What is employee attrition?
Employee attrition is a gradual reduction in the size of your workforce that occurs due to unavoidable factors such as employee resignation for personal or professional reasons.
Employee attrition cannot be confused with employee turnover. Attrition and turnover are two similar concepts, but they are quite different.
Employee Attrition vs. Turnover
A lot of unavoidable factors are responsible for attrition, including planned resignation, retirement, and structural changes. On the other hand, turnover is a short-term metric, which has to be addressed immediately.
Differences Between Attrition and Turnover
|Doesn’t put a strain on the employer||Puts a strain on the employer|
|Don’t have to replace the employees||The employees must be replaced|
|Attrition can be both positive and negative||Turnover is more negative and has to be addressed immediately|
What is the employee attrition rate?
An attrition rate is a metric used to measure the employees left in a company to the number of employees that were taken in one year.
How to calculate attrition rate?
Here’s how you can calculate the attrition rate:
- Take a headcount of the employees you started with at the beginning of the year. Let’s keep this number as 750.
- Find out how many employees left in that year. Let’s say 150 employees left the company.
- Count how many employees you hired that year. Take the final headcount at the end of the year. Let’s assume you hired 200. This means your total headcount is 950.
- Now, calculate the average number of employees for that year. For this example, our average will be (750+950)/2 = 850.
- Lastly, calculate the attrition rate by dividing the number of employees who left the company by the employee average. Then, multiply it by 100.
For this example, here’s the calculation: (150/850) x 100 = 17.65%.
Attrition Rate Formula
Attrition Rate = Number of Attritions/Average Number of Employees x 100
Why is attrition important?
When attrition is high, it increases the costs to the company. Employers lose a lot of money that they had invested in the employee – right from recruitment, selection, and onboarding to training. Also, attrition lowers productivity, which means more cost to the company.
What are the types of employee attrition?
This is the most common type of attrition. Here, the employees decide to quit voluntarily. The reasons for quitting can be many, but most of these reasons are in your control. Voluntary attrition has to be proactively curbed as you stand to lose your high-value talent, which can bring down productivity over time.
In this type of attrition, the company initiates the attrition. Employee misconduct or behavioral issues are the most common reason for involuntary attrition. In some cases, involuntary attrition occurs during mergers and acquisitions.
In this type of attrition, the employees leave one department to join another department in the same company. In most cases, internal attrition is beneficial as it directs the talent towards the right area, ensuring better employee-job fitment, which makes it profitable for the business.
However, the red flag could be if the particular department has been facing similar cases of internal attrition. If yes, then it needs to be investigated.
Demographic attrition means employees of a single group – ethnic minorities, veterans, women, people with disabilities, older professionals – are leaving the company in massive numbers. If you are trying to build an equal-opportunities workplace, demographic attrition becomes a significant concern that needs to be resolved immediately. Conduct employee surveys, find the root cause of attrition and its antidote before it affects your workplace culture.
Attrition due to retirement is statistically too small a number (usually one or two every year) to actually affect the attrition rate. But, if the number is high, it can be significant to cause attrition. However, keep a watch on your older professionals who could be leaving the company early due to reasons other than their age.
What are the causes of employee attrition?
Here are some of the factors that cause or affect employee attrition.
Employees who join a company brimming with enthusiasm but leave after a month or so could be recruitment error. This means the employee was not hired for the right job.
When there is a change in the personal life or goals of the employees, they are compelled to change or leave their jobs. Some examples are change in the child’s school, change of residence, change of the spouse’s job, etc. In this case, attrition is inevitable.
This is one of the most common reasons for voluntary attrition. Workplace challenges range from poor leadership to a lack of requisite tools for work.
When employees feel that the company doesn’t offer opportunities for learning and advancing their careers, they decide to leave the company. When employees fight tooth and nail to get on the top, but they fail, they start to feel that they can do better somewhere else and hence leave.
How to reduce attrition?
- Assess the right job and culture fit at the time of hiring
- Provide learning and employee development opportunities to advance career growth
- Encourage real-time feedback
- Ensure compensation is competitive and as per industry standards
- Conduct detailed exit interviews
- Equip your managers to lead well
- Create a happy and productive culture
Focusing on Your Company’s Attrition Rate: The Pros and Cons
Keeping track of your attrition rate is good. It helps you be on top of things of how many employees leave and why they leave. It also gives you an opportunity to fix underlying issues and improve morale, productivity, and business performance.
However, employees leaving the organization could also be an opportunity for business. You can restructure the team and can even save costs by hiring less experienced people or splitting the role between qualified team members. Remember, a high attrition rate shouldn’t be a cause of unnecessary concerns.
Ensure that you compare your attrition rate with country and industry average because what may seem like a red flag to you might actually be quite common. However, keep in mind that when attrition rates start to increase, it’s time to analyze your employee data and make relevant changes quickly.