![\"What](\"https:\/\/www.teamly.com\/blog\/wp-content\/uploads\/2022\/06\/What-Is-Employee-Attrition.png\")
<\/p>\nEmployees are a company\u2019s greatest asset \u2026 which is why rising employee attrition rates are giving businesses cause for concern. They\u2019re smart to be worried because high employee attrition rates often go hand-in-hand with other undesirable outcomes, like lower employee morale, declines in productivity, and recruitment challenges.<\/p>\n
To prevent those doomsday scenarios, it\u2019s important that businesses understand what employee attrition means (and what it doesn\u2019t), the risks that are associated with employee attrition, and what steps they can take to prevent employee attrition.<\/p>\n
In this article, we\u2019ll take an in-depth look at those topics and we\u2019ll also explain the different types of employee attrition, what causes employee attrition, and how to calculate the employee attrition rate, so you can determine whether a potential problem exists at your organization.<\/p>\n
However, before we dig deep into the topic, let\u2019s make sure we\u2019re all on the same page by first, defining what employee attrition actually is.<\/p>\n
<\/p>\n
Employee attrition refers to the process of workers leaving a company for voluntary or involuntary reasons, without being immediately replaced. Sometimes employee attrition is due to a hiring freeze, at other times, there are deeper issues at play. However, whatever the cause of employee attrition, there\u2019s one inevitable result: the company\u2019s workforce shrinks in size.<\/p>\n
Although employee attrition and employee turnover are often used interchangeably, there\u2019s one critical difference between the two terms and that is: what happens after an employee departs.<\/p>\n
In the case of employee attrition, when an employee leaves, their position is eliminated or it remains unfilled. With employee turnover, the company replaces the departing employee — keeping the size of its workforce the same.<\/p>\n
![\"Types](\"https:\/\/www.teamly.com\/blog\/wp-content\/uploads\/2022\/06\/Types-of-Employee-Attrition.png\")
<\/p>\n
There are 4 main types of employee attrition:<\/p>\n
Voluntary attrition occurs when someone departs a company for personal or professional reasons, such as retirement, a cross-country move, health issues, or to accept a new job elsewhere.<\/p>\n
Although this is the most common type of employee attrition, it can be a cause for concern, especially if employees are leaving en masse, which can be a sign of a toxic work environment, employee burnout, or bad management.<\/p>\n
At any rate, when voluntary attrition is high, it\u2019s well worth it for companies to conduct exit interviews with departing employees. Doing so can provide helpful insights into why people are leaving and with that information, an organization can develop a plan of action to improve employee retention.<\/p>\n
One especially concerning HR problem is demographic-specific attrition. Demographic-specific attrition occurs when people from a certain demographic — such as women, older employees, ethnic minorities, veterans, or LGBTQ — leave an organization at a significantly higher rate than other employees.<\/p>\n
This type of attrition can be an indicator of deep-seated issues within a company, such as systemic sexism or racism–both of which signify a corporate culture problem.<\/p>\n
To resolve demographic-specific attrition, companies need to find out what\u2019s causing it by deploying employee surveys and conducting exit interviews. However, once they\u2019ve uncovered the reasons behind demographic-specific attrition, they\u2019re only part way to resolving the problem.<\/p>\n
Before they can expect to see improvement, they have to act on the information they uncover. While that may seem blindingly obvious, most HR executives (58%)<\/a> when surveyed report that their companies don\u2019t act on the data they receive from employee engagement surveys — or if they do, they only address the easy issues.<\/p>\n However, if companies fail to do anything about the information they\u2019ve gathered, workers are likely to grow even more frustrated, which can worsen employee attrition.<\/p>\n Internal attrition means that employees are quitting jobs in one department to work in another one. Typically, internal attrition isn\u2019t a cause for concern, since people are staying at the company, which indicates that they\u2019re generally happy.