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Why Employee Attrition Matters

What is employee attrition?

Employee attrition, also sometimes called employee churn, refers to the loss of employees due to retirement, resignation initiated by the employee, elimination of a position or other similar life events.

As opposed to turnover, when a job is vacated and refilled, with attrition, the employer doesn’t refill the position. Employee attrition occurs when current employees are leaving faster than new ones are hired. 

This guide discusses common reasons for employee attrition and steps employers can take to benefit from or reduce attrition.

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Employee attrition vs. employee turnover

Sometimes people think employee attrition and turnover are interchangeable terms, but the two are quite different. 

Employee turnover is when employees leave due to negative circumstances that are preventable. Employees may leave because of a toxic culture, demanding bosses or workplace conflict, for example. Turnover only applies to positions the company intends to refill. 

If your turnover is high, many employees leave—either voluntarily or involuntarily. This could be due to problems with management, culture or the hiring process. A high turnover rate can stress your hiring teams and impact overall company morale.  

In contrast, employee attrition is when employees leave for natural, often unpreventable reasons, such as retirement, medical and maternity leave. The organization doesn’t refill these positions, and therefore, the total workforce number for the company decreases.  

While a high attrition rate could be a sign of a problem within the company (such as many people taking stress leaves), it’s more often a sign of an old workforce. You could have many people retiring in positions you don’t feel is necessary to refill. However, it’s important to ensure knowledge is transferred as people exit their roles.

Related: Estimate the cost of high employee turnover

Common reasons for attrition of employees

These are the most common causes of employee attrition:

  1. Retirement: Employees reach a certain age and choose to retire.
  2. Resignation due to life events or personal reasons: Employees may resign due to life events unrelated to work. For example, an employee may relocate because of a spouse’s or partner’s job or bring a new child into their family and decide not to work. Other employees may resign for personal reasons not disclosed to an employer. In some cases, employees don’t return after a personal leave from work has ended.
  3. Career change: Employees may return to school or change careers.

Benefits of employee attrition

Employers want to reduce turnover because recruiting and training new hires is costly. When an employee voluntarily leaves an organization, however, there may be benefits to an employer, such as:

  • Decrease in labor costs: Layoffs can occur due to a change in business operations or a decline in profits. Unfortunately, layoffs can significantly reduce employee morale, leading to additional turnover and difficulties with future hiring. When employees leave by choice, the company can decrease costs and reduce the risk of layoffs. 
  • Shifting of resources: By choosing not to refill a position, employers can assign new duties to other employees, change departmental workflows or shift resources within an organization.
  • New dynamics: Attrition offers opportunities for new ideas and dynamics. It can refresh an organization and provide current employees with new opportunities.
  • Culture change: It’s not always easy to change an organization’s culture, especially without replacing entire teams. Natural employee attrition allows employers to refresh a company culture without firing or layoffs.

Preventing employee attrition

While reducing turnover can be difficult, preventing attrition can require even more finesse. Here are some steps you can take:

  • Encourage flexibility: By offering flexible hours, telecommuting or part-time work, you can help employees going through life events balance work and home life. If someone goes on medical leave, stress leave or maternity leave, they’ll know that flexible work options are available to them, making returning to work more feasible. 
  • Give incentives: While attrition is not usually due to dissatisfaction with wages or benefits, salary increases and improvements to benefits can encourage employees to stay. If you value an employee’s skills, consider offering them an incentive.
  • Meet individual needs: Pending retirement or health concerns can make it difficult for an employee to complete some tasks. Consider assessing individual employee needs and addressing them. You could take annual surveys in which employees suggest improvements to make them feel happier, more comfortable and more supported at work. For example:
    • Individuals close to retirement may want to move to part-time hours.
    • Staff may request standing desks to feel more comfortable in the office. 
    • Employees may bring up the need for coverage for mental health services.
    • Parents returning from maternity or paternity leave may want daycare in the building or the option to work from home. 
  • Know your employees: You can’t predict the future, but you can learn more about your employees’ goals and experiences working for your organization. Implement processes to get and give employees feedback regularly. Think about your organization broadly and how you might grow your business while retaining and developing good employees.

Related: How to Find Good Employees

FAQs about employee attrition

Why should you track attrition?

It’s a good idea to track employee attrition for a few reasons. First, monitoring attrition lets you identify any patterns within the company that you may need to address. For example, if you notice many employees are going on stress leave and not returning, there might be something happening in the workplace to cause that pattern. Once you discover this problem, you can take action and stop further attrition. 

Secondly, tracking attrition can help you monitor overall employee numbers to ensure you’re operating efficiently. Sometimes, when people leave an organization, their role isn’t filled, and others absorb their tasks. If this happens too frequently, it can start to burden the remaining staff. You don’t want to see your attrition rate go too high as it can put a strain on your company’s ability to operate smoothly.  

How can you track employee attrition?

Make sure your HR hiring team is keeping track of employee numbers. The records should be updated every time someone joins the organization or leaves it. Whenever a position becomes vacant due to attrition, the attrition rate should be calculated and updated. 

Ensure your organization has a maximum desired attrition rate. If the company goes above this rate, upper management should be notified so they can find out what’s occurring to keep attrition so high. 

How can you calculate the attrition rate?

Calculating your organization’s attrition rate is fairly straightforward. The attrition rate is found by dividing the average number of departures during a given period (such as a quarter or a year) by the average number of employees in that same period. Then, multiply that number by 100 to get the attrition rate as a percentage. 

Generally speaking, most organizations aim to have an attrition rate of 10% or lower.

Is employee attrition good or bad?

Employee attrition is inevitable. Ultimately, it’s impossible to keep everyone, and situations will come up that will cause people to leave. Still, it’s essential to keep an eye on attrition and ensure it doesn’t get too high. When attrition levels exceed 10%, it can start to cause problems for a company. High attrition means hiring can’t keep up, and tasks within your business might be overlooked or forgotten. 

Companies need to monitor attrition and be proactive in taking measures when they notice the attrition of employees is climbing too high. 

 

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