What Is Employee Attrition – Definition, Attrition Rate, Factors, and Best Practices
Employee attrition is an inevitable part of any business. There will always be unavoidable circumstances due to which employees will leave. The reasons could be many – personal or professional – but if the attrition rate crosses a certain threshold, it could be a matter of concern. An increasing number of employees leaving an organisation could reflect a deep-rooted problem with either a company’s culture, its growth prospects for the employees, or general management issues. In any case, it is a good idea for organisations to scrutinise the attrition rate and make timely amends.
What is Employee Attrition?
Employee Attrition is the phenomenon where an organisation’s workforce diminishes considerably due to employee resignation. Certain factors are out of an employer’s control like employees shifting to another city, retirement, or if a company relocates and its employees don’t move. Other factors that can be a bigger concern are lack of professionalism from the employer, undesirable professional growth, a hostile or unfriendly work culture, a company’s declining market value, an industry going through a bad phase, or bad leadership. These factors are well within an organisation’s control and can be rectified to reduce employee attrition.
What is the difference between Attrition and Turnover?
Attrition is when employees leave an organisation due to voluntary reasons. It is usually seen as a more amicable departure of the employees where such vacancies are not filled, at least not immediately. For its nature, attrition can benefit the company by reducing the labour cost. If a position is terminated, organisations can reduce the headcount and it will not have any future expenses either if the position is not refilled. However, the disadvantages include a reduced workforce that can put extra pressure on the remaining employees.
On the other hand, turnover might occur due to the same reasons as attrition, but it is seen negatively. Organisations must look at an immediate replacement for the vacancies, which can increase their cost to employees. The higher the turnover, the higher the cost that a company must abear in hiring new recruits.
What is the attrition rate?
The attrition rate measures the number of people leaving a company as compared to the number of people employed in a year. This also includes fresh hires. Here’s how you can calculate the attrition rate:
- Calculate the number of employees you started with at the beginning of the year.
- Track the number of employees who left during the same year.
- See how many new employees were hired throughout the year.
- Now calculate the average number of employees for that particular year.
- To get the final figure, calculate the number of employees who left during that year as a percentage of the average number of employees from the previous step.
Bear in mind that the formula alone doesn’t present the entire picture. To get a more realistic figure, you must break this information further. You can look at it by departments, age groups, diversity, etc. This will allow you to identify the cause of a higher attrition rate and make amends.
What are the types of employee attrition?
There are five types of employee attrition that you must be aware of. These are:
1. Voluntary attrition
Voluntary attrition is one of the most common reasons employees leave a company. An employee could leave your organisation for better opportunities, ill health, relocating to another city, or making a career change.
While most of these reasons are outside an organisation's control, employees leaving for reasons like a toxic work environment, lack of career growth, poor leadership, etc. are factors that an organisation can fix.
2. Involuntary attrition
This form of attrition happens when the company initiates an employee's exit instead of the employee deciding to leave. This could be due to termination, position elimination, or layoffs. One of the most common reasons for involuntary attrition is companies eliminating a position, which could strictly be from a financial point of view. However, the management must also look at talent development instead of laying off employees.
3. Internal attrition
Internal attrition refers to employees shifting from one department to another within the organisation. It could be a desirable proposition in some instances as companies can look at moving employees to positions where they fit better and can be more productive.
4. Demographic-specific attrition
This can be a significant cause of concern for organisations that are looking to build an equal-opportunities workplace. Demographic-specific attrition means that a specific group of employees – women, ethnic minorities, employees with disabilities, experienced professionals, etc leave in huge numbers. Companies must immediately spring into action to identify the root cause and work on making amends.
5. Attrition due to retirement
If a few employees retire from your organisation in a given year, which is likely to happen, it can't be classified as attrition. But if the number is sizable, it can be termed attrition. While retirement is a natural progression of things, it must be investigated if the numbers are high. Employees might decide to retire early and look at other opportunities for reasons other than their age.
Main reasons for employee attrition?
An employee can leave a job for many reasons – personal or professional. However, an organisation must carefully investigate the patterns and identify loopholes to reduce employee attrition. Some of the main reasons for employee attrition are:
1. Poor job satisfaction and pay
Job satisfaction is often related to an employee's salary. Employees who feel underpaid will not feel motivated enough to give their best. Even though the salary is not the only factor for job satisfaction, it makes for a major chunk. Poor work environment, limited personal and professional growth scope, fewer promotions, etc. can also lead to poor job satisfaction. Such employees will look for other opportunities and leave your organisation when they find one.
2. Lack of employee motivation
Feeling motivated is the driving force behind a dedicated and productive workforce. Motivated employees show more commitment towards their responsibilities, take up more work, and be more dedicated, sincere, and productive. The right motivation will also reduce absenteeism and increase employee retention.
3. Poor work-life balance
Having the right work-life balance is imperative in keeping your workforce happy and satisfied. A healthy work-life balance promotes mental well-being, which can directly impact an employee's productivity.
4. Not feeling belonged in the organisation
As social beings, we want to feel belong wherever we go. Every employee spends a large part of his day in the office, and if the sense of belonging in the organisation is missing, the employee will not be able to give his best. Studies have shown that employees developing a sense of belonging can reduce the turnover rate to about 50 percent.
Best Practices to reduce employee attrition
Even the best and the most coveted companies will witness employee attrition at some point in time. However, a high attrition rate can be a worrisome trend that businesses must work on. Here's how organisations can reduce employee attrition:
- Employee recognition: People want their hard work to be acknowledged, appreciated, and recognised. Meaningful and honest recognition of their work will boost their morale and drive them to do better.
- Upskill employees through training: Any company that invests in improving its employees and works towards upskilling them is likely to witness a lower attrition rate.
- Ensure employee well-being: The better you take care of your employees, the happier and more productive they will be. Ensuring employee well-being is an effective way of lowering attrition.
- Engage with them: When employees feel the management hears them, they feel appreciated. Ask for their feedback and genuinely work on their suggestions. Also, regularly provide constructive feedback and help them improve their tasks.
- Career growth and benefits: One of the most common reasons for employee attribution is a lack of career growth. Ensure that your employees see a future in your company. Also, providing them with good benefits will make them feel motivated. You can do a few things, including health and medical insurance, paid time off, life insurance, flexible working hours, etc.
- Conduct proper exit interviews: This is one aspect that most organisations ignore. But if done correctly, it can make a huge impact on the way employees are treated. Create a proper exit interview flow and ask important questions to employees who are leaving. This will give you an idea about what made them leave, where you can improve, and what steps you can take to make your employees feel better. Exiting employees are more likely to provide honest feedback.
Employees leaving an organisation is a reality that nobody can escape. However, companies can reduce attrition by providing the right work culture, career growth, proper guidance, and leadership. Taking good care of the employees will only benefit your business. A motivated, appreciated, and happy workforce will ensure that your organisation remains at the top of its game.