Is low turnover a warning sign for your business?

High staff retention always looks like a win. At least, that is, until you zoom in and realise it sometimes isn’t.

In an era of growing AI-driven job instability and economic uncertainty, it seems as though the era of mass job-hopping may have peaked. Instead, many employees are now staying put even when they’re discontent, bored or blocked – a phenomenon known as “job hugging”.

When people stay because they must, not because they want to, it can stunt growth, disengage your best talent and erode your competitive edge.

So how can you spot and stop job hugging in your organisation? And what actions do you need to take right now? Read on to find out.

Why staying put is no longer always good

Employee retention has been one of the traditional ways business leaders evaluate team health. Fewer exits and longer tenures are associated with a strong workplace culture, especially in a tight job market.

But in 2025, as the employment landscape changes, these assumptions are breaking down fast.

According to a Robert Half survey from July 2025, only 27% of US employees planned to look for a different job before the end of the year. This was down from 29% in January and 35% the previous year. While similar data isn’t available for Australia, anecdotally we’ve noticed more people staying their roles, and a quieter candidate market than we were seeing 12 months ago – especially in sectors like financial and professional services.

The reason for this, according to survey results, is economic uncertainty. The cost of living is rising and inflation remains high and there are fewer attractive roles on offer than there were. But, interestingly, many employees also say they fear AI and automation may soon make their skills redundant – so taking a gamble on switching roles, and becoming the last employee into an organisation that may be about to cut staff, just doesn’t seem worth it right now.

How job hugging impacts your business

If low turnover is masking job-hugging in your organisation, the consequences can be far more serious than just a few stagnant roles.

The first and most obvious risk is a lack of skill growth, not just in individual employees but also in your teams. Because when people stay put without moving, learning or being stretched, your organisation’s entire capability development slows. This, in turn, impacts productivity and innovation, and studies show that a workforce that feels safest staying still is far less likely to experiment, propose new ideas or drive meaningful change.

But job hugging also creates a false sense of stability and lack of ambition among team members. When one employee becomes disengaged and just does the bare minimum it starts to impact the amount of effort others put in.

It also leads to blockers in the career pathways for other potential higher performers – who may find themselves resigned to never getting ahead. This could lead them to decide to stop putting in the effort needed to advance or even force them to move on to a more dynamic role. In which case you lose a good employee who could be a part of your future, but retain an underperformer who you’d probably be better off without.

Finally, job-hugging introduces a delayed-impact risk. When employees stay primarily out of fear or uncertainty, they’re far more likely to leave en masse the moment market confidence improves, effectively creating a “Great Resignation 2.0” that will hit your business all at once.

For business owners, these aren’t abstract HR problems. They are direct threats to productivity, growth, competitiveness and the long-term health of your organisation.

The two types of job huggers (and how to spot the unhealthy kind)

That said, not everyone who stays is doing it for the same reason. Broadly, there are two types of job-huggers – and every business leader should know how to tell them apart.

The growth-minded stayer is someone who remains because your organisation offers challenge, development and a clear path forward. They’re engaged, learning and choosing to build a future with you.

Then there is the fear-driven stayer. This is the employee who stays not out of commitment, but because they feel they have limited options or they’re wary of change.

These are the people who step back from their work. They tend to show low initiative, little movement and a sense of “waiting it out”.

For businesses, the danger lies in treating both groups as the same. Commitment and caution can look identical on a spreadsheet but they play out very differently in your culture and performance.

So how do you spot unhealthy job-hugging in your workplace? Here are the practical signs:

• Stalled roles: If someone hasn’t changed responsibilities or taken on a stretch assignment for 18-24 months.
• Low internal movement: If promotions, lateral moves and cross-team projects drop off.
• Flat performance despite stable engagement: If someone is saying all the right things but output, momentum or initiative decline.
• Training isn’t sinking in: If you’re spending good money on training but employees aren’t applying new skills or capabilities in real-world projects.
• A sluggish organisation: If retention looks great on paper, but your innovation slows, productivity stalls and teams feel less adaptable.

These are the early indicators that people aren’t staying because the culture is strong: they’re staying because they’re stuck. And that’s when job-hugging becomes a risk.

What you should do to combat job hugging right now

If you’re worried about job hugging in your workplace, here are some strategies that could turn risk into opportunity:

1. Create “micromobility” pathways: Use short-term projects, cross-functional rotations or stretch assignments to give people a challenge. This lets employees move without needing a full role change.
2. Invest in capability & learning: Build transparent upskilling and reskilling pathways so people don’t feel stuck. Show people how staying means growth, not stasis. Link it to your business strategy: “Here’s what our future needs, here’s your path.”
3. Refresh career conversations: Have real conversations with your team members (but be mindful of employment law). Find out why they stay and what could pull them away.
4. Refresh your EVP (Employee Value Proposition): If your offer is just “come and don’t leave”, you’ll only ever retrain stayers. So highlight learning, internal mobility and future-readiness.
5. Measure what matters: Instead of just retention, try to measure development, internal mobility and productivity. Then compare this across teams.
6. Watch for warning signs: Absenteeism creeping up or innovation slowing? These may be early flags of job-hugging and disengagement.

Final message: stability isn’t the same as strength

In the current climate, where the job market feels less certain and the ramifications of an AI-driven future remain unclear, it’s easy to understand why many employees see staying put as a smart decision. But for many businesses, their safety could be high risk.

If low turnover is simply the result of fear or lack of options, you’re not building capability, you’re treading water. And sooner or later, that stagnation will cost you one way or another.

That’s why the best organisations are building growth- and mobility-rich environments where staying becomes a choice and “getting comfortable” simply isn’t an option.

Want more?

If you’re worried about job hugging in your workplace. Catalina Consultants can help you audit your retention, identify hidden stagnation and design strategies that drive performance.

Get in touch to find out how.