Although each industry has experienced its own employee turnover pains over the past few years, there are some cornerstone issues which seem to have influenced turnover rates across the board.

‍Flexible and remote work opportunities increased, but not everything went smoothly
‍The rate of remote work rose to 26% of all employees in 2022, which is a record high. Additionally, 16% of all U.S. companies are fully remote. But this uptick in remote work arrangements comes with a certain level of friction. 

Gartner found that 70% of employees believe remote workers get paid less and are less likely to be promoted than their on-site counterparts. On top of that, 68% of employees who could work remotely have been required to return to the office in some capacity. 

This is true despite the fact that, according to analysis by ADP Research Institute, 64% of the global workforce has already quit, or would consider doing so, if they were required to return to the office full-time. 

Piers Hudson, senior director of Gartner HR, explains:

“Leaders’ efforts to restore the organization’s ‘normal’, pre-pandemic way of working are clashing with a workforce that has largely normalized working in a hybrid environment.”

Although it’s still too early to tell how this tension will impact employee turnover rates in the long term, it may explain some industry-specific turnover, particularly in sectors where remote work has become the norm. 

‍Cross-industry mobility is high
‍Research by McKinsey found that, among workers who quit their jobs between 2020 and 2022, 48% moved to a different industry.

Burnout is one of several factors that likely contributed to this. Three years into the pandemic, industry-specific burnout still looms large in some sectors, namely healthcare and education. 

‍According to the US Bureau of Labor Statistics, nearly 1.7 million people quit their healthcare jobs in the first half of 2022 alone. This is the equivalent of 3% of the entire healthcare workforce turning over each month. Employee turnover numbers in the education industry tell a similar story. Bloomberg reports the number of teachers who quit their jobs in 2022 was nearly 41% higher than in 2021.

A labor shortage in many industries is another factor likely contributing to cross-industry mobility. As employers widen the net to attract candidates, many companies have dropped four-year degree requirements for mid-level positions, giving workers new options previously unavailable to them.

The Federal Reserve Bank of Philadelphia estimates that 700,000 positions have opened up to those without degrees over the last two years. 

‍Economic concerns prompted some to seek new jobs
‍72% of workers who received a raise in the first half of 2022 reported that their raise was less than the 8.5% of the inflation rate. Additionally, 80% of job seekers believed the U.S. would enter a recession within the next year, and 60% of workers felt the job market would get worse over the next six months.

This likely prompted some employees to seek new jobs for greater pay and more financial stability, in anticipation of harder times to come. 50% of employees who planned to quit their job in 2022 reported better pay and benefits as their primary motivation. This trend dovetailed with the cross-industry mobility, as many employees changed industries, not just jobs, for better salaries.
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It’s tough to pin down exactly why employee turnover rate is high or low in any particular city, but a few data points stick out. 

The top two cities for employee turnover in 2022 were San Francisco and Palo Alto. Each of these two Silicon Valley locales saw a turnover rate a full two percentage points higher than the third leading city on the list. 

‍High employee turnover has long been a mainstay in Silicon Valley. The data suggests this trend continued in 2022.

This matches with the employee turnover numbers by industry: the three industries that saw the highest turnover — AI, software, and data analytics — were all in the tech sector. 

Cost of living also likely played a factor in high turnover for some locations. 

Data from the U.S. Census Bureau and a survey commissioned by CraftJack identified a lower cost of living and a new job opportunity as two of the top three motivators for people relocating in 2022. 

Turnover within roles was likely impacted by the same factors that affected industry and location turnover rates. However, at least one key factor may account for the stratification of turnover rates among various roles: demand.

Using recruiting InMail volume and responses, LinkedIn found a correlation between higher demand and higher turnover rates. 

This makes sense given that there were 10.4 million job openings at the end of 2022 and employees are more likely to find a new job if there is demand for their skills, regardless of their reason for changing jobs.

It makes even more sense in light of the added mobility offered by remote work and the economic pressures to snap up higher salaries.
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The expansion of remote work, economic pressures, and more cross-industry mobility have upset the apple cart a bit over the past few years. Factors impacting turnover rates in all categories appear to boil down to a few major factors.

Leadership and employees are misaligned
Workers want to reorganize their lives around new ways of working, notably remote working. However, in a lot of cases these desires seemed to be at odds with company leadership, as many businesses attempted to return to on-site work.

Roselyn Feinsod, Principal People Advisory Services at Ernst & Young LLC, observes:

“Organizational culture has historically been built based on shared in-person experiences and it is fascinating to see that the new ways of working have improved such culture in the eyes of many employees. As we look toward the longer-term and organizations continue to transform their operations, employers will need to consistently re-assess conceptions of productivity and the impact on their cultures, ensuring their team’s approach is optimized for the in-person, hybrid and digital work experience.”

Flexibility and pay are central issues
People are reevaluating their relationships with work. According to Kimberly Shells, a Gartner analyst, “About 65% of employees are reconsidering the role of work in their lives.” Families, hobbies, and communities “are relatively more valued now than have been in the past.”

This reassessment, coupled with economic pressures, seems to be prompting employees to change jobs to get better work-life balance, live in better locations, and cope with economic realities. Liz Fealy, Global People Advisory Services Deputy Leader at EY summarizes: “Employees’ willingness to change jobs in the current economic environment is a game-changer. The COVID-19 pandemic has shown that flexibility can work for both employees and employers, and flexible working is the new currency for attracting and retaining top talent. Employers who want to keep the best people now and in the next normal will need to put flexible working front and center of their talent strategy.”

A shifting labor market put workers in the driver’s seat
‍A shifting labor market has prompted employers to remove some of the traditional requirements for many positions, being more receptive to applicants with certificates and lower level degrees.

To Kimberly Shells, this means "Barriers to job switching are as low as they've ever been,” and employees looking to upgrade their salaries and add work flexibility took advantage of this in 2022.
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Gartner predicts that turnover rates are likely to keep rising through this year, potentially increasing as much as 20%. Piers Hudson, at Gartner, predicts that “An individual organization with a turnover rate of 20% before the pandemic could face a turnover rate as high as 24% in 2022 and the years to come. For example, a workforce of 25,000 employees would need to prepare for an additional 1,000 voluntary departures.”

Given that the external factors impacting employee attrition are long-term or potentially permanent realities, companies need to be as proactive as possible. According to Hudson, “New employee expectations, and the availability of hybrid arrangements, will continue to fuel the rise in attrition.”

Businesses should be prepared to offer flexible working arrangements, adjust pay scales to account for current economic conditions, and carefully monitor attrition factors for high value employees, because the current labor market climate is unlikely to blow over any time soon.
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