Attrition vs turnover: reviewing the most crucial HR metrics
Table of contents
- Turnover vs attrition
- Employee attrition vs turnover cost differences
- Attrition vs turnover rate
- Why measuring turnover and attrition is essential
- Summing up
No matter what industry you work in, it’s normal for employees to come and go.
Some workers leave the company because they want to find better jobs. Others leave because they’re retiring, get laid off, or can no longer work for health reasons. Although the terms are often used interchangeably, employee turnover differs from employee attrition.
Let’s compare employee attrition vs turnover. To do that, let’s look at what attrition and turnover are, the differences between them, and what they mean for your business.
Turnover vs attrition
Attrition and turnover are related terms in HR and are often conflated, so they are sometimes confused with each other. In both cases, these terms refer to the process by which employees leave the company. While turnover refers to layoffs due to negative reasons such as differences in corporate culture and toxic management, employee attrition occurs due to natural causes such as retirement. Turnover and attrition occur when employees leave the company for different reasons, such as layoffs and terminations. The main reasons for employee turnover include:
- Lack of recognition
- Poor company culture
- Poor relationships with management
- Poor learning and development opportunities.
Employee attrition is the loss of an employee because of a natural event or process. Causes of attrition include:
- Elimination of the job position
- Health issues
- Employee passing away.
The most significant difference between employee attrition vs turnover is that employee turnover includes all layoffs. Therefore, it includes positions whose responsibilities are filled by other employees.
Employee attrition reflects all long-term vacancies and eliminated positions. For this reason, it’s possible to have a high turnover rate and still have a growing company. But your company is probably downsizing, if your attrition rate is consistently high is probably shrinking.
Reasons for employee attrition vs turnover
The same factors that cause attrition can cause a turnover. And although turnover is usually perceived negatively, it can be voluntary (an employee quits to find a better job) and involuntary (an employee is fired because of poor performance). Causes of both attrition and turnover include:
- Financial stress. Employees experiencing financial stress (unable to save money, living paycheck to paycheck) are more likely to look for higher-paying jobs, which may lead to their leave.
- Stagnation. While some employees are happy with their current position, others will look for professional development opportunities and career advancement within the company. If these opportunities are not offered, they may seek opportunities elsewhere.
- Inflexible work environment. Suppose an employer is uninterested in promoting or trying to promote work-life balance and opportunities for professional growth or neglects to address issues with employee morale. In these cases, turnover can increase.
- Poor work-life balance. Employees with a positive work-life balance will be more satisfied at work. Thus, they’ll be more likely to stay with the company. A balance between work and home makes people happy and promotes mental well-being. Companies should make this balance a central part of their human resources strategy.
“What gets measured, gets managed.” – Peter Drucker, management consultant, educator, and author
Employee attrition vs turnover cost differences
Just as attrition and turnover differ, so do their costs.
Employee turnover is synonymous with a company seeking to reduce costs by reducing its workforce, either by refusing to replace employees or through layoffs. The costs of this activity are usually kept to a minimum, as it’s a cost-cutting method.
However, if an employee leaves voluntarily, this results in a vacancy the company needs to fill. Employee turnover can sometimes cost twice as much as regular hiring, especially if an employee has been absent for a long time.
In short, while employee turnover can cut costs, turnover can also increase costs.
There is an overlap in costs between attrition and turnover, as turnover can sometimes contribute to a company’s bottom line, especially if the company is going through tough times.
Attrition vs turnover rate
If the turnover rate is high, many people are leaving the organization voluntarily or involuntarily. According to Heather Whiteman, Director of the People Analytics Specialization at Universidad Francisco Marroquin, high turnover can show a disengaged workforce, insufficient growth opportunities, or poor hiring decisions. Attrition means people retire or quit, but they aren’t replaced. This could mean that your company is aging, and you need to put systems in place for knowledge transfer.
How to calculate the employee turnover rate
When employees leave the company, hiring managers and recruiting teams must invest time and money in finding replacements.
Employee turnover measures the rate at which employees you consider replacing leave your company. These departures can be voluntary or forced. To calculate turnover:
- Divide the number of employees who quit during the review period by the average number of employees over the same period.
- Multiply the result by 100 to get the percentage.
Employee turnover (%) = (total number of dropouts ÷ average number of employees) x 100%
Pretty easy, right? If you average 100 employees over twelve months and 15 left, your annual turnover rate will be 15%. If you’re looking for a baseline, note that annual turnover varies widely by industry, from an average of 10% in the energy sector to 60% in retail. The turnover rate of technology companies is usually around 13%.
How to calculate the employee attrition rate
Attrition occurs when an employee voluntarily leaves, and you choose not to fill their position. Employees may retire, join a new company, or return to school. In all these cases, the employee leaves of their own will and cannot be replaced. Redundancies and restructuring are not voluntary and, therefore, cannot be considered attrition.
It’s easy to calculate the attrition rate of a company’s employees. Below is a practical example:
- Find the average number of employees. For example, say you typically have 100 people.
- Next, work on calculating the average attrition in a month.
- Now consider the number of employees who left unfilled positions during a particular month. In our example, let’s say 8 employees left and were not replaced.
- Then multiply that average number of employees who left (8%) by 100% to determine that your attrition rate for the month was 8%.
Employee attrition (%) = (number of employees who left ÷ average number of employees over a given time interval) x 100%
You can also look at attrition rates by the department. Even though a company may have a low overall attrition rate, one department may lose employees while another continues to grow.
Why measuring turnover and attrition is essential
Turnover and attrition rates have value. According to David Cuzick, chief strategy officer at House Method, spending is easier to track, but turnover is a more significant challenge with a bigger reward.
Attrition vs turnover often occurs when employees discover better opportunities elsewhere. A better opportunity could mean working fewer hours, getting higher pay, having a better work-life balance, or even being closer to home. High turnover usually indicates many problems, such as poor onboarding, project disengagement, and poor management.
“An employee’s motivation is a direct result of the sum of interactions with his or her manager.” – Dr. Bob Nelson, bestselling author, keynote speaker, and employee engagement & recognition consultant
How to control employee attrition and turnover
Here are some ways to control employee attrition and turnover:
- Recognize employees
- Offer training and development programs
- Focus on employee well-being
- Ask for and share feedback
- Promote career growth and planning
- Ensure proper employee benefits
- Create flexible work models to retain valuable talent in a specific capacity
- Identify clear career paths.
Attrition and turnover, while an unfortunate fact of life for businesses, cost more than money: they hurt productivity, morale, and profits. You can work to minimize attrition and turnover by investing in employee retention strategies and hiring workers from the start.
Consider attrition management to customize an analytics project, create transparency around attrition drivers, identify attrition target groups, and develop site-specific attrition reduction measures.