When running a business, you will inevitably lose some of your employees over time. If those employees are not replaced, it can lead to employee attrition, which can cause issues like understaffing, low morale, burnout among remaining team members and more. Here’s what leaders should know about employee attrition and how to address it if you’re struggling to fill vacancies left by exiting team members.
What is employee attrition?
Employee attrition occurs when someone leaves a company, for any reason and through any means, and is not replaced by another employee. Regardless of whether the individual left on their own volition, it is considered attrition if the position remains unfilled or is eliminated after their departure. By itself, this isn’t necessarily a negative thing. For businesses that need to cut costs, not filling a vacancy (and having existing employees take on the extra work) can provide some leeway in the budget.
However, problems can arise if attrition levels are too high. Remaining team members may struggle to absorb the additional responsibilities, especially if they lack the necessary training or are already managing high workloads. This can lead to employee burnout, reduced productivity and a mile-long to-do list of tasks that simply could not be accomplished without adequate staffing.
Types of attrition
The main types of attrition are:
- Voluntary attrition. This occurs when an employee voluntarily quits their job. Some reasons for voluntary attrition include pursuing a new career opportunity, moving to a new city or caring for family. This is the most common type of attrition.
- Involuntary attrition. This refers to any attrition initiated by the organization rather than the employee. Termination and company restructuring are the most common types of involuntary attrition.
- Attrition due to retirement. When employees reach their mid-60s and beyond, it is common for them to retire from a job.
- Internal attrition. Internal attrition occurs when an employee leaves their job in one department to join another.
- Demographic-specific attrition. This type of attrition occurs when employees from a certain demographic group (e.g., women, people of color or people with disabilities) are leaving an organization at higher rates than other groups.
Employee attrition vs. employee turnover
While employee attrition and employee turnover are often used interchangeably, there are subtle differences between the two.
If an individual leaves their job for any reason and the employer does not fill the vacancy, this is considered employee attrition. For example, when an organization must make layoffs or restructure departments, this is typically done with the expectation that the positions will be eliminated altogether. Another example of attrition is when someone retires, and the company decides not to hire a replacement for them.
Attrition is not necessarily a negative thing, especially in circumstances that are beyond the employer’s control. However, high attrition rates or patterns in employees leaving may be worth exploring further for underlying causes that need addressing.
Turnover refers to when an individual leaves their position and the employer intends to fill the position. Whether an employee has been fired because of poor performance or they are leaving voluntarily to pursue a different opportunity, this falls under the category of turnover if someone else is hired to replace them.
While employee turnover is often caused by similar reasons as attrition, turnover is often viewed more negatively and can cause more pressing issues. In addition to overburdening existing employees to complete the necessary work, staff turnover can be expensive.
The cost of hiring and training new employees, as well as the inevitable reduction in productivity, can burden an organization’s budget.
What are the causes of employee attrition?
Some common causes of employee attrition are:
- Low unemployment. If your industry or geographic location has low unemployment rates, it can be more challenging to fill vacancies. If a business does not want to expand its search or reduce its hiring standards, it may face high levels of attrition.
- Workplace demographics. Companies with a larger senior workforce may have many of their employees retire at the same time. This can leave more vacancies than can easily be filled at once.
- Toxic work culture. Whether it’s a difficult boss, employee infighting or unrealistic expectations, a toxic workplace can lead to employees leaving in droves. High turnover rates are often a red flag for potential job candidates, making it difficult to fill and maintain those positions. [Read related article: How to Create a Strong Company Culture]
- Business relocation. Even if it makes sense for a business to move to a different geographic location, employees may be unable or unwilling to relocate. In this scenario, it takes time for companies to hire replacements, resulting in high attrition rates.
- COVID-19 shutdowns. Amid the coronavirus pandemic, businesses around the world were forced to shut their doors, unable to reopen at full capacity or at all. Whether temporarily or permanently, many companies had to let employees go due to a lack of business.
- Reorganizations/restructures. When companies reorganize or restructure their teams, it is done with the intention of eliminating positions altogether. In this situation, attrition is necessary (and, in fact, is the ultimate goal of restructuring).
What types of jobs have high attrition rates?
