Employee Tenure

Angela Livingston
Angela Livingston
Need to determine the average tenure in a hurry? Not sure how to entice your employees to stay with your company longer? This employee tenure article will give you everything you need to know, from understanding what tenure is to a step-by-step guide for increasing tenure at your company.

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What Is Employee Tenure?

Tenure is the amount of time an employee has been employed by your company or the average amount of time that all your current employees have been employed with the company.

A few related terms you’ll want to know:

  • Employee turnover rate: The percentage of all the employees that separate from the company (for any reason) over a specific period of time.
  • Attrition: Decreasing the size of the company by not replacing employees that have separated.

Occasionally you’ll find that someone uses “attrition” to mean “turnover,” but that isn’t accurate.

The Bureau of Labor Statistics (BLS) states that in January 2020, the median tenure of all salary and wage employees in the U.S. was 4.3 years and that it hadn’t changed much since 2016. As you might guess from what we generalize about various generations, older workers had a higher tenure than younger workers. This report offers a number of baselines you can use when looking at your company’s tenure, especially if you want to break it down by age, gender, race and ethnicity, etc.

Why it’s Important for HR to Understand the Tenure of Employees

Tenure calculation can provide insights into your company’s people operations and culture.

  • Short Tenure. If your company has a short tenure, this could be because your organization is a startup, in which case understanding tenure may not be that useful. But if your organization has been in place for 50 years and your average tenure is two years, you might want to dig into that a little more. Can you uncover reasons why your employees don’t stay very long?
  • Long Tenure. If your average tenure or the tenure of a specific employee is very long (30+ years), that can be a hint to get started on some succession planning if you haven’t already.

Additionally, having a long average tenure is indicative of not spending a lot of energy and money on constant recruiting, allowing for greater focus on the actual work. When employees have been with a company a long time, it lends itself to a stable culture with opportunities to mentor others and time for employees to develop a deep understanding of the product or service the company offers.

Reasons for Shorter Employee Tenure

This list could be pages long because it could reflect all the reasons employees chose to leave a company. These are the four most likely concerns that are causing your employees to separate voluntarily.

Mobility

Common wisdom of the day among employees is that it is easier to get a higher level position outside the company than by being promoted within. If you want less turnover and longer tenures, make sure you make it clear to your employees what kind of career path they can have within the company and help them achieve it.

Poor Leadership

It is often said in HR that employees stay because of their teammates, but they leave because of their manager. If you have a manager that is making their employees miserable instead of engaging them for higher productivity, expect it to affect the length of tenure and turnover.

Culture

It is hard to understand the exact nature of a company’s culture while interviewing. Sometimes people are in a pinch and they take an offered role no matter what it is or who they are working for. This can result in people not feeling comfortable working at your company. Think of this as “it’s just not my scene,” if you will. It is probably not personal, and it is probably not related to a specific person they work with. Nevertheless, they don’t feel like a cultural fit.

Belonging

This is often highly related to both poor leadership and culture. If your company culture is not highly inclusive and is prone to microaggressions, affected populations will look to be employed at places that make them feel welcome and valued.

Compensation

Have you ever heard someone say, “I just can’t afford to work there anymore”? This situation is usually painful for everyone involved. It might be that the transportation costs of getting to the workplace are mounting and not worth the pay the employee can receive. It might be that child care costs more than the employee makes.

The other piece of this is if you have failed to benchmark salaries and are underpaying. There’s a fine difference between not being a market leader in pay and underpaying. If people feel reasonably well compensated and like the company, they are likely to stay even if they can earn a little more elsewhere. People are mostly change adverse.

However, if they feel they are not being paid fairly, that is very demoralizing, will drive down engagement and productivity and people will look for better paying jobs elsewhere. Employees will feel unvalued and even taken advantage of if you underpay.

How To Increase Employee Tenure at Your Company

In short, make it a place people want to work and they will stay, or at least stay longer. If you want to increase tenure at your company, read through the following steps and see if there are any where you might focus your attention.

Step 1: Leadership Development

If your leadership is weak or aggressive, it will permeate every aspect of your company. Consider it a fiscal obligation (if nothing else) to develop your leaders into a phenomenal and cohesive team that plays together and not against each other.

Step 2: Culture and Belonging

Every company has its own culture and norms. Take a hard look in the mirror to understand where you need to help the company do better. Employee engagement surveys can be helpful for identifying blindspots. For very small companies, an outside perspective from a consultant may be valuable if employees are reticent to give their opinions due to confidentiality concerns.

Remember that promoting from within is a major component of the company culture. Not all positions need to be posted for external candidates to apply.

