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What is employee attrition & how can you reduce it?

Last updated

16 December 2023

Author

Dovetail Editorial Team

Reviewed by

Shawnna Johnson

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People are the heart and soul of every organization, from the front lines of customer service to the concept and development of new ideas. Organizations can suffer in many ways when an employee leaves a company without a replacement for their position.

Employee attrition is natural, but it can seriously dent your bottom line if it gets out of control. It can also affect morale and impact customer satisfaction

Fortunately, you can measure employee attrition and employ best practices to reduce employee attrition over time. Understanding the reasons behind staff attrition in your organization is essential to your company’s success. 

Keep reading to discover how to reduce employee attrition.

What is employee attrition?

Employee attrition is the natural process of employees leaving and reducing workforce numbers. 

Many employees leave through resignation or retirement. Companies can also initiate this process with lay-offs, position elimination, or terminations.

Organizations should pay attention to their employee attrition rate and implement measures to prevent attrition where possible. 

While some attrition is normal within every company and can sometimes be a good thing, high attrition is an issue. You may need to look at company culture, benefits offered, and leadership strength.

What's the difference between attrition and turnover?

While attrition and turnover might seem the same, there's a key distinction between the two. 

Attrition is the reduction of employees in your organization who leave for voluntary and involuntary reasons. These can include retirement, structural changes, or other planned factors. 

Conversely, turnover measures all attrition as a percentage over a specific period.

A company can have a high turnover and still be quite successful. An example could be a well-established restaurant that hires and fires employees on a seasonal basis. 

However, a business with a high employee attrition rate could struggle to see profits and meet goals if important positions remained vacant for a significant period.

The costs of employee attrition

Employee attrition can be expensive for businesses. Direct costs like hiring and training replacement workers can cut into the bottom line. But it also has indirect costs. 

Employee burnout and lost tribal knowledge can damage your business's profits and make it hard to maintain a positive company culture.

Employee burnout

When an employee leaves, companies must hustle to hire and train a replacement. 

In the meantime, other employees often step in to fill the gap, handling the lost employee's tasks and responsibilities. This increases the chance of employee burnout among your remaining workers.

Burnout can damage your employees’ morale and become quite costly. It can lead to sudden resignations or “quiet quitting” before stepping away for good.

Loss of productivity

Some employee attrition is planned, but other exits can take a company completely by surprise. 

In these cases, organizations must continue to try to meet business objectives while operating with fewer employees than usual. When you lose a hardworking employee, overall company productivity can take a hit.

Ideally, it won't take long to bring in a replacement, but it can often take several months to find a promising new hire. 

After hiring, there's still an initial training and assimilation period to get the person up to speed. This extended timeframe can directly affect company productivity and negatively influence your bottom line.

Dissipated tribal knowledge

On-the-job knowledge is specialized information kept in an employee's brain. It’s known as "tribal knowledge.” 

Unfortunately, employees take this wisdom with them when they leave, meaning your team may have knowledge gaps. And a new hire may take years to develop this know-how. 

To avoid this, focus on succession planning and a knowledge transfer program for retirees. It’s also crucial to cross-train all employees.

Costs associated with hiring a replacement

When one employee leaves, your company typically must hire another to fill the gap. This process can be very expensive, potentially costing the company thousands of dollars. 

The recruiting process can be time-intensive, taking anywhere from four to twelve weeks, not including the time it takes to train and prepare a new hire. 

In addition to recruitment costs, you may need to pay your current employees overtime (and deal with burnout) while you work to complete the former employee's tasks.

Costs of training a new employee and possibility of mis-hire

After you find and hire a candidate, you’ve got the costs of training and assimilation to consider. 

Depending on the specifics of the role you're filling, onboarding and training a new employee can take months—about three on average. It can take much longer for that employee to feel fully productive and competent in their role. 

There's also the risk of mis-hiring. While it might not happen often, your new hire could be a poor fit. This could lead to additional costs associated with finding yet another replacement.

The three types of employee attrition

In general, companies need to be aware of three types of employee attrition:

Voluntary attrition

Voluntary attrition is the most common type, and it’s when employees decide to leave the company. People leave jobs for various reasons, from poor overall job satisfaction to receiving a better offer and seasonal worker attrition. 

