A Good Sign for the Economy? Retail Turnover on the Rise

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Employee turnover levels at retailers are on the rise, particularly among part-time store workers and positions tied to the booming ecommerce sector, according to the findings of a new survey by global management firm Hay Group.

The findings may signal improvement in the economy, as employees are more likely to stick with a job — even if they don’t like it — when it is hard to find new work. But the development could be a double-edged sword for retailers, who are reporting that their turnover costs are about the same as pre-recession levels and are slowly starting to climb.

In fact, 26 percent of the retailers Hay Group surveyed reported their turnover costs have increased over the past year.

“On one hand, it’s a harbinger of an improving economy, but on the other, it’s a significant challenge for retailers who will need to devote more time and resources to retention and recruiting,” said Maryam Morse, national reward practice leader of Hay’s retail practice. “Retailers are very focused on profitability right now, which is likely to lead to an increased demand for part-time workers who can be scheduled to work at only the highest traffic times.”

The 54 retailers polled by Hay Group — which included OfficeMax,Ascena Retail , PetSmart , Ross Stores and Limited — reported a median turnover rate of 67 percent for part-time store workers in the first quarter, a 33 percent increase over 2011. One in five retailers said they have seen an increase in turnover in the first part of 2012.

Among the corporate workers who serve online retail channels, turnover was also robust, with rates that were nearly double 2011. For hourly distribution center workers, turnover rates were up 29 percent from a year ago.

Meanwhile, more than half of the retailers said the cost of turnover is back to pre-recession levels.

With many retailers expecting turnover to continue to rise, more retailers are focusing on retaining workers. Interestingly, most cited tactics such as establishing career paths for employees or providing additional training, rather than changing compensation. That may be because in positions with higher turnover, about 74 percent of retailers said workers were leaving for better opportunities rather than for a higher salary (44 percent).

That said, salary is a popular tool to retain workers who are specifically identified as high performers. Retailers have budgeted an average of 3.6 percent in merit increases for top performers this year, up from 3.2 percent last year and more than the 2.8 percent planned for employees overall this year.

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