Staff turnover rate soaring in small business – can they afford it?

IML STAFF RETENTION REPORT FINDS ALARMING JUMP IN THE PROPORTION OF RESIGNATIONS IN TURNOVER RATES

 

  • The Institute of Managers and Leaders 2018 Staff Retention Report has found a startling rise in the proportion of resignations in annual staff turnover, escalating 12% in the last year
  • Small business might be in the red with the largest increase of resignations seen in the sector
  • Demand and popularity of flexible work continues to boom with 43% of businesses implementing policies
  • More evidence shows performance reviews drive resignation, with 28% of organisations now ditching the appraisal

 

A new report released this week has raised the alarm on Australian worker resignation rates. The 2018 Staff Retention Report, released by the Institute of Managers and Leaders, has found the national resignation rate has seen the sharpest rise (+5.3%) in five years. Meanwhile, however, the total staff turnover rate has seen the sharpest drop (-10.7%) in five years. These figures indicate an alarming rise in turnover numbers attributed to resignations, jumping from 63% in 2017 to 75% in 2018.

 

Small business

 

Most alarmingly amongst the report’s findings are the jumps in resignation rates for small businesses. Between 2017 and 2018, resignation rates have increased by 1.2% to 10.2% in businesses with turnovers between $5 to $10 million annually. This statistic comes in view of the government’s recent fast-tracking of the $29.8 billion tax cut for Australian small business. However, with the cost to replace a single staff member adding up to an average of $22,135 for small businesses, the new lowered tax rate benefit will pale in comparison to the costs to replace increasing numbers of resigned staff.

 

Meanwhile, big business’ resignation rates show incredibly positive outcomes with the largest decrease of 1.3% to 10% for organisations turning over $100 to $200 million annually. Publicly listed companies show the lowest resignation rates of all company types at only 9%, while the highest can be found in the non-profit (12.7%) and not-for-profit (12.1%) sectors.

 

Flexible work trend

 

2018 has also seen a boom in the demand and popularity of flexible work environments. Of the 12 factors that drive resignation rates measured by the Staff Retention Report, only those related to flexible work increased while all other factors saw a decline. The largest rise in the reason given by resigning staff in the past year was the lack of flexible start and finish times (+1.8%) as well as the lack of flexible working arrangements (+1.4%). Meanwhile, factors that have been popular year on year such as insufficient financial reward surprisingly saw the steepest drop (-7.3%) followed by conflict with a manager or staff member (-6.5%).

 

The flexible work trend continues to be reflected in the strategies organisations are implementing in order to combat and reduce resignation rates. Of nine groups of strategies measured in the report, the reviewing and implementing of flexible work practices has seen the largest increase in popularity (+3.9%), with 43.0% of Australian organisations employing flexible work policies. Similarly echoing trends in resignation factors, the strategy with the steepest drop in popularity was staff counselling and consultation (-4.6%) followed by reviewing and updating staff remuneration and benefits policy (-4.4%).

 

Time to ditch the performance review

 

Performance appraisals – the employer’s long-upheld scripture on measuring job performance – is seeing adverse costs to businesses through amplified resignation rates, suggesting it might be time for some businesses to ditch the practice all together. Companies with formal performance plans in place see a higher resignation rate (+0.5%) than those who don’t, with 28% ditching the performance plan all together.

 

Organisations that focus on a learning culture rather than performance appraisals for development also experience lower voluntary staff turnover rates, with those who implement a formal training policy reporting an average 0.4% less in their resignation rates. This figure is also a reflection of factors driving resignation rates; limited opportunities for career advancement and progression is the second most reported motive for staff resigning with 58.0% of organisations losing workers for this reason.

 

 

Commenting on the recently released findings, IML’s General Manager of Corporate Services and Research Sam Bell FIML said, “This year’s Staff Retention Report is a wake-up call for Australian organisations, particularly small businesses and not-for-profits. No organisation is too small or too young to invest in their people whether its professional development, flexible work policies or showing their staff members they care.”

 

“The key to creating an effective and successful retention strategy is understanding your people beyond the workplace,” said IML Chief Executive, David Pich FIML. “After all, we all work harder so we can live better.”

