According to the Department of Labor, employee quit rates have fallen by 12% in the last year — the lowest they’ve been since the “Great Resignation” of 2021. So why isn’t this reason to celebrate?
The recent decline in job quitting actually signals declining confidence in the job market itself, which translates into lower job availability and a longer job search. Here’s what that means for small business owners.
The Positive Side of Reduced Turnover
Business owners can expect several benefits from this recent trend. After all, lower quit rates are certainly better than the alternative. Here are several of the positives outcomes employers will witness:
Lower Hiring Costs
Fewer people leaving means you’ll devote less time and money to hiring someone. According to data published by the Society for Human Resource Management, the cost of hiring a new employee can be three to four times the position’s salary. Lower quit rates help you avoid this cost.
More Stable Workforce
A revolving door of new faces doesn’t exactly aid in workplace productivity, nor does it make for a stable workplace culture. But with fewer people quitting, employers can expect more predictability in their team members, which customers will certainly appreciate.
Wider Pool of Potential Employees
With dwindling numbers of people quitting their jobs, there could also be a shift in the talent pool when positions become available. This might help hiring managers zero in on candidates who more closely align with the job criteria or their company culture.
The Negative Impact on Employers
While employers can experience significant advantages with smaller turnover rates, they can also see unexpected drawbacks, including:
More Challenges to Find Qualified Workers
The reduced quit rate could actually worsen the talent shortage. That’s because businesses may find it harder to find job seekers who have the right constellation of skills. And small businesses may struggle to afford more specialized candidates.
Less Pressure to Raise Wages
Reduced labor competition means that wage growth might slow. On the surface, that sounds like good news for business owners looking to slash operating costs. However, it could likely produce the opposite effect. A lack of strong wage growth could make it harder for business owners to attract and retain top talent as stagnant wages can signal devaluation, leading to demotivation, talent flight, and ultimately, higher costs for businesses.
Economic Slowdown
The decline in quit rates can negatively impact the American economy as a whole. In other words, the same economic forces slowing America’s quit rate could also be taking a toll on the world of small businesses. This slower movement and cautious spending, coupled with reduced hiring by small businesses themselves, can create a stagnant cycle: less innovation, decreased consumer demand, and ultimately, slower economic growth for everyone.
Action Steps for Business Owners
If you are a small business owner, how can you respond to this present trend? Here are a few tips to stay resilient in the face of the recent economic instability.
Focus on Retention
Retention rates have been fluctuating wildly since the pandemic, and some experts caution that America could face retention rates as low as 24% in the coming years. Employers can counter this trend by:
- Designing a meaningful onboarding experience
- Creating a positive work environment
- Offering competitive wages and benefits
- Providing opportunities for growth and development
You might also consider asking your existing employees what’s prompting them to stay. Doing so could provide insights that help you boost retention across your entire organization.
Be Strategic About Hiring
Don’t just commit to a new hire out of desperation. Really take the time to identify your company’s values, your goals, and what success looks like in the position. This will help you more clearly pinpoint effective job candidates, as well as refine the way you communicate your job opening.
You might also consider alternative hiring strategies such as:
- Employee referrals
- Upskilling your current workforce
- Recruitment marketing content
These methods will help you expand your search results to connect with a larger community of potential job seekers.
Stay Informed
Learn as much as you can about current economic trends. The more you understand today’s business and job climates, the quicker you’ll be able to adapt to trends or events that impact you or your employees.
Some of these trends may be industry-specific, which is why it helps to focus on industry publications and podcasts. But you can still learn a great deal from broader economic analyses and HR trends, which will help you better adjust to an evolving job market.
What Does the Future Hold?
If the past few years have been any indication, the job market will remain anything but stable. Admittedly, the impact of reduced quit rates may depend on a variety of factors, such as your industry, size, and location.
The goal, however, remains the same: minimizing the impact of these trends while seizing opportunities to expand your business. If you need HR advice for your small business, Focus HR can help. Contact us today to request a consultation.