<\/p>\n Also, internal attrition isn\u2019t necessarily a bad thing, since experienced employees are still using their knowledge, skills, and abilities for the benefit of the organization. Furthermore, by switching departments, employees may find their new positions are a better fit, which can improve engagement, work output, and quality.<\/p>\n However, internal attrition can be an issue if throngs of employees are exiting one department or manager in particular. In such a case, HR needs to determine why by evaluating the answers to questions, like:<\/p>\n Once the cause has been determined, HR can develop a plan of action to address the issue.<\/p>\n With involuntary attrition, companies are responsible for letting workers go — employees don\u2019t leave voluntarily. There are many different reasons companies might do this.<\/p>\n For instance, sometimes companies decide to eliminate a position for structural reasons. Other times, involuntary attrition is due to mergers, acquisitions, poor performance, or employee misconduct.<\/p>\n The most common reason for involuntary attrition is because a position\u2019s been eliminated. In such cases, involuntary attrition is planned in advance.<\/p>\n By contrast, when an employee is let go due to poor performance or misconduct, the company usually doesn\u2019t plan for involuntary attrition. Instead, the decision not to fill the position is usually made farther down the road.<\/p>\n By now, perhaps you\u2019re wondering how to predict employee attrition. While there\u2019s no surefire method for doing so, there are certain factors that can contribute to employee attrition, such as:<\/p>\n Toxic workplaces are typically rife with gossip, aggression, and pettiness. Take, for instance, this description of a toxic working environment, recounted by Susan Fowler in her book, Whistleblower:<\/p>\n \u201cAt Uber, every meeting had been a short painful skirmish, where managers and employees fought like starving dogs over a scrap of meat.\u201d<\/em><\/p>\n As you can imagine, in an environment like the one Fowler described, employees tend to leave in droves. Worse, word gets out, and the company\u2019s bad reputation makes replacing the employees who\u2019ve departed that much more difficult.<\/li>\n Sometimes a person just isn\u2019t a good fit for the job they\u2019ve been hired to fill. For instance, maybe the role doesn\u2019t match their strengths, perhaps they lack the temperament for the job, or the responsibilities are such that nobody could be successful in the role–which often occurs with newly created positions. Regardless of the reason, poor job fit can cause employees to feel bored, underutilized, and frustrated.<\/p>\n While a bad fit can be immediately apparent after someone\u2019s been hired, in other cases, the duties of the position can change over time — making a once-strong match a poor fit some years later. In either case, when there\u2019s a job fit mismatch, employee attrition increases.<\/p>\n<\/li>\n To calculate employee attrition rate, you\u2019ll first want to pick a period of time to evaluate–such as a month, a quarter, or a year. Then, you\u2019ll want to perform the following calculations:<\/p>\n To calculate the attrition rate, we\u2019d divide the number of employees who left by the average number of employees, then multiply by 100<\/strong>, which would give us the following equation (75 \u00f7 325) x 100. So, in this example, our employee attrition rate is 23.08%.<\/p>\n Great question. Although there are no hard and fast rules, a general guideline is that companies should aim to keep their employee attrition rate below 10%. However, keep in mind that a good employee attrition rate can vary from company to company, as well as from industry to industry.<\/p>\n That\u2019s why it\u2019s useful to track your employee attrition rate over time, rather than just relying on a one-time snapshot. Then, if you noticed your employee attrition rate consistently increasing, you could reasonably assume there\u2019s a problem meriting further investigation.<\/p>\n Employee attrition is something that companies need to take seriously. To illustrate why it’s important, let\u2019s take a look at the typical risks companies face when they have employee attrition issues.<\/p>\n Interestingly enough, employee attrition isn\u2019t always undesirable. In fact, sometimes it can be a good thing, such as when it \u2026<\/p>\n There are several things companies can do to reduce voluntary employee attrition, including:<\/p>\n More so than ever before, employees are seeking flexibility in the workplace. There\u2019s an increasing desire for flex-time, as well as the opportunity to work remotely.