UK firms face a rising talent exodus as economic and labour market conditions improve, according to a new study from global management consultancy Hay Group, conducted in association with the Centre for Economics and Business Research (Cebr).
Employee turnover is set to accelerate in 2014, after subdued levels in recent years. The number of workers taking flight in the UK is expected to rise sharply in 2015 as confidence revives, reaching 4.3 million. This represents 765,000 more departures compared to 2012.
This trend is set to continue. Turnover rates over the next five years are predicted to rise from 14.6 to 18 per cent, and the number of departures in 2018 will stand at almost 4.7 million(1), representing over one million more departures compared to last year.
Globally, average employee turnover rates are predicted to rise from 20.6 per cent in 2012 to 23.4 per cent by 2018 – representing some 192 million separations. Emerging markets are set to feel the brunt of the turnover spike first, beginning this year, while developed economies will start to see departures peak in 2014, as economic conditions improve.
Chris Smith, consultant at Hay Group in the UK, comments: “People have been reluctant to leave their current role due to the turbulent labour market associated with the economic downturn, government spending austerity and the Eurozone crisis which has held down turnover rates in many firms.
“But as conditions improve, dissatisfied workers pose a significant flight risk for organisations of all shapes and sizes in the UK. Recognising and then meeting the needs of the workforce will be key to retaining talent in the next few years.”
The study, Preparing for Take-Off, is based on a unique Hay Group macroeconomic model that analyses the main factors affecting employee turnover. The study covers 700 million employees in 19 countries worldwide.
The research also highlights significant talent shortages in the UK, with labour cited as a factor limiting production for 12 per cent of businesses – one of the highest levels in Europe and well above the four per cent observed in Germany.
The advanced manufacturing industry has particular difficulty securing skilled labour, with 18 per cent of businesses reporting shortages.
Meanwhile, the professional, scientific and technical activities sector is forecast to experience a period of mass migration. It is predicted that approximately a quarter of new jobs created over the next five years will require science and technology based skills but that there will be a shortage of people with these abilities. This will intensify demand for employees who possess these skills, challenge retention efforts and drive turnover higher.
Building a supportive work environment
To identify the key factors affecting employee retention Hay Group conducted a detailed analysis of their employee opinion database, which includes information from over 5.5 million employees across the world.
The research reveals that confidence in leadership, opportunity for career development, autonomy, supportive work environment and appropriate compensation are among the most consistent predictors of employee engagement and commitment.
Globally, employees who are planning to stay in their company for more than two years score their employers over 20 percentage points more favourably on these five factors than those employees who are aiming to leave in the same period.
Chris Smith comments: “With retention a growing concern, organisations must guard against the significant costs associated with hiring and training new employees, as well as potential talent shortages, by focusing on retaining key staff.
“Robust succession planning processes and identifying and developing high potential talent from within the business is now essential. Organisations also need to understand which key factor(s) keep their employees engaged and respond accordingly whether that be compensation, career development, confidence in leadership or other drivers of commitment.”