1. HR Glossary
2. Attrition

Attrition

What is Attrition?

Employee attrition may appear to be a simple issue, but there is much to consider. Even though the term is frequently used interchangeably with employee turnover, they are not synonymous.

Employee attrition meaning is that it is a natural method by which employees quit the workforce. The reasons can be voluntary retirement, personal growth issues, limited flexibility, and much more. In india, as per the reports of LiveMint, the attrition rate is 20.33%

An employee will eventually desire to quit your organisation for personal or professional reasons. Some types of attrition are unavoidable, such as when an employee retires or moves to another city. However, if there are a lot of employees leaving because of the working reasons, attrition can have a significant impact on both your company and culture. In this tutorial, we'll explain all you need to understand about employee attrition and how to measure it effectively.

Attrition is a necessary component of any business. However, when the attrition rate exceeds, it becomes a cause for concern. In this article, you will get to know more about attrition rates and what is attrition.

Meaning of attrition

Attrition meaning is when a person quits an organisation for whatever cause and is not replaced for an extended time or at all. It frequently results in a reduction in the size of an organisation's or department's workforce since vacancies are not renewed as people leave. It may happen throughout the entire firm or in specific departments or divisions. This usually occurs when automation or new technology replaces employees. This may clear your question about what is attrition.

Difference between attrition and turnover

Both attrition and turnover reduce the number of people on staff; however, the HR department intends to fill positions that are vacant as a result of turnover. In general, attrition is voluntary, which means that the employee chooses to leave the organisation. The explanation is usually retirement or resignation.

Employee turnover can be voluntary or involuntary, encompassing both voluntary departures and involuntary terminations or discharges. In many circumstances, layoffs might be considered attrition because they result in a reduced workforce that is not immediately replaced by new employees. However, some layoffs are temporary, and people are eventually summoned back to work.

Attrition calculation

When knowing about attrition, you must be wondering about what is attrition rate; the attrition rate is the rate at which employees leave an organisation. The rate can be computed as follows with the attrition formula

Attrition Formula

Attrition Rate (%) = (Number of separations/ Average Number of employees) * 100

The average number of employees takes into account both departing and newly hired employees throughout that period. It provides an overview of how many employees depart the organisation at any particular time. It is a significant element because organisations must prepare to begin recruiting for critical roles that cannot be left unfilled. This clarifies what is attrition rate.

What Are the Various Types of Attrition?

There are five forms of employee attrition you should be aware of:

Attrition because of retirement

If two or three employees have retired from your organisation this year, this is statistically insignificant to qualify as attrition. However, if a large portion of your team retires simultaneously, this can result in attrition. Attrition due to retirement should not be overlooked; your senior professionals can decide to retire early or become independent consultants for reasons other than age.

Voluntary attrition

This is the most common form of attrition, in which employees simply quit their positions. There can be numerous reasons for voluntary attrition (more on that later), most of which are within your control.

You should aim to prevent voluntary attrition amongst high-value people, as it can reduce productivity over time. For example, if a company's marketing professionals are leaving different business units, it is cause for concern.

Involuntary attrition

In this instance, the firm, not the employee, initiates the exit. For example, the employee may have demonstrated wrongdoing on the job, which is a common cause of involuntary attrition. Attrition may also occur due to structural causes. Mergers and acquisitions are frequently accompanied by a wave of involuntary attrition.

Internal attrition

Employees are leaving one department to join another. Internal attrition is sometimes advantageous since it directs talent to more profitable areas. It also ensures that employees are more fit for their jobs.

However, if a given department experiences a high rate of turnover in one year, it is worth investigating. Is there anything missing from the job? Is the management inadequately skilled? These are questions that HR should ask and answer.

Demographic-specific attrition

This is a major concern for progressive organisations seeking an equal-opportunity environment. Demographic-specific attrition occurs when employees from a certain demographic, such as women, ethnic minorities, individuals with disabilities, veterans, or senior professionals, leave the organisation in large numbers.

Before demographics-based attrition impacts your workplace culture, you must conduct employee surveys right away to determine the fundamental cause. A positive culture can serve as an antidote to the quitting pandemic.