Having an employee referral bonus for the positions you do post externally can help as well. When your employees refer someone, make sure their referrals are seriously considered. Being willing to recommend your company as a place to work is a big complement! Additionally, people often only encourage people they want to work with to apply and this should generally strengthen your best culture elements. Watch out that this doesn’t lead to a diversity barrier though. Most people gravitate to people like themselves, and thus the people they refer are likely to be like themselves in some ways. Too much referral hiring can lead to groupthink and other noninclusive issues.

Step 3: Career Pathing for Increased Internal Mobility

While we often say in HR that the employee’s career is in their own hands (meaning no one can develop an employee for them), it is incumbent on the managers of these employees to guide their development. Conversations must happen that help managers (and thus the company) understand where the employee wants to grow and help the employee understand where the company wants them to grow (often with an eye on succession planning). Plans must be made and then executed for development. This step can’t just be a nice goal. The company must invest in the development of their employees if they want to have a hope of retaining them.

In order for that to happen, HR must make clear to the company what the options are for employees. Creating career paths can take many forms, but the idea is to map out the various positions one might aspire to and through over the course of a career with the company and how to promote between them.

Eliminate all the mystery around promotion and the transparency will be rewarded with better internal promotion rates, which will inspire other employees to stay with the company instead of looking elsewhere for a new job.

Step 4: Total Compensation

You may not be in a position to offer market leading pay or benefits. But do the best you can to ensure that people feel well compensated for the work they are doing.

Look to flexibility as a potential offset for higher compensation. Ensure employees understand the value of their total compensation package. Make sure they understand how to maximize their benefits and tax savings. Get creative about perks or discounts the company can arrange with other partners. Decreasing the cost of life is almost as good as increasing base pay as long as your employees know about it and actually benefit from it.

Also, look carefully at who is being asked to “front” money for the company for reimbursement later. Low compensated employees are more likely to be living paycheck-to-paycheck, and this can be a true burden for them where it might not be a big deal for more affluent employees.

Consider your pay transparency philosophy and if it can help you to change it at all and how your leadership would feel about changing your pay transparency philosophy. In some cases, more information for employees leads to better understanding and not feeling so undervalued. Many employees will assume the company philosophy is to get as much work as possible from whoever they can pay the least to do the work. Prove them wrong to change perspectives.

When it Might Not Make Sense To Encourage High Tenure

There are some instances where even though the cost of replacing employees is high, it might not make sense to try to keep employees.

  • Retirements. When the employee says it is time, it’s time. There are opportunities to extend careers for those that are interested, and hopefully you have already prepared the likely successors, completed cross training and can immediately get to work on retaining critical knowledge. It is disrespectful to make an employee feel that they are letting the company down by retiring, even if it wasn’t planned long in advance. Sometimes things happen that cause people to need to retire much earlier than expected.
  • Poor performance or behaviors: Let’s be honest — when some employees leave, there is a silent cheer in the office when the door closes behind them. As the old saying goes, everyone brings joy to this room; some when they enter, and some when they leave. Cultivate the culture you desire by not feeling obligated to hang on to less than stellar employees just because they have been there a long time.

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Questions You’ve Asked Us About Employee Tenure

How do I calculate employee tenure?
For a single employee, take the date of hire (or adjusted service date if applicable due to rehire, etc.) and determine how many months and years have passed since then to today. Free and easy to use date calculators are available online to make this easier. To calculate the average tenure for your company or a department, it will be best to use a spreadsheet. If the years of service are not readily available data, take the hire date (or adjusted service date if applicable due to rehire, etc.) and use a formula to calculate the years of service. In Excel there are a number of ways to accomplish this such as using DatedIf and Today to calculate the difference between the date in a cell and today’s date. This will give you the years of service for each employee. Then simply take the average, which again Excel can do for you in a jiffy by using the Average formula for up to 255 employees. If you have more than that, just do an AutoSum and then divide by the number of employees.
Does employee tenure drastically vary between industries?
Yes. Not only can tenure be drastically different in various industries but for different roles as well. For instance, most people in the U.S. will not spend a significant portion of their career working as a cashier for a single company. Retail has high turnover, so the average tenure will be lower as well. But even within retail, you may find that a store manager position will have higher tenure than a cashier. Some example industries with much lower average turnover rates are insurance, banking and chemicals.
Angela Livingston
Angela Livingston

Angela Livingston, SHRM-CP, MBA has nearly a decade of HR experience in high regulated, high tech companies that are Federal Contractors and supported people in other states. She’s worked for an international company with ~20K US employees that did a lot of immigration work, and she’s worked for a company with ~3500 US employees that doesn’t support work visas. One constant is that she’s always working with people empathetically with an eye on integrity.

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