Voluntary turnover still increasing … and mid-year can be a danger time

Analysis

Voluntary turnover still increasing … and mid-year can be a danger time

The rate of voluntary turnover has increased for the fourth year in a row, according to the latest Australian Institute of Management annual turnover report.

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The rate of voluntary turnover has increased for the fourth year in a row, according to the latest Australian Institute of Management annual turnover report. A particular danger time for employers is July and August, because many long-serving employees choose this time to retire or resign. What can you do to identify employees who are about to resign, and persuade them to change their minds?

Voluntary turnover now at least 13%

The 2008 Voluntary Staff Turnover Report, recently released by the Australian Institute of Management (AIM), says that voluntary staff turnover is currently running at an average of 13.1%.  This rate has increased steadily from 12.6% in 2006/07, 11.5% in 2005/06 and 9.4% in 2003/04.

The Voluntary Staff Turnover Report is compiled from data obtained from the AIM’s long-running, annual National Salary Survey. Turnover rates for previous years are quoted from previous National Salary Surveys.

The point is that the average organisation can now expect to lose more than one-eighth of its workforce each year through voluntary turnover, ie resignations and retirements. This is occurring in an environment of widespread skills shortages, which suggest that replacement costs may be increasing at an even faster rate. Add involuntary turnover, such as dismissals and forced retirements (eg on medical grounds) to this and the total rate of turnover probably averages around 20% a year.

AHRI says 18.5% overall

A survey by the Australian Human Resources Institute (AHRI) published in March 2008 (see below) reported an overall turnover rate of 18.5%.

Why mid-year is a danger time

For long-serving employees who are considering retirement, moving to part-time or casual work, or taking a break from the workforce for awhile, the taxation system provides an incentive to wait until after 30 June to give their notice.

These employees often have big accruals of untaken annual leave and long-service leave, which means a large termination payout. It makes financial sense to them to take the payout in a financial year when total work income is likely to be lower rather than during a full year of full-time employment, in order to reduce taxation.

The changes to superannuation implemented a couple of years ago may be unintentionally providing another incentive. Their intention was to encourage people to keep working for longer instead of retiring at age 55, by making superannuation 'tax-free'. Some anecdotal evidence suggests, however, that sometimes the changes may be having the reverse effect. Employees are doing their sums and realising that their superannuation payouts will be larger than they had expected, and therefore they will have a higher retirement income to live on.

This situation is being reinforced by the strong market performance of most superannuation funds over the past few years, which has further increased the value of people’s entitlements. As a result of these developments, some people are deciding they can afford to retire earlier than they had planned. This seems to be particularly the case for couples where one partner has already retired and places pressure on the other partner to retire as well. That situation has implications for providing flexible work arrangements, discussed further below.

Identifying the warning signs

Whatever the impact of the above factors, one thing is very clear: older and long-serving employees often start planning their departures well in advance.

If you know what to look for, you may be able to identify warning signals that a resignation or retirement is imminent as a new financial year approaches. Then, if the employee is valuable and you want to persuade him/her not to leave, you may be able to avert turnover by taking proactive steps to persuade the employee not to leave.

Signs of an impending resignation are usually subtle but, occasionally, can be quite blatant. They include the following:

  • improved grooming and dress (if looking for other jobs)
  • personal items disappearing from work stations
  • working less overtime or taking less work home
  • different patterns of absenteeism and sick leave, or taking annual leave in single days
  • variations in job performance (usually it deteriorates, but where the nature of the work is such that it can be demonstrated to other employers, it may improve significantly)
  • making phone calls away from different work stations, or on mobile phones, instead of office phones
  • reacting calmly to actions and decisions that you would expect the employee to be irate about, eg increasing workload or removing a benefit
  • the 'small target' strategy - the employee tends to avoid participation in decisions, meetings, etc, is reluctant to discuss issues in any detail and gives as little as possible away
  • people who frequently complain constructively about things, because they genuinely want things to be done better (as distinct from the 'whingers') will suddenly go quiet
  • conversely, employees who are generally quiet may start to express frustration and dissatisfaction with various work issues. This may indicate that the employee is contemplating leaving, but hasn’t yet made his/her mind up, or perhaps even hopes that
    someone will notice and encourage him/her not to leave.

The above list shows that you should be watching out for CHANGES in employee behaviour, whether they are changes for the better or worse.

Increase contact with employee

A recommended approach is to increase your level of informal contact with the employee, without resorting to micromanagement. Use this contact to provide opportunities for the employee to raise concerns or dissatisfaction in a non-threatening environment. But it will require more than just a sympathetic ear - if issues are raised, you will need to be genuinely committed to doing something about them, otherwise the best you can hope for is to temporarily delay the inevitable.

If the employee’s issue appears to be unrelated to the job, working environment or style of management, but is more of a 'lifestyle' issue, the best course of action is to examine your flexible work options and look to retain the employee in at least some capacity, if no longer full-time.

Some recent innovations in flexible work options that cater for mature age people include the following:

  • arrangements such as 'nine months on, three months off', that suit couples where one partner works and the other has retired, because they can take lengthy annual holidays together
  • grandparents’ leave, an option recently introduced to the banking industry
  • various forms of purchased leave arrangements that increase the amount of leave by reducing remuneration proportionately.

The more traditional options such as part-time and casual work, contract and project work, working from home, can also be used.

If the employee has lined up another job that is part-time or otherwise more flexible, evaluate whether you can match or better the work arrangements of the new job, and make a counter-offer if you can.

Summary

A proactive approach to retention of valued employees is essential at any time. This applies year-round and to all employee demographic groups. However, the past trend for a 'spike' in long-term turnover in July/August, combined with the general trend of increasing voluntary turnover, mean that now is a time to be particularly vigilant for warning signs - and to act quickly if they appear.


Further information

  • AIM: The 2008 Voluntary Staff Turnover Report can be purchased from the AIM website. The report compares the policies and practices of organisations with lower-than-average turnover with those of organisations with higher-than-average turnover. It also examines the strategies of low-turnover organisations.
  • AHRI: The AHRI HRPulse survey report, 'Love 'em, don't lose 'em: identifying retention strategies that work', March 2008, is available from the AHRI website.


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