Factors affecting the attrition rate

Personal commitment

An employee's personal circumstances have changed, prompting them to shift occupations. For example, new parents may wish to relocate to a city with better schools, causing attrition due to personal commitment. While a mid-career professional may want to shift to another city to get further education, the reasons are limitless. By conducting extensive exit interviews, you may stay in touch with these employees and guarantee that they consider your company in the future when they have the opportunity.

Professional inspiration

This is where HR might play a significant role in reducing attrition. An employee can depart because they believe there aren't enough prospects for advancement in your company. This is the case in several technology businesses, where technical talent is compelled to compete for managerial roles as they advance through the ranks. Take inspiration from Microsoft, which established a long-term technical track to prevent professionally driven churn.

Difficulties in the workplace

This is another prevalent cause of attrition. Workplace challenges can range from ineffective to a lack of necessary equipment for the job. This type of attrition is generally easy to address. Request regular feedback, listen to the employee's perspective, and resolve any gaps in their employee experience. Someone satisfied with their employment is unlikely to leave if the majority of their workplace criteria are met.

Improper employee-to-job fit

We've all seen employees join a company with great enthusiasm only to quit a month or two later. This could indicate that the position was not a good fit for the individual in the first place.

You can address attrition resulting from this aspect by fine-tuning your job descriptions and onboarding. Such that it opens a new window for the employee who joins the organisation. Employees will know when to expect, and you will see reduced turnover among new hires.

Poor job satisfaction and salary

Job happiness and salary frequently go hand in hand. While employee satisfaction is not only determined by compensation, few employees will be satisfied with their jobs unless they are paid competitively.

Many people's earnings have not kept pace with inflation, their expectations, or both. It is also assessed by bonuses, annual raises, and other financial incentives. All of these factors contribute to financial security, which is a key component of financial well-being.

Poor workplace culture

Workplace culture has a significant impact on employee turnover. Every organisation has its own set of regulations (both written and unwritten), attitudes, and core values that define its distinct corporate culture. If the culture does not reflect employees' workplace values, they are more likely to depart. This is why a corporation must establish its cultural tone early on.

Poor work-life balance

Employees who believe they have a positive work-life balance are more likely to be satisfied with their jobs. As a result, they are more inclined to remain with their firm. Achieving a balance between work and home life keeps people happy while also promoting mental health and fitness. Companies must make this balance a major component of their human resource strategy.

Is attrition beneficial?

Interestingly, attrition is not always a negative thing. In many circumstances, turnover can be beneficial to business for the following reasons:

• Poor-performing staff depart your organisation, lowering costs and providing a place for new hires.
• It can promote diversity in one-dimensional organisations (for example, tech corporations with a disproportionately high number of men).
• It filters out employees who aren't a good match for their roles and probably shouldn't have been employed in the first place.
• It promotes a dynamic workforce because the same individuals with the same perspectives aren't leading the company for decades.
• It is essential during structural changes, such as when transitioning to a new business strategy or having insufficient money.

Keep these considerations in mind as you analyse your employee attrition rate. To determine the impact of attrition on your firm, you must consider the type of talent lost and the reasons they departed.

What can HR do to ensure that attrition helps the company?

Plan for a diverse workforce

HR leaders can respond to the nature of the labour market by researching and gathering data to plan for various sorts of employment within the organisation. Perhaps necessary core workers can be made full-time employees, and other individuals can be hired as temporary workers or contract employees. HR leaders should, as always, evaluate the needs of both the firm and the individual employees.

Retaining personnel is critical to the company's success

After identifying the most influential and important people for its growth and advancement, HR leaders may concentrate on engaging and retaining them. HR leaders may boost their chances of retaining valuable people by offering competitive remuneration packages, opportunities for personal and professional growth, and fostering a business culture based on trust, gratitude, and respect.

Implement a warm offboarding programme

HR leaders can implement an offboarding programme that enables employees to leave on good terms. It is critical to express gratitude and best wishes to departing employees as they embark on their next professional path. In this manner, employers demonstrate honesty, and employees can serve as beneficial ambassadors for their former employer.

