What Is Employee Attrition? (With Definition and Benefits)

Updated September 30, 2022

Every company experiences staff attrition at certain periods, and it can influence the activities of other employees and the company's recruitment process. This attrition occurs due to certain personal or official conditions, such as downsizing and retirement. Understanding the reasons for attrition and the effects can help companies manage their operations to reduce staff attrition. In this article, we define employee attrition, explain why it happens, highlight the types, and provide ways to prevent staff attrition.

What is employee attrition?

Employee attrition, also called staff attrition, is the loss of employees in a company due to certain factors such as retirement, resignation, or termination of employment. Staff attrition is the cycle in which employees in a company vacate their official role permanently. Some factors that may contribute to staff attrition are hostile leadership and work environment, professional stagnancy in the company, and lack of confidence in the company's value.

3 types of employee attrition

There are three major types of staff attrition, and they include:

1. Voluntary attrition

Voluntary staff attrition is very common in companies. Employees may vacate their position voluntarily, based on personal factors. Some factors that can make employees quit their job include retirement, academic purposes, or relocation. When executive managers in a company experience a high rate of voluntary attrition, they evaluate its operations to discover the challenges employees may be facing.

2. Involuntary attrition

Executive managers in a company cause this type of attrition. Employees vacate the position because employers terminate their contracts or eliminate the position completely. Employers can terminate employees' employment as a sanction for official misconduct. Structural reorganization in a company can also contribute to involuntary attrition.

3. Internal attrition

This type of attrition happens within a company. Employees vacate their position in a department and move to another department within the same company. Internal staff attrition can be desirable in a company because employees move from one department to another department where they can be more productive.

Employee turnover vs. attrition

You may use employee attrition and employee turnover interchangeably. Although these concepts are quite similar, they relate to two different situations. In attrition, once the employee vacates the position, the employers can leave the position vacant. Turnover is different because immediately after an employee vacates a position in the company, the hiring manager recruits a qualified candidate to resume the vacant position.

A company can measure its employee churn rate by adding its staff attrition and staff turnover. An employee churn rate is the rate at which employees in a company stop working and the rate at which the company hires new employees. With these essential metrics, companies learn how to improve the working conditions to keep employees better.

What are the reasons for staff attrition?

Employees vacate their position in a company for various reasons. Here are the most common reasons:

Retirement

Retirement refers to when an employee permanently leaves the workforce. Employees may voluntarily retire for personal reasons or due to old age. Staff attrition occurs when an employee retires without their position being filled.

Resignation

Resignation is a common cause of staff attrition in a company. Some employees submit their resignation letters to their employers because of certain personal factors. For example, employees may resign because they're moving to a new location, going back to school, or for other undisclosed reasons. Some employees quit their job on a good note, while others vacate their position without prior notice to their employers.

Career change

Some people start their careers because of the desire to survive. They may eventually vacate their position to divert into another industry that genuinely interests them. Some employees start a job to gather enough money to pay for their tuition. Once they get enough money, they vacate their position to go back to school.

6 Steps to calculate staff attrition rate

The staff attrition rate evaluates how many employees vacated their position in the company in a year compared to how many employees hiring managers recruited into the company in the same year. Executive managers calculating staff attrition rate also consider new staff. If you're a hiring manager and you want to calculate the annual staff attrition rate, you can follow these steps:

Conduct an employee headcount at the beginning of the year to determine the company's total workforce at the start of the year.
Record the number of employees who have left the company throughout the year.
Calculate the number of new employees the company has hired in the year.
Conduct a final headcount at the end of the year to discover the company's workforce at the end of the year.
Add the total at the start of the year and the total at the end of the year, and divide the result by two to get the average number of the company's workforce.
Calculate the number of employees who left the company as a percentage of the average number of the company's workforce.

You can calculate the staff annual attrition rate using this formula:

Annual attrition rate = Number of attrition / Average number of company's workforce x 100

What are the benefits of staff attrition?

When employees vacate their position in a company, employers in the company enjoy some benefits like reduced labour costs. Here are the benefits of staff attrition:

Reduces labour cost

When employees vacate their official position because of their personal decision, it helps companies reduce the cost of maintaining labour. A company can record a significant reduction in its labour costs, especially when implementing a hiring freeze. A hiring freeze occurs when the company halts the recruitment of new employees to fill vacant positions.

Diverts company resources

Attrition can help companies divert their resources toward their remaining workforce. After attrition, companies leave the position vacant, so they assign new duties to other employees. They may alter departmental workflows to ensure continued efficiency.

Introduces new dynamics

Staff attrition grants companies the opportunity to implement new ideas and dynamics in the company. Employees who retain their positions in the company can diversify effectively and have access to new opportunities. Attrition can help refresh an institution and motivate employees to focus on achieving the common goal.

Promotes cultural change

Sometimes employers may want to implement a new culture or system of operation in the company. Staff attrition can help them achieve this without firing or replacing the entire workforce. The remaining employees understand the company's objective and can easily adjust to a new system of operation.

How to reduce employee attrition

When the annual staff attrition rate is low, it signifies that the employees like the work environment and the company's operations. As an HR personnel, to reduce the rate of staff attrition in the company, employers can follow these steps:

1. Give a detailed job description

During the recruitment process, ensure that you provide detailed job descriptions to interested candidates for the position. This description can help them clearly understand the job and what employers expect from them. When they read the job description and still apply for the role, it signifies that they're ready to work. If they pass the recruitment process and eventually become employees in the company, they can perform their duties comfortably.

2. Provide opportunities for development

Creating career advancement opportunities for employees in a company can reduce the chances of attrition. Most professionals want to retain their employment in companies that provide development opportunities. Employers create a healthy relationship with their employees to discover areas they desire development. Offering these initiatives can help employees find satisfaction and happiness in their jobs.

3. Encourage employees adequately

Employers can reduce the attrition rate by paying competitive salaries to their employees and encouraging them with other incentives. If the company can maintain the range compared to other companies, employees' chances of retaining their jobs are high. Employers can also encourage employees and convince them to retain their jobs by introducing incentives like flexible working conditions and vacation time. Employees can reject other offers when they're satisfied with the benefits they get from their company.

4. Develop a healthy relationship with employees

Developing a healthy relationship with employees in a company is essential, and it can help reduce the staff attrition rate. When executive managers in a company build a healthy relationship with the employees, they motivate them to improve their efficiency. Employers can build this healthy relationship by making constructive comments, commending employees' hard work, and resolving their complaints.

5. Ask employees for referrals

Before the company's recruitment process begins, you can ask employees to recommend candidates that can perform in that position effectively. When reliable employees refer their candidates and they get the job, it reduces the likelihood of a high attrition rate. You can start an incentive program where you reward employees who refer experts who can keep their positions in the company.

6. Invest in the welfare of employees

To reduce the chances of staff attrition, employers can invest in their employees' welfare. Sometimes, health issues can contribute to why employees leave their official position. When employers invest in their employees' welfare and introduce programs to resolve their health challenges, it can increase their chances of retaining their jobs.

What Is Employee Attrition? (With Definition and Benefits)