Only a small percentage of employees work for the same company from start to finish. Most people leave after a certain time, or the employer forces them to leave through an involuntary termination.
People leaving firms may appear simple, but there is much to unpack for employee attrition.
Although the terms are frequently used interchangeably, they are not the same. Let’s look at what employee attrition is, what causes it, how to measure attrition rates, and how to manage it at your company.
Table of contents
- What is Employee Attrition?
- Employee attrition vs. turnover
- What are the different employee attrition methods?
- What is the employee attrition rate?
- What factors lead to employee attrition?
- What are the best practices for reducing employee attrition?
- Frequently asked question
What is Employee Attrition?
Employee attrition is described as an employee’s decision to leave his or her firm for various reasons. These could be personal or professional reasons.
Job changes, retirement, family obligations, and relocation are just a few examples of employee attrition meaning. When employee attrition exceeds a specific threshold, it becomes a concern.
Above all, it may cause a lack of diversity in the workplace. To define employee attrition might also differ from one company to the next.
Employee attrition happens when your workforce shrinks over time because of unavoidable variables like employee resignation for personal or professional reasons.
Employees depart the workforce faster than they are being hired, often beyond the company’s control.
Suppose you’ve recently opened a new office that will serve as your company’s sales hub. Every sales associate must work out of this location; a few individuals cannot move and must leave the organization. This is a common reason for employee departure.
Other factors contributing to attrition include a lack of professional development, a hostile work environment, or a loss of faith in the company’s market worth. Another element that contributes to employee attrition is ineffective leadership.
Employee attrition vs. turnover
Remember to distinguish between attrition and turnover when defining attrition. Attrition-related vacancies aren’t quickly replaced.
This is because various circumstances, such as retirement, planned resignations, and structural changes, can all contribute to attrition.
Turnover is a more immediate metric. The void left by turnover must be filled as soon as possible through rehiring.
What are the different employee attrition methods?
There are five different employee attrition to be aware of:
#1. Attrition because of retirement
If only two or three workers have left your organization this year, statistically speaking, this is too tiny an employee group to be counted as attrition.
However, attrition might occur if much of your team retire simultaneously. Retirement attrition should not be overlooked; your senior executives may retire early or become independent consultants for reasons other than age.
#2. Voluntary attrition
This is the most typical form of attrition, in which employees simply leave their positions. Voluntary attrition can occur for various reasons (more on that later), most of which are under your control.
It would help if you aimed to reduce voluntary attrition among high-value employees as soon as possible, as this can reduce your productivity.
For example, if a company’s marketing expertise is being moved out of different business units, this is cause for concern.
#3. Involuntary attrition.
The company, not the person, is the one that starts the exit in this case. For example, the employee may have engaged in workplace misconduct, a common cause of involuntary attrition.
Structural issues could also cause attrition. A wave of involuntary attrition frequently follows acquisitions and mergers.
#4. Internal attrition
Employees in one department are leaving to work in a different department. Internal attrition can be beneficial in some situations since it directs talent to more profitable areas. It also ensures a better match between employee and job.
However, if a single department has experienced a high rate of attrition in a given year, it is worth looking into.
#5. Attrition based on demographics
This is a significant challenge for progressive businesses attempting to create an equal-opportunity environment.
Employees from a single demographic — women, ethnic minorities, individuals with disabilities, veterans, or older professionals – are leaving in droves, according to demographic-specific attrition.
What is the employee attrition rate?
Attrition refers to the number of employees who have left a firm, office, or department compared to the typical number of persons employed in that year. This also considers new hires. You should keep track of staff attrition by the following
- Conducting a headcount to determine how many staff you have at the start of the year.
- Keeping track of the number of persons who leave throughout the year.
- Keeping note of the people you hire during the year and doing a final headcount at the end of the year.
- Calculating the annual average number of employees.
- Finally, divide the number of employees who left by the average number of employees to arrive at a percentage. This will provide you with the attrition rate and allow you to keep track of your employees.
What factors lead to employee attrition?
Several factors bring about employee attrition. Some of them are-
#1. Personal motives.
Any change in one’s personal life is a crucial reason for leaving one’s current work. It could be because of a change in your wife’s employment or your child’s school, causing you to shift jobs.
Alternatively, you may need to resign from your employment since you are caring for your parents on your own. It’s also possible that you’ve retired early because of health concerns.
In basic terms, various personal factors can cause an employee to leave his current position, making employee attrition inescapable.
#2. Lack of professional motivation
Employee attrition is related to various factors, including the inability to advance in your current organization.
Employees are encouraged to leave a job if they have the talent and caliber to grow in the hierarchy of an organization but they are not allowed to do so.