 

Pich continues, “What the 2018 Staff Retention Report has shown us is that flexible work arrangements, increased superannuation contributions and dropping the performance plan support a healthy stress-reduced work-life balance and a realistic employer attitude towards what really matters to staff. Ultimately, if organisations show they care about their people, their people will show genuine commitment to their work and the business.”

 

– ENDS –

 

 

Interviews and full report are available upon request.

 

See below for executive summary of key findings.

 

For media enquiries, contact

Whitney Duan, Media & Communications Manager

0417 284 411 | whitney.duan@managersandleaders.com.au

 

 

About the Institute of Managers and Leaders

The Institute of Managers and Leaders (IML) is a non-profit Membership organisation. IML assesses and awards Chartered Manager, the gold standard marque of management and leadership excellence. For more than 75 years, we have been supporting professionals on their leadership journey. This promotes our vision, “creating better managers and leaders for a better society”.

 

Notes to the Editor: 2018 National Salary Survey Executive Summary

 

Key research findings

 

  • Market Trends
    • More than one-half (56.1%) of organisations across Australia are currently concerned about staff retention
    • The average annual resignation rate within organisations in Australia is 10.0% in 2018 (for the preceding 14-month period)
Resignation rates and total staff turnover rates
Australia20142015201620172018
Resignation rate10.6%10.3%10.3%9.5%10.0%
Total staff turnover rate15.7%15.3%15.7%15.0%13.4%

 

  • Average resignation rate by state location
    • Highest: NSW/ACT – 10.5%
    • Lowest: WA – 6.8%
    • Largest increase: QLD – from 8.4% (2017) to 9.7% (2018)
    • Largest decrease: NSW/ACT – from 10.8% to 10.5%

 

  • Average resignation rate by industry
    • Lowest: Agriculture (forest/fish/farm) – 7.0%
    • Highest: Banks/finance/insurance – 14.1%
    • Largest decrease: Wholesale – machinery/auto – from 12.0% to 8.2%

 

  • Average resignation rate by annual turnover
    • Lowest: Less than $5M – 9.5%
    • Highest: $10M to $20M – 10.7%
    • Largest increase: $5M to $10M – from 9.0% to 10.2%
    • Largest decrease: $100M to $200M – from 11.3% to 10.0%

 

  • Average resignation rate by company type
    • Lowest: Publicly listed – 9.0%
    • Highest: Non-profit – 12.7%
    • Largest decrease: Non-profit – from 14.1% to 12.7%

 

  • Factors driving resignation rates
    • Highest: Seeking a new challenge – 75.7%
    • Lowest: Underutilised – 5.3%
    • Largest decrease: Insufficient financial reward – from 46.0% to 38.7%
    • Largest increase: Lack of flexible start/finish times – from 5.6% to 7.4%

 

  • Strategies companies use to reduce resignation rates
    • Highest: Learn from conducting effective exit interviews – 94.1%
    • Lowest: Reviewing/updating staff grievance procedures – 32.8%
    • Largest increase: Reviewing/implementing flexible work practices – from 39.1% to 43.0%
    • Largest decrease: Staff counselling/consultation – from 49.1% to 44.5%

 

  • Strategies used to increase staff retention
    • Additional superannuation contributions above the SGC
      • Resignation rates of companies with – 8.6%
      • Resignation rates of companies without – 10.5%
    • Formal training policy
      • Resignation rates of companies with – 9.4%
      • Resignation rates of companies without – 10.7%
    • Formal performance plan
      • Resignation rates of companies with – 10.1%
      • Resignation rates of companies without – 9.6%
    • Formal development plan
      • Resignation rates of companies with – 9.8%
      • Resignation rates of companies without – 10.2%
    • Formal succession plan
      • Resignation rates of companies with – 9.6%
      • Resignation rates of companies without – 10.3%
    • Additional personal/carer’s leave
      • Resignation rates of companies with – 9.6%
      • Resignation rates of companies without – 10.1%

Research methodology

 

The analysis contained in this report is based on a snapshot of responses received from a total of 272 organisations across Australia as at August 2018. The database is derived from the Institute of Managers and Leaders’ National Salary Survey.

  • Resignation rate = (Number of staff that voluntarily left the company in the last 12 months / total number of employees) * 100
  • Total staff turnover rate = Number of staff that left the company in the last 12 months, either voluntarily or involuntarily / total number of employees