Attrition is the departure of employees from the organization for any reason (voluntary or involuntary), including resignation, termination, death or retirement. The migration of employees to and from a business is natural.
Attrition can also be defined as gradually making something weaker and destroying it, especially the strength or confidence of an enemy by repeatedly attacking it.”
With this in mind, employee attrition refers to organizations that don’t replace employees who leave. Ultimately this diminishes the size of a workforce as they are leaving the workplace at a faster rate than they are being hired. Thus, it makes a company weaker and gradually destroys it, just like the definition says.
Difference between attrition and turnover
The terms attrition and turnover refer to employees leaving an organization and are often used interchangeably. While both cost the organization in terms of money, time and effort, by their definition of them, they are very different.
Employee attrition refers to the lifetime of an employee within the organization. It is not in the organization's control and has no negative connotation or representation of the company. It can simply be because an employee is retiring, moving places to be with their family, going back to school to complete their education, or simply because the employee passes away. Regardless of the reason, the employee leaving is not because of any happening within the organization, but because of life happenings.
Employee turnover, on the other hand, refers to employees leaving the organization for reasons like poor hiring decisions, hostile or discriminatory work environment, lack of learning or developmental opportunities within the organization, finding a better job, etc.
When turnover happens, it usually reflects negatively on the organization.
What Are the Different Types of Attrition?
There are five types of employee attrition that you need to know of:
1. Attrition due to retirement
If two or three people have retired from your company this year, this is statistically too small an employee group to count under attrition. However, if a sizable chunk of your workforce retires at the same time, this can cause attrition.
2. Voluntary attrition
This is the most common type of attrition, where employees decide to simply quit their jobs. There can be many reasons for voluntary attrition (more on that later) and most of them are in your control.
3. Involuntary attrition
In this scenario, it is the company and not the employee that initiates the exit. For example, the employee may have shown instances of misconduct in the workplace – a common reason for involuntary attrition. Structural reasons could also cause attrition. Mergers and acquisitions are often followed by a wave of involuntary attrition.
4. Internal attrition
Here, employees are quitting their jobs in one department to join another department. In some cases, internal attrition is desirable, as it routes talent towards more profitable areas. It also ensures better employee-job fitment. But if a specific department has witnessed a high rate of attrition one year, it merits an investigation. \
5. Demographic-specific attrition
This is a significant concern for progressive companies trying to build an equal-opportunities workplace. Demographic-specific attrition means that employees from a single group – women, ethnic minorities, people with disabilities, veterans, or older professionals – are leaving the company in droves.
What is the employee attrition rate?
The employee attrition rate is a measure of how many left a company compared to the average number employed that year. This is reflected in a simple equation:
(Number of Attritions/Average Number of Employees) x 100.
An employee attrition rate is a measurement of employee turnover over a specific time period, typically one year. It helps employers know whether they are doing a good job retaining their talent in times when downsizing isn’t necessary or desirable.
Here are the steps to calculate an annual employee attrition rate:
Determine your average number of employees during the year. To do this, add the number of employees at the beginning of the year to the number of employees at the end of the year, then divide by two.
Divide the number of employees who left voluntarily during the year by the average number of employees you calculated in the first step.
The result is the attrition rate, which is generally expressed as a percentage.
For example, if you have 90 employees at the beginning of the year and 110 at the end of the year, 90 + 110 = 200.
Dividing that result by two shows you had an average of 100 employees during the year.
If 20 employees left during the year, dividing 20 by 100 shows the attrition rate is .2, which is 20 percent.
Best Practices to Reduce Employee Attrition Rate
The average employee attrition rate varies significantly between companies and industries.
There is an apparent downside to attrition – your workforce shrinks in size, you lose out on valuable product/domain knowledge, and you risk damaging your employer brand.
It is therefore important to note the following:
When hiring, be sure new employees not only have the necessary skills to do the job but are also a good fit for your culture.
Make sure your compensation package is competitive.
Survey employees regularly, and then use their feedback to make changes that will increase their job satisfaction.
Assess for job and culture fitment right at the time of hiring
Offer learning and employee development opportunities to accelerate career growth
Conduct detailed interviews after an employee has exited to spot attrition trends