Attrition vs. Turnover Rates: What Costs More?

Every company will face both employee attrition and employee turnover. While these two terms are occasionally used interchangeably, they actually represent two different scenarios and can impact your company’s functionality in different ways. Understanding what attrition and turnover are and how to manage both can help you run your business more smoothly. Learn about both employee attrition and employee turnover, understand the reasons for employee attrition and turnover, review the costs associated with both, consider the impacts of employee departures and assess tips for retaining employees long-term. 

 

Related: 10 Exit Interview Questions You Should Ask

 

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What’s the difference between attrition and turnover?

Employee attrition and employee turnover both refer to an employee leaving their job. The difference between the two lies in the reasons for the employee’s departure:

 

Employee attrition

Attrition takes place when an employee leaves their position for a reason unrelated to their satisfaction at work. Usually, employee attrition isn’t thought of as a negative practice, but instead a normal part of the employee life cycle. 

 

The key to recognizing an employee departure as attrition is recognizing that they’re not leaving their position due to dissatisfaction with the job or the company. They’re leaving for external reasons unrelated to their career, or the company must let them go. Often, positions left open from employee attrition are easier to fill because those leaving give substantial notice. Sometimes, the positions aren’t filled at all, and instead, the organization adapts to the shift in the workforce. 

 

Employee turnover

Employee turnover is directly related to employee satisfaction. Generally, companies want to avoid turnover as it can be a costly endeavor. 

 

To recognize employee turnover, consider whether the employee left their position for another job elsewhere. If their decision to leave is driven directly by their desire for a better job at a different company, it’s employee turnover. Filling positions left vacant as a result of employee turnover can be costly, since turnover often happens with little notice. With little time to prepare reorganization within the company, you’re forced to spend substantial time and money making a new hire. 

 

Related: How to Reduce Employee Turnover

 

Reasons for employee attrition and turnover

Employee attrition and turnover happen for different reasons. Attrition is externally motivated, or not related to job or company, while turnover is internally motivated, and happens as a direct result of the job or company. Common reasons for employee attrition include:

 

  • Moving out of town
  • Passing away
  • Retiring
  • Returning to school
  • Starting a family or taking care of family at home
  • Downsizing

 

Employee turnover, conversely, happens for these common reasons:

 

  • Poor fit for the employee
  • Hostile work environment
  • External promotion
  • Lack of opportunity
  • Termination

 

Related: The Importance of Employee Attrition

 

Costs associated with employee attrition and turnover

While many companies don’t view attrition negatively and understand that it’s a normal part of the workforce life cycle, it does still cost the company money. Turnover is well-known for its high costs to employers. If you have to replace the employee leaving the company, whether they’re retiring or leaving for a better position at a different company, you can expect to incur some costs:

 

  • Recruiting: If you intend to fill the position left vacant by attrition or turnover, you’ll need to create a job posting, advertise the job, interview candidates and perform screening on possible hires. 
  • Onboarding: Once you’ve selected an employee to hire, you’ll need to onboard the employee and provide them with training. Depending on the position, onboarding and training can take a considerable amount of time and resources. 
  • Productivity: Your new employee will take some time to match the productivity of the employee you lost, resulting in a potential dip in profits until the new employee is operating at full productivity. 
  • Engagement: High turnover can cause the remaining employees to lose engagement in their own work during the vacancy and hiring process. 
  • Problem solving: New employees may not have the necessary skills or insight to immediately solve problems or assist customers. 
  • Development: Some positions may require additional training or professional development, which can be costly for your company. 
  • Culture: Your company’s culture can face challenges after turnover. Employees may wonder what’s causing people to leave their positions. 

 

Between attrition and turnover, turnover is usually more costly than attrition. While you may have to replace the employee who left to return to school or retired, you likely won’t have to manage the company culture and engagement costs that often accompany turnover. Additionally, with enough notice, you could consider reorganizing or restructuring your organization to replace the employee who left rather than hiring a new person which could end up saving your company money. 