Attrition rates vary across industries, subsectors and job titles. According to LinkedIn’s 2018 talent turnover report, attrition rates were the highest in the technology (13.2%), retail/consumer products (13%) and media/entertainment (11.4%) industries. However, certain positions within industries are subject to higher attrition than others; the same report indicated that within the media/entertainment industry, marketing specialists had an attrition rate of 19.8%.
Of note, attrition is becoming more prevalent in the workforce as a whole. The 2019 Retention Report by Work Institute predicted that by 2023, 35% of employees will leave each year to work in a different company. Employees who voluntarily quit cited a lack of opportunities for career development as the top reason for leaving, followed by poor work-life balance and manager behavior.
While industry trends can be a helpful starting point, business leaders should look within their company to understand their attrition rates.
How do you calculate attrition?
To calculate your company’s attrition rate over a period of time, take the number of employees who have left (without having their positions filled), then divide it by the total average number of employees. Multiply this number by 100 to obtain your percentage of attrition.
For example, consider a company with an average of 90 employees year over year. If 11 employees left without a replacement in the last year, the attrition rate calculation would be:
11/90 = 0.12 or 12%
Pros and cons of attrition
When compared to employee turnover, in which vacancies are typically filled, employee attrition has its pros and cons:
Pros of attrition
The biggest advantage of attrition is reduced labor costs. This is especially helpful for organizations that are struggling financially and need to make budget cuts to stay afloat. Eliminating a position (or choosing not to fill it after an employee leaves voluntarily) not only reduces headcount costs, but any associated expenses with new hires. Additionally, attrition can lead to a more amicable departure during difficult events such as layoffs.
Cons of attrition
By not filling a vacant position, businesses have to operate with a smaller workforce. Team members may not be able to manage the overflow of work, especially if they lack the necessary training or simply are managing too many other responsibilities. Unexpected attrition can also be costly, especially for specialized roles or positions that rely on strong client-employee relationships.
Whether attrition is having a positive or negative impact on your company, implementing top HR software can streamline the process of collecting data and successfully managing your workforce.
How to prevent voluntary attrition
To address attrition within your organization, start by identifying pain points for high-performing employees and those at high risk of leaving, said Ian Cook, vice president of people analytics at Visier.
“Analyzing indicators such as team makeup, skill sets, roles, tenure and compensation ratios, combined with performance ratings, helps determine common pain points of high performers so organizations can take steps to address voluntary [attrition] among this group,” Cook told business.com. “With the right data in hand, employers can then create tailored engagement plans, implement more one-on-one engagement between employees and their managers, and realign with high performers on the specifics of their role – all steps that have a powerful impact on retention.”
Here are a few additional steps you can take to promote employee satisfaction and retention.
Train your managers.
Management is a separate skill set that should be cultivated in all company leaders. Investing in management training is a win-win: It gives leaders the confidence and skills they need to effectively manage their team while also allowing employees to enjoy a healthy manager-employee relationship that helps them to grow their skills.
Keep up with competitive salary rates.
Money can often be a deciding factor in both hiring and retaining top talent. Staying up to date on market rates can allow you to offer competitive (yet fair) compensation for your employees.
Conduct stay interviews.
While exit interviews are commonplace and can give insight as to why someone has decided to leave your company, stay interviews can keep them from leaving in the first place. A stay interview is designed to help leaders understand what keeps employees within the organization, as well as which areas can be improved.
Revisit your benefits and perks.
The perks that initially drew in your employees may not be the same ones they are seeking now. Revisit your benefits package every few years, considering your staff’s changing needs and any new perks that may be available. For example, younger employees without families may not need paid childcare, but it may be attractive to those same employees five years later if they choose to start a family.
With most nonessential workers telecommuting amid the pandemic, many teams have found that their jobs can be done just as effectively from home as from the office. Offering flexibility in remote work or start hours can help employees better manage their work-life balance, making it more likely for them to stay.
Use accurate job postings.
One of the best ways to retain employees is to ensure that you are attracting the right candidates and clearly sharing expectations at the onset. By crafting job postings that accurately describe the job’s responsibilities and specifications, you’re more likely to find candidates who are happy to join and stay with your company.