Staff turnover is rising as balance tips in favour of job seekers

Staff turnover is rising, with more workers in New Zealand willing to risk taking on a new job in the current economic climate.

Simon Bennett, chief executive of AWF Madison, the country's largest recruiter and temporary labour provider, said, anecdotally average employee tenure was decreasing.

"The average tenure was once where people used to think three years was good but it's closer to two years now," Mr Bennett said.

That's good news for recruiters but less so for employers. International studies have estimated direct and indirect costs associated with staff turnover at a total 100 to 300% of an employee's salary for managerial staff and 50 to 120% for operational staff.

Renewed hiring confidence post-GFC has resulted in a tightening market for qualified staff, tipping the balance in favour of candidates, Bennett said. A construction boom in Auckland has also led to an acute shortage of skilled tradesmen in the region while the local IT industry has resorted to signing-on bonuses of up to $15,000 while competing for skilled staff in its field.

The annual New Zealand Staff Turnover survey released in March found the national average turnover for 2015 was 18.4% – the highest rate since 2008 and an 11% increase on the previous year.

The survey, by Lawson Williams Consulting Group and the Human Resources Institute of New Zealand (HRINZ), said factors such as an aging workforce, skills shortages, attitudinal shifts to how quickly someone changes jobs, reduced loyalty, rapid organisational change and reduced job security, have all driven gradual increases in staff turnover over the past 20 years.

There was a sharp blip downward in that trend during the global financial crisis from 2007 to 2009. Since 2014 a record number of people have entered the workforce, which has seen more people change jobs despite continued low wage inflation.

There isn't much employers can do about the shift, which is largely generational, Mr Bennett said, but they need to adjust their recruitment and induction practises to get new staff "up and running more quickly."

The staff turnover survey said previously the 11.3% rise in voluntary turnover (people choosing to leave) to 12.6% would have meant a corresponding drop in involuntary turnover (people being sacked or made redundant) but in 2015 both went up as a result of New Zealand's so-called "two-speed economy." Growth and confidence in Auckland and Canterbury and in industries such as construction weren't reflected across all regions and sectors.

HRINZ chief executive Chris Till said significant jobs growth nationwide this year was continuing to fuel staff turnover despite record high migration.

Turnover rates vary hugely between industries from an average 11% in 2015 for the energy/electricity industry to 52.7% for fast-food and hospitality, the survey said. It also ranges by skill and pay levels, with higher turnover in unskilled and semi-skilled workers on low pay rates.

Although some staff turnover can be good for an organisation by bringing in new people with fresh thinking, anything over the 30% mark typically has a degrading impact on the organisation because of the loss of institutional knowledge and skills and recruitment costs, Mr Till said.

In one survey example, though, a company participant was comfortable with its higher-than-average turnover for its industry because it had a high turnover rate of 26% among staff that were under-performing that it wanted to leave and a rate of only 7% among the higher performers it wanted to retain.

Money is typically not the major factor for a worker leaving – a lack of career prospects, bad workplace culture, or a failed relationship with the boss are key drivers, Mr Till said.

The 2016 Hays Salary Guide out this month showed voluntary staff turnover had risen in 23% of the 419 organisations surveyed over the past year. Just 12% reported decreased staff turnover and the remainder had stayed much the same.

The increasing number of resignations shows the country's job market is delivering opportunities for workers, Mr Hays said. Business director Jonathan Greening said it was a vote of confidence in the economy from the grassroots level with more people willing to risk changing employers.

"There are so many employer confidence surveys that it's nice to see one indicating the employees' point of view," he said.

Employers, particularly construction companies in the Auckland boom, were getting creative in remuneration packages that included more flexibility or seeking offshore workers rather than offering steep wage rises, he said.

(BusinessDesk)

Get full access to the NBR Rich List 2016, released July 28, by claiming your free 30-day trial to NBR ONLINE premium content at NBR.co.nz/free