 

Related: How to Calculate Turnover Rate for Employees

 

Impacts on the company caused by employee attrition and turnover

Employee attrition and employee turnover can create consequences for your company. It’s important to understand the impact of both attrition and turnover, so you’re prepared to manage any challenges following an employee’s departure:

 

Employee attrition

While employee attrition is both natural and inevitable, it can present some challenges for your company:

 

  • If you choose not to replace the departing employee, your remaining team may feel overworked with the additional responsibilities.
  • When long serving employees retire, they often take their knowledge and resources with them. 
  • Even if an employee leaves with no ill will for your company, the act of their leaving can encourage others to do the same.

 

Employee attrition does offer a few benefits to companies:

 

  • Employee attrition can help ease a company’s financial burden if you don’t need to replace the employee immediately or at all. 
  • Employees who leave for retirement or an unrelated venture often do so with positivity and respect for their company and colleagues, helping to maintain the company’s culture and ease any concerns over the employee’s departure. 

 

Employee turnover

When employees quit their jobs, you can expect the following consequences:

 

  • High, consistent turnover could be an indicator of a larger problem within your company, which is causing employees to want to leave. 
  • Constantly hiring new employees takes you away from your normal job duties, which could eventually harm your business.
  • Your human resources department may not have the time to work on hiring new employees for important, if less immediately necessary, roles within the organization.

 

You can gain a few benefits from employee turnover:

 

  • Employees who perform poorly or have a negative attitude about their job may choose to leave on their own. 
  • You can hire better employees for the position who fit in with the company and meet expectations. 

 

Related: Employee Satisfaction Surveys: What They Are Why They’re Important for Their Business

 

Tips to prevent employee attrition and turnover

You can prevent some forms of employee attrition and most types of employee turnover. Use these tips to help you create a thriving, positive workplace your employees won’t want to leave:

 

Make great hires

The best way to avoid early attrition or turnover is by ensuring you hire the best possible employees from the start. Take time during the hiring process to make sure the candidate has the necessary skills to perform the job well and will fit with the company’s culture. 

 

Ensure new employees have resources

After hiring new employees, make a practice of meeting with them periodically over their first few months on the job to make sure they have all the information and resources they need to perform their job well. Helping employees adjust to their new job by ensuring they feel heard and respected should build loyalty to the company. 

 

Check in with your staff

Regularly meet with your staff individually and in groups to answer any questions they may have and seek feedback on procedures and processes. Giving your employees the space to share concerns and innovations will keep them engaged with the company. 

 

Provide learning opportunities

Offer regular professional development opportunities to interested employees. Consider starting a mentoring program to help new employees build the skills of seasoned employees. Establishing learning opportunities for your employees shows that you care about their career development within the organization. 

 

Recognize employees

Establish a regular practice of recognizing great work and sharing praise with your employees. You might consider instituting an incentive program or another form friendly competition to inspire excellent work and give employees the opportunity to earn rewards or prizes. 

 

Address conflict

Address conflict as soon as it arises. When ignored or left unchecked, small conflicts can develop into enormous problems that may cause employees to leave their positions. Instead, help mediate any issues as soon as they arise. 

 

Offer growth opportunities

Provide promotion opportunities within your organization to encourage employees to stay with your company. Ask employees when they interview about their long-term career objectives and share any potential growth opportunities your company offers. 

 

Give employees flexibility

Provide employees with flexibility, particularly those with families to care for at home. Knowing they can still work and meet their familial needs may help encourage them to stay with the company rather than looking elsewhere for flexibility. 

 

Conduct exit interviews

When employees do leave your company, conduct exit interviews to find out why they decided to leave. Having actual data to work with can help you establish patterns and find solutions to repeated challenges. 

 

Related: Employee Motivation: Five Ideas to Try

 

Both employee attrition and employee turnover can impact your company’s functionality. Knowing what to expect when faced with an employee’s departure and having strategies to reduce potential personnel changes can help your business save money and retain a top-notch workforce. 

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