Staff turnover costs Australian small businesses at least 50% of an employee’s annual salary per departure, when you factor in recruitment, onboarding, and lost productivity. The good news is that most turnover is preventable. Here is what actually causes people to leave and what to do about it.
Losing a good person is one of the most disruptive things that can happen in a small business. The cost is rarely just the recruitment fee. It is the three months of reduced output while the new person finds their feet, the institutional knowledge that walks out the door, and the signal it sends to the rest of the team.
The national average turnover rate in Australia sits at around 16%, but for small businesses the rate tends to be lower, around 11%. (Australian HR Institute) That sounds manageable until you work out what even one or two departures cost in a 10-person business.
Why do people actually leave?
Exit interviews, when businesses bother to do them, almost always show the same picture. People leave for a combination of reasons, and salary is rarely the main one.
- Poor management. The relationship with a direct manager is the single biggest driver of whether someone stays or goes. Not the company, not the salary. The manager.
- No development pathway. People want to know there is somewhere to go. When they cannot see growth, they look elsewhere.
- Feeling undervalued. Not just financially. Recognition, feedback, and feeling like their work matters.
- Lack of clarity. Unclear expectations, inconsistent communication, and a sense that nobody really knows what is going on.
- Better pay elsewhere. This matters, but it is usually the reason people give rather than the real reason they started looking.
“In 2025, 54% of Australian workers searched for a new job. Only 7.7% actually moved. That gap is not loyalty. It is people who have mentally checked out but have not found somewhere better to go yet.”
What actually reduces turnover?
The businesses with the lowest turnover tend to do a few things consistently well.
They hire well. Turnover often starts at the point of hire. Bringing in someone who is not the right fit for the role or the culture creates problems that are hard to fix later. A clear position description, a structured interview process, and reference checks done properly all reduce the risk of a bad hire.
They onboard properly. Most small businesses do almost no onboarding. The new person starts, gets shown around, and is expected to figure the rest out. A structured 90-day onboarding plan that sets clear expectations, introduces the person to the team and clients, and provides regular check-ins makes a significant difference to whether someone stays past the six-month mark.
They give regular feedback. Not annual reviews. Regular conversations. Weekly or fortnightly one-on-ones where the manager checks in on how things are going, what is working, and what the person needs. These conversations catch problems early and make people feel seen.
They develop their people. Development does not have to mean formal training programs. It can be as simple as giving someone a stretch project, a new area of responsibility, or a clear pathway to a senior role. People who feel like they are growing stay longer.
They pay fairly. You do not need to pay above market, but you do need to pay at market. An annual review of remuneration against current market rates is basic good practice. Letting someone get underpaid while the market moves around them is a reliable way to lose them.
What about employees who are disengaged but not leaving?
This is arguably the bigger problem. Research consistently shows a significant proportion of the workforce is present but not performing at full capacity. They are not bad employees. They are disconnected ones. Regular one-on-ones, genuine recognition, and clear expectations help, but sometimes the issue is more structural and needs a closer look at culture and management practice.
Where should a small business start?
If turnover is a problem in your business, start with exit data. Find out why people are actually leaving. If you do not have that data, the next best thing is stay interviews: direct conversations with your current team about what keeps them there and what would make them consider leaving.
Jigsaw HR works with businesses across Australia and New Zealand on retention strategy, management coaching, and culture development. If turnover is costing you, we can help you work out why and what to change.
Losing good people? Jigsaw HR can help you work out why and what to do about it. Book a free 30-minute call.