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What is Attrition?

Attrition is the voluntarily or involuntarily exit of an employee for reasons such as retirement, death, resignation, or termination. