Beyond the Paycheque: What Drives Turnover
Our latest analysis with NZIER shows that voluntary turnover in New Zealand is driven by more than just pay movements. Employee confidence plays a critical role – and it shifts quickly during periods of economic pressure such as the current fuel shock.
Confidence in Tight Labour Markets
When labour markets are tight and job opportunities are plentiful, employees feel more confident about moving. This confidence lifts voluntary turnover even when pay is stable, as workers believe they can secure a better role elsewhere. Strategic Pay’s 20‑year turnover dataset shows this pattern clearly: voluntary exits rise fastest in periods of strong labour demand.
The Shift to Caution
However, during fuel or inflation shocks, confidence can fall just as quickly. Rising operating costs and economic uncertainty often lead employers to slow hiring or reduce workforce levels. As labour demand softens, employees become less certain they can find alternative roles – and voluntary turnover declines, even when pay is increasing. This is reflected in recent data where the 2023 remuneration catch‑up coincided with a sharp drop in turnover as unemployment began to rise.
Balancing Economics and Employee Behaviour
The key insight for employers is that turnover risk is shaped by both financial and behavioural factors. Pay matters – but so does how confident employees feel about their prospects in the wider labour market. Understanding this dynamic helps organisations anticipate retention pressure more accurately and respond with the right mix of remuneration and workforce strategies.
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