shifts and request to cover them.

Interested in learning more about Payactiv’s Service? Book your demo now!

¹ Earned Wage Access requires employer participation. Employees can only access a portion of the wages they have earned to date.

² Standard data rates from your wireless service provider may apply.

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