The good news? Many of these factors are entirely within your control.

Employers should understand why employees are leaving the company and get in front of any trends.  

A concerning type of voluntary attrition is demographic-specific. This occurs when employees from a single group, such as women or veterans, leave the company in higher percentages. 

Demographic-specific attrition often indicates that you need to address an issue within the fabric of the company.

If you notice this issue, take immediate action to see why these employees are leaving and what you can do to resolve any issues.

While voluntary attrition due to retirement is common and natural, it can lead to a huge knowledge gap in your company. 

Noticing a high number of retirements in a few years? Carry out internal research to ensure other factors aren’t causing people to leave your company.

Internal attrition

Not all attrition is bad, and internal attrition is a prime example. 

Internal attrition is when an employee leaves one department within the company to accept a position in a different department. This can be a promotion or simply a change in direction to suit the employee's personal career goals. 

While this can be positive for the company overall, if one department sees a high attrition rate, it merits a closer look. It could indicate problems with management or the department. 

Involuntary attrition

Involuntary attrition is attrition initiated by the company rather than the employee. 

Examples of involuntary attrition causes include: 

  • Lay-offs

  • Termination for cause

  • Position elimination

  • Plant closures

  • Project completions

  • Mergers, acquisitions, and structural changes

Companies should investigate why employees were terminated for cause. This ensures they’re not experiencing problems within the recruitment process or training. It’s also a great way to pin down unclear policies and procedures.

How to calculate your organization's attrition rate

Attrition isn't inherently a bad thing. Generally, it’s part of any work environment

However, when high levels of employee attrition occur without a good explanation, it’s wise to examine your company culture, leadership skillset, and benefits. 

There's a simple way to calculate your company's turnover rate:

Average no. of employees who left during a period / average no. of employees x 100

For example: 10 / 200 x 100 = 5%

When determining acceptable metrics, check historical averages and see what attrition looks like over an extended period. Any dips or spikes in recent years could indicate potential issues.  

While there's no one right attrition rate for any company, you can research industry averages to set a benchmark. 

Best practices to reduce employee attrition

Employee attrition can take a toll on your bottom line and workforce. Concerned about attrition or looking for proactive steps to safeguard your brand? These best practices can assist.

Invest in the employee experience

Engaged, happy employees are more likely to remain with the company. Ask your employees what they want from office culture and discover if it reflects your organization’s values. 

Investing in employee engagement strategies shows you value your employees and their feedback.

Hire talented leaders

Strong leaders are critical for any organization’s success. They can create an engaging work environment and enhance employee productivity by inspiring everyone to achieve their goals. 

Ultimately, hiring and investing in strong leaders who are committed to company values and culture can hugely benefit your organization.

Listen to employees' concerns

Voluntary attrition often stems from employee dissatisfaction with a company. Whether this is due to a specific situation or manager, companies have an easy way to reduce it: Simply listen to your employees when they report a concern or problem. 

Listening to your employees means you’ll likely gain a wealth of knowledge and be able to make immediate improvements if warranted.

Provide competitive benefits and salaries

Competitive wages and benefits are commodities and huge drivers of overall job satisfaction. 

To attract and retain quality employees, offer competitive wages and benefits for your industry and company size. 

If your budget is small, get creative and think of other ways to reward your employees.

Extra vacation days, flexible time off, and remote work opportunities are great ways to help your company stand out in the job market.

Regularly solicit feedback

Knowing your employees’ likes and dislikes can prevent employee attrition. 

Regularly soliciting employee feedback can include one-on-one check-ins, employee satisfaction surveys, and focus groups. What makes the most sense for your company? 

Remember to put the feedback you receive into action, proving to your employees that you are paying attention.

FAQs

What's the difference between attrition and resignation?

Attrition is the reduction of employees in your organization who leave for various reasons, including voluntary and involuntary.

Resignation is a form of voluntary employee attrition. 

Is employee attrition always bad?

While you should carefully monitor employee attrition, it isn't always bad. 

High rates of internal attrition can indicate that your company provides plenty of opportunities for internal advancement or that your workforce is mainly seasonal.

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