Navigating Workforce Shifts: Voluntary Terminations and FTE Conversions in 2024

In researching our “Summer/Fall 2024 U.S. Labor Market Report,” we looked at voluntary termination and FTE conversion data to see how they were trending and what the data might mean for organizations.

We found that voluntary terms appear to be painting a picture of shifting worker sentiment when comparing this year to the same time in 2023. As the market recovers, more workers feel confident enough to leave their jobs, reflecting a break from the risk-averse mindset of past years, when we saw a falling trend line from 2021 to 2022.

Keep in mind, however, that although sentiment is shifting, there is still significant uncertainty in the economy, and voluntary terminations are low when compared to pre-pandemic levels. Full-time employee (FTE) conversions show a parallel story, decreasing over time (though Q2 did see a slight uptick). 

Low FTE conversions are being driven by the general theme of cost reduction, which started in Q1 2023:

• Conversions started 2023 at 11.7% and steadily declined to a low of 10.4% in Q1 of 2024.
• Year to date in 2024 the overall average is 11.4% and steadily rose month to month to 13.7% in April.
• While the average for Q2 ticked up, recent July and August data suggests that Q3 may be tapering back down, with July coming in at 12.4% and August coming in at 10.9%.
• To put this in a yearly average perspective, conversions in 2021 and 2022 were 16.3% and 15.8%, respectively.

Voluntary terminations declined in parallel with conversions from 2022 to 2023, dropping from 19.8% to a low of 13%, but started to break away and trend upwards in Q1 of 2023. As the overall market, including the S&P 500, started to recover, voluntary terminations started to increase and currently sit at 16.7% for 2024.

We are generally seeing a shift month to month where workers are becoming less risk averse, but only when compared to the lows of early last year. There is still significant uncertainty in the markets, illustrated by the fact that voluntary terminations are lower than pre-pandemic levels and much lower than what was seen during the Great Resignation in 2021, when rates peaked at 37.9% in May 2022.

During the first few months of Q3, the trend seems to be continuing. In July voluntary terminations hit 22%, and August hit 17.2%. Depending on September, we may see Q3 average out to be higher than Q2’s 16.9% figure.

Managing Worker Retention as Voluntary Terms Increase

As organizations try to manage costs, worker sentiment is shifting. With workers becoming less risk averse and companies converting them less to full-time employees, Organizations must develop robust retention programs, providing clear career development opportunities. Even if voluntary terminations are still not as high as pre-pandemic levels, they can get there fairly quickly.

Focus on flexible work arrangements and targeted retention bonuses to manage labor costs without sacrificing employee satisfaction. In addition:

• Offer an automated, seamless onboarding process that introduces workers into a welcoming, contingent-friendly culture
• Convey value to employees through ongoing communications and “temperature checking”
• Leverage workforce analytics and sentiment monitoring to better understand flight risk and improve retention

Contingent Worker Redeployment as an Alternative to FTE Conversions

What if you have talented independent contractors coming off assignment, but don’t have any full-time positions available for them? Redeploying them to other contingent opportunities within your organization is an ideal way to retain talent and reduce the sourcing/onboarding time associated with the open role(s) in question, but many organizations have deprioritized continuity in the contingent workforce, either because of a lack of interest or resources.

But given the significant potential of redeployment to deliver cost-effective access to top talent, it may be well worth the investment. Magnit clients that have leveraged our Redeployment Marketplace to redeploy workers have seen significant reduction in time to fill along with increases in talent quality scores and lower markups for this talent.

For much more on the latest in the U.S. labor market, including hiring trends, headcount controls, AI impact, and the skills most in demand, download our new report.

Disclaimer: The content in this blog post is for informational purposes only and cannot be construed as specific legal advice or as a substitute for legal advice. The blog post reflects the opinion of Magnit and is not to be construed as legal solutions and positions. Contact an attorney for specific advice and guidance for specific issues or questions.