Keep the door open so personnel can return

HR directors can collaborate with managers and executives to create policies and a business culture that embraces boomerang personnel. High-quality employees who leave a company and later decide to return might provide valuable information, experience, and excitement.

How Does Attrition Impact an Organisation?

However, even if attrition is a vague term, it can have a tangible impact on the company. After all, whenever an employee goes, something changes. Let's talk about some of the following examples:

Let's imagine a senior manager makes the painful decision to retire. They are trusted with a wide range of duties and expertise, and it is now up to the organisation to try to replicate that knowledge or pass it on to a different individual (a succession plan may be beneficial here).

For example, suppose two employees in comparable positions decide to relocate and leave simultaneously. In this instance, their team may have an immediate talent shortage. In this circumstance, evaluating your workforce planning tools to mitigate the situation would be beneficial.

Finally, consider involuntary attrition. An employee has been caught making actions that resulted in a data breach in your organisation; they are now being fired on top of producing problems that the entire organisation must handle. You are not only missing an employee, but you also have many other concerns to deal with.

This, once again, highlights the topic's nuances. Employee departures are not one single notion but rather a combination of circumstances, context, and effects that each living brings with it.

Steps for Controlling Attrition

Companies can adopt various remedial actions to ensure employee retention and limit the number of workers departing. Some of the employee retention tactics to control attrition are listed below:

• Motivating staff with a growth plan.
• Recognise staff achievements with awards.
• Introduce staff to new jobs and promote development and training within the organisation to assist them in advancing their careers.
• Taking frequent input from employees might assist in positively engaging dissatisfied workers.
• Constantly strategise organisational structure to eliminate unnecessary job positions and reduce misfit recruitment.

Conclusion

Reducing employee attrition is not always straightforward, but it is feasible. The trick is to get to know your staff. Be aware of their own goals and desires, and manage your organisation with a human touch. Employees who are valued and rewarded are happier and less inclined to leave.

Contact us for more information on how to reduce employee attrition and turnover. We can help you establish an environment in which people thrive and desire to stay for the long term. Our HR software can also help you to know and understand other employee dynamics that are needed for your workplace.

FAQs

How is employee attrition different from customer attrition?

Employee attrition is a drop in the number of employees working for a company caused by employees leaving and not being replaced. In contrast, customer attrition refers to a diminishing client base.

How Can I Prevent Customer Attrition?

You may reduce customer attrition by ensuring that your firm offers the goods and services that your customers desire, provides exceptional service to its clients, stays current with industry developments, and fixes any issues that arise as a consequence of customer complaints.

Is employee attrition beneficial or detrimental?

Employee turnover can be an issue for businesses because it reduces the pool of valuable talent in the workforce. However, this can also be a positive thing. Attrition might force a company to investigate the factors that are producing it. It also allows businesses to save labour costs because staff leave voluntarily and are not replaced. Eventually, it may lead to the hiring of new personnel.

Why is attrition important?

High attrition is a source of concern for any firm because it incurs costs. The corporation loses money on the recruitment and selection of these individuals, as well as the training they receive for their specific professions. The corporation may also have to spend more money to fill the positions left vacant by these individuals. As a result, a company needs to monitor its attrition rate, which reduces the employment base.

Why should HR leaders be concerned about employee attrition?

With such a high percentage of natural attrition in the workforce, HR managers are advised to capitalise on the rise of job mobility. HR managers who are knowledgeable can comprehend the current attrition reality may shape an enthusiastic, productive, and loyal team.

How may employee attrition benefit company culture?

Attrition occurs even under the best of working conditions. Attrition can also create possibilities to acquire elite talent or persons who are better suited for specific positions. Accepting the existing work culture's high turnover rate can assist HR leaders, managers, employees, and executives in creating a business culture that promotes personal growth, fulfilment, and success.

How Much Time Does Employee Attrition Take?

Since attrition is voluntary and a bit unexpected, businesses might take months or even years to achieve the required worker size. Some organisations that need to downsize right away provide cash incentives for their staff to depart, hastening the process.

Why is your attrition rate important?

Employee turnover can have a detrimental effect on your company's performance. That is why it is necessary to understand the status of your company's attrition rate.

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