Employee turnover has a range of negative effects on small businesses. From low morale and poor output to negative impacts on a company’s reputation, it’s in a company’s best interest to reduce turnover. Staff are integral to small businesses – they keep operations running and the money coming in. While employee turnover can’t be eliminated, it can be reduced by providing a workplace where people are happy and want to work with you and for you.

What is employee turnover

Employee turnover can be defined as a measurement of the number of employees who leave an organisation during a specific time period – normally one year. There are typically two types of employee turnover, voluntary and involuntary.

Voluntary turnover refers to any instance where an employee actively chooses to leave an organisation. This can happen if a better job opportunity arises elsewhere, or if there’s conflict and disengagement within the current workplace.

Involuntary turnover occurs when an employer chooses to terminate an employee’s contract. This could be due to the employee’s poor performance record or their toxic behaviour and attitude in the workplace.

Negative impacts of employee turnover

A revolving door of employees has various negative impacts on small businesses. While it’s something that every company will inevitably experience, it’s a costly exercise. This is due to the fact that it takes time and money to find and train a replacement. So, if companies have a high employee turnover, it’s in the company’s best interest to reduce it.


Turnover is expensive for companies to manage. It can bring costs such as severance pay and administrative tasks like exit interviews to the fore. Additionally, employers have to go through recruitment, selection and hiring processes all over again. At the end of this, employers also need to train a new employee, and this costs more money and time.

Low Morale

While turnover has a direct impact on company revenue and profitability, it also results in low employee morale that can stem from a variety of factors. Firstly, employees may experience low morale if they’re being expected to manage an increased workload due to another employee leaving.

Secondly, workplace relationships are key to employee’s satisfaction with work. Morale will be affected if employees are constantly losing friends in the workplace and having to build new working relationships. This could result in the stable employees losing faith in the hiring process and shutting themselves off to interacting with new employees, making for a hostile working environment.

Poor output

Employee turnover affects a business’ output in two ways. Firstly, it may decrease altogether. If employees are constantly leaving, their position within the company virtually halts until a replacement can be found. This means that for a period of time, no work is being completed, potentially resulting in missed deadlines.

Alternatively, employee turnover can result in a decrease in the quality of work that a company produces. If a company has to hire a new employee quickly, they may not have the same experience as the previous employee. This could result in the new employee producing work that’s of a low standard.


Having a reputation that depicts a business as a revolving door of employees can be harmful as potential employees may steer clear of the company. This is due to the fact that, based on appearances, there must be something wrong with the company if no staff want to stay.

A poor reputation can also have negative implications for small business clients. People may not want to take their business to a company that can’t seem to hold onto their employees. This stems down to the fact that people will wonder if your business is a hostile working environment if staff are constantly leaving.

How to reduce turnover in a small business

Reducing turnover in a small business doesn’t involve changing fundamental operating procedures. Rather, the key to reducing turnover lies in implementing a few set practices that will pay dividends in the long run.

Hire the right people

During the hiring process, look for people who can competently perform the advertised role while also fitting in to workplace culture. This is important, because if employees don’t fit in with the work environment, they won’t be happy. If they aren’t happy, forming relationships with coworkers is harder and new employees will end up feeling lonely and may leave.

Small businesses can go about hiring the right people by asking behavioural questions during the interview process. This helps employers find out how potential employees react in certain situations. If things are progressing, show the potential hire around the business, highlighting workplace culture firsthand. If employees are the right fit, they’ll be more inclined to stay with the company.

Offer competitive pay and benefits

It’s no secret that people want to be compensated for their work. Doing market research on wages will ensure your business knows what competitors pay their employees. This helps you set wages and benefits that will entice employees to stay. Because by offering fair pay and benefits, employees will be less inclined to look for other employment, helping businesses reduce the rate of turnover

Be clear about career paths

If an employee feels they have advanced as far as possible in a company, they’ll look for another employment opportunity that offers a more diverse career path. That’s why it’s good for employers to lay out the career path for their employees before hiring. If there are no opportunities for advancement, it’s better for employees to find out before accepting the job, saving the company and themselves time and money.

If there are opportunities for career advancement, show your employees. This benefits employees by giving them a sense of direction and purpose. It also works as a way for employers to make sure their employees stay with their company long-term.

Finding the right people for your business with Ability Options

Turnover can have major negative impacts on your small business, so it’s important you hire the right people for the job in the first place to avoid it. Ability Options can help you find suitable candidates for your small business. Contact us today.

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