<\/p>\n Since a whopping 80% of employees say they\u2019d be more loyal<\/a> to an employer who offered flexible working options, this is a great place to start if you want to prevent or reduce employee attrition.,\/p><\/li>\n Salary benchmarking helps companies assess whether the wages they\u2019re offering are competitive. If they aren\u2019t, companies may struggle with employee attrition.<\/p>\n However, by making sure employees are fairly compensated, companies will find it easier to retain workers. And, as an added benefit, they\u2019ll also improve employee morale and satisfaction.<\/p>\n<\/li>\n To reduce employee attrition, you want to get the right person in the right role from the get-go. One way to do that is by creating more accurate job descriptions.<\/p>\n The best job descriptions explain the responsibilities of the job, required skills, working conditions, and information about the company culture itself, so potential candidates can accurately assess whether they\u2019d be a good fit.<\/p>\n<\/li>\n Workers are more likely to seek out a new employer if there aren\u2019t any opportunities for growth in their current role. One way companies can avoid this is by improving internal hiring practices, for instance by developing an internal hiring policy and creating an internal job board.<\/p>\n Ideally, companies will also provide employees with development opportunities, so they have the skills they need, should a position become available that they\u2019re interested in.<\/p>\n<\/li>\n Interestingly enough, satisfaction with benefits is strongly correlated to job satisfaction. According to one survey<\/a>, 59% of workers who are extremely satisfied with their benefits are also extremely satisfied with their job–compared to just 18% who are very satisfied with their benefits or 8% who aren\u2019t satisfied with their benefits.<\/p>\n With benefits playing such a huge role in job satisfaction, companies should regularly assess whether their benefits plan is meeting employees\u2019 needs, so they can make adjustments if necessary.<\/p>\n<\/li>\n<\/ul>\n With employee attrition on the rise, company leadership has become increasingly concerned about the issue. Fortunately, there are a number of steps that companies can take to reduce employee attrition rates.<\/p>\n Perhaps the most important among them, however, is to be proactive. By acting before there\u2019s an employee attrition problem, companies can help safeguard against it. As this quote suggests, \u201cInitiate the preservation process when the person is still in love with the place, not when they are fed up and ready to leave.\u201d<\/p>\n For some great suggestions on how you can do that, check out our blog post, 7 Secrets to Keeping Employees Happy<\/a>.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":" Employees are a company\u2019s greatest asset \u2026 which is why rising employee attrition rates are giving businesses cause for concern. They\u2019re smart to be worried because high employee attrition rates often go hand-in-hand with other undesirable outcomes, like lower employee morale, declines in productivity, and recruitment challenges. To prevent those doomsday scenarios, it\u2019s important that … <\/p>\nInternal Attrition<\/h3>\n
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Involuntary Attrition<\/h3>\n
![\"Employee](\"https:\/\/www.teamly.com\/blog\/wp-content\/uploads\/2022\/06\/Employee-Attrition-Causes.png\")
<\/p>\n<\/span>What Causes Employee Attrition?<\/span><\/h2>\n
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\nWhen the unemployment rate is low, it\u2019s more difficult for businesses to attract and hire talented candidates. As a result, companies may stop trying to fill open positions and instead, eliminate them altogether.<\/li>\n
\nCompanies will often relocate to resolve supplier issues, take advantage of tax breaks, or to consolidate offices. When a company relocates, workers may decide to remain behind, even if their relocation expenses are covered.<\/li>\n
\nWhen two companies join forces, some positions become redundant — since there isn\u2019t a need for two marketing managers, database administrators, or graphic designers. As a result, companies often lay off employees after a merger or acquisition, without filling their positions.<\/li>\n
