Maximize the Potential of New Hires with Targeted Reward Strategies

Total rewards (TR) professionals are aware that employee turnover is expensive. However, they may be surprised — even alarmed — to learn that 40% of turnover occurs within the first year of employment, according to the 2025 Retention Report from Work Institute, a workforce data and services firm. 

Data from the report points to several key drivers of retention, including:

• Management-related turnover rose from 7.4% in 2022 to 9.6% in 2024, emphasizing the critical role managers play in shaping the experience of new hires.
• 15.1% of first-year turnover was attributed to work-life balance. Flexible scheduling and hybrid work models are increasingly important to retain new hires.
• At 14.6%, health and family concerns remain a top reason for early attrition and highlights the need for comprehensive benefits that address personal needs.
• The increase in involuntary turnover, from 6.7% in 2022 to 9.3% in 2024, signals challenges in hiring, onboarding or performance management processes.

“Compensation and career development are generally the leading reasons employees start job hunting,” said Hannah Yardley, the chief people and culture officer at Achievers, an employee experience and recognition platform. “However, for first-year employees or recent new hires, research shows the primary factors for an early exit are often a mismatch between employee expectations and a clash with the company’s culture.”

TR pros can start engaging with these workers to set expectations early — even during the recruitment process — before they start heading toward the exit.

Access a bonus Workspan Daily Plus+ article on this subject:

• Nicely Filled Rewards: Because There’s More to Turnover than Dough

What Is the Impact?

When first-year employees decide to leave, it likely affects the whole team, said Tom McMullen, a senior client partner at Korn Ferry, a global organizational consulting firm.

“Early departures can demoralize teams, increase workloads for others and slow down project momentum, especially in small or specialized teams,” he said.

McMullen also noted first-year turnover often signals a misalignment between the employee’s expectations and the organization’s reality, which can damage employer branding and future hiring efforts.

“First-year turnover tends to hit in terms of wasted investments, as organizations invest heavily in recruiting, onboarding and training new hires,” he said. “When employees leave within the first year, these investments are lost before any return is realized.”

Employees get hired on a promise, noted Kathleen Schulz, an organizational well-being and global innovation leader at Gallagher, a risk management and consulting firm.

That promise is often outlined in the employee value proposition (EVP), which shares what employees are expected to give, what they are expected to get and the culture they will be joining — but in Gallagher’s 2024 Organizational Well-Being Report, only 40% of the respondents said their EVP reflected their actual work experience at their organization.

“This ‘give and get’ deal has historically been fairly transactional, but it has evolved to be more of an inspirational promise, intending to help connect employees to the organization’s mission and values,” Schulz said. “This disconnect between policy, practice and accountability can be devastating to all employees, but particularly to new employees hired on a promise that goes unfulfilled — negatively impacting performance, engagement, well-being and, ultimately, retention.”

Start on Day One

The Work Institute report showed career-related reasons were the top category of employee turnover, accounting for 18.9% of job quits in 2024.

As a solution, McMullen suggested employers consider learning stipends or career development credits after the first quarter to encourage growth for first-year employees.

“Link rewards to career pathing by showing how performance and development lead to tangible rewards such as promotions and bonuses,” McMullen said. “Provide transparent growth paths and tie them to reward milestones.”

First-year retention hinges on early engagement, Yardley added.

“Make sure your rewards strategy is felt from day one. Create moments of recognition early and often, and give managers tools to reinforce positive behaviors,” she said. “We know that monthly recognition has an impact on retention versus quarterly or annual recognition, so sending a recognition to your employee in that first week solidifies the feeling of connection to the business. ... When employees feel valued from before day one, they’re much more likely to foster a sense of belonging, build strong relationships at work and stay with the company.”

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Experience
• Employee Recognition
• Total Rewards
• Workforce Engagement