HR plays an important function at this point. Simply put, you do not want to continue working for an organization that does not value your skills and does not allow you to advance in your career. Employee attrition will almost certainly result from such a situation.
#3. Challenges in the workplace
Another big contributor to employee attrition is this. You will likely become demotivated if your company cannot meet your work needs.
As a result, you may feel compelled to resign from your employment. You may also consider leaving your current job if your company does not provide a pleasant working atmosphere.
However, if your personal and professional goals align with your firm’s, you will be obligated to stay with them.
#4. Poor management
Poor management can have a significant impact on employee attrition. Employees who feel like they’re not being managed effectively may become disengaged, unhappy, and ultimately leave the company.
They may also feel undervalued, unsupported, and unfulfilled. So, managers must communicate effectively, provide feedback and recognition, and support their employees to create a positive work environment that retains top talent.
#5. Covid-19 outbreak
The unexpected onset of the Covid-19 epidemic resulted in a drop in worldwide economic activity.
Non-essential commercial activities were compelled to close because of the central government’s shutdown.
As a result, some firms were forced to close, leaving employees with little choice but to lose their employment. Hopefully, by 2021, the situation will have improved as enterprises and start-ups resume operations.
What are the best practices for reducing employee attrition?
If you’re having trouble keeping your staff, it’s time to look at some of the best techniques for reducing employee attrition.
#1. Find the root of the problem.
Foremost, it would be best to determine the actual cause of the high employee attrition rate. It is HR’s responsibility to look into the reasons for this.
There are various reasons for this, including a poor compensation package, a lack of desire, a company move, or a company restructuring, to mention a few.
Once the specific cause of the high attrition rate has been determined, develop the necessary solutions to reduce employee attrition.
#2. Adjust the remuneration package
Offering a lucrative package to staff is quite challenging. However, believe me when I say that strengthening the salary package on offer significantly lowers employee attrition.
Your company’s HR department should do a comparative review of the benefits packages available in your industry.
This will aid you in comprehending and improving your compensation package.
#3. Select the most qualified candidate for the position.
Every candidate’s selection procedure is the initial step in the hiring process. As a result, you should remain focused on the candidate’s loyalty and retention as a prospective employee.
This can be accomplished by asking the candidate a few pertinent questions. To put it another way, your company’s HR department should devote enough time to screening candidates and selecting the best applicant for the job to avoid employee attrition
#4. Ask for input from your coworkers.
Getting input from your employees efficiently determines if they are pleased or unhappy in their current position.
Furthermore, rather than being considered a source of criticism, feedback should be viewed as a source of encouragement.
Your company’s HR staff can convene meetings with various departments and then solicit input from employees on their happiness or dissatisfaction.
#5. Improve the working environment.
Toxic workplace circumstances are one of the key factors contributing to employee attrition in the current situation.
This has become much more important in the Covid-19 working environment. So, your company should implement several employee-friendly rules to improve the workplace.
For example, in a month, your company could implement the concept of remote working days. Alternatively, provide a monthly voucher to the most deserving employee.
The goal is to make employees happy so that they remain loyal to the company and stay for an extended period.
#6. Decide on a strategy for expansion.
When you consider your employee’s professional development, he or she will remain loyal to your company. Every employee possesses a distinct set of abilities and knowledge.
You must choose the best staff for a particular project and guarantee that the employee realizes his or her full potential.
This will make the employee feel valued and aware that his efforts are being observed. Recognition of one’s work at work is critical to keeping an individual on the job.
Frequently asked question
Personal motivation, professional motivation, workplace obstacles, and inadequate employee-to-job fitting are four factors that influence employee churn.
The attrition rate of a corporation, sometimes known as the ‘churn rate,’ is the rate at which employees quit.
When you break it down, it’s the number of people who have departed the company over time divided by the average number of employees. It’s usually expressed as a percentage (%).
Attrition rates can assist you in figuring out how well you’re keeping your employees. A high attrition rate, for example, implies that your staff frequently leaves, while a low rate shows that you keep your personnel longer.
Retirement is one of the most common reasons for employee attrition. If a considerable majority of an organization’s employees are in the same age group, attrition because of retirement can become a major worry.
In today’s competitive business world, attrition can negatively influence a company’s bottom line and morale.
Employee and consumer attrition are both examples of attrition. Managers may face difficulties because of workforce turnover or an inability to retain clients.
While having people leave in large numbers can be a bad thing, attrition doesn’t have to be a bad thing if a company needs to cut roles to stay afloat financially.
When your company is in difficulties, it’s sometimes easier to avoid replacing workers who leave independently rather than cutting roles.
(If you decide to eliminate jobs, you may be compelled to provide severance or pay for long notice periods, depending on where your company is headquartered.) I hope in reading this, you understand what employee attrition is.
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