\nA sizable percentage of the workforce consists of Baby Boomers on the brink of retirement. This is especially true of those industries<\/a> where workers tend to skew older, like airlines, utilities, and insurance. Companies that employ a large number of Boomers can expect voluntary attrition to rise as more and more Baby Boomers retire.<\/li>\n
\nA lack of growth opportunities is another factor that can affect employee attrition. If there\u2019s no room at the top to grow, or there\u2019s no clear path for moving up the corporate ladder, employees are more likely to seek greener pastures elsewhere.<\/li>\n<\/ul>\n![\"Employee](\"https:\/\/www.teamly.com\/blog\/wp-content\/uploads\/2022\/06\/Employee-Attrition-Rate.png\")
<\/p>\n<\/span>How Is Employee Attrition Rate Calculated?<\/span><\/h2>\n
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Attrition Rate (%): \t100 X (# of Employees Who Left\/Average # of Employees)<\/div>\n<\/p>\n<\/li>\n<\/ul>\n<\/span>What Is a Good Employee Attrition Rate?<\/span><\/h2>\n
![\"Risks](\"https:\/\/www.teamly.com\/blog\/wp-content\/uploads\/2022\/06\/Risks-of-Employee-Attrition.png\")
<\/p>\n<\/span>What Are the Risks of Employee Attrition?<\/span><\/h2>\n
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\nWhen workers leave a company and aren\u2019t replaced, the employees who remain are forced to pick up the slack and take on additional work duties. Because these employees are less experienced, they\u2019re more likely to make mistakes and fulfill these responsibilities slower than someone with more experience might.<\/li>\n
\nEmployees may feel overworked if they\u2019re forced to assume additional responsibilities–making them prone to burnout, which is associated with disengagement, increased absenteeism, and lower productivity.<\/li>\n
\nEmployees who are forced to take on more work may be more inclined to leave themselves. This can cost companies a significant amount of money as now they\u2019re forced to recruit, hire, and train new employees to replace those who are leaving.<\/li>\n
\nInexperienced staff, employee burnout, and high turnover don\u2019t just affect the internal workings of a company. They can also affect customer satisfaction. As a result, customers may be inclined to take their business elsewhere.<\/li>\n
\nWhen a company has a high employee attrition rate, there are less workers to get things done. As a result, productivity declines, which can ultimately affect a company\u2019s long-term performance and goals.<\/li>\n<\/ul>\n![\"Is](\"https:\/\/www.teamly.com\/blog\/wp-content\/uploads\/2022\/06\/Is-Employee-Attrition-Bad.png\")
<\/p>\n<\/span>Is Employee Attrition Always \u201cBad\u201d?<\/span><\/h2>\n
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\nIf a company\u2019s employee attrition rate is high due to a toxic working environment, leadership may decide to make sweeping changes. In such cases, employee attrition can be a catalyst for much-needed improvement.<\/li>\n
\nAt businesses that have a high percentage of a certain demographic — such as men in the tech industry — employee attrition creates an opportunity for a more diverse workforce.<\/li>\n
\nSometimes companies are looking to save money but don\u2019t want to resort to layoffs. In such cases, employee attrition can be beneficial, since it gives companies the opportunity to reduce labor expenses without having to lay employees off.<\/li>\n
\nAttrition can also be beneficial when those leaving the company are underperformers. Not only does their absence have less impact on a company\u2019s productivity, but it can also improve the morale of those who are happy to see the deadweights gone.<\/li>\n
\nCompanies may want to make changes, for instance, by eliminating a product line or reorganizing the corporate structure. In cases such as these, employee attrition may actually align with company goals.<\/li>\n<\/ul>\n![\"Reduce](\"https:\/\/www.teamly.com\/blog\/wp-content\/uploads\/2022\/06\/Reduce-Employee-Attrition.png\")
<\/p>\n<\/span>How Can Companies Reduce Employee Attrition?<\/span><\/h2>\n
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\nManagers play a big role in how happy (or not) employees are at work — which is why it’s worth investing in management training, so managers possess important interpersonal skills like active listening, constructive criticism, and that oh-so-important managerial asset, emotional intelligence.<\/li>\n
\nTo reduce employee attrition, it\u2019s worthwhile to annually survey workers to assess how happy they are. By doing so, employers can measure engagement, then make improvements if necessary to improve morale.<\/li>\n\n<\/span>In Conclusion<\/span><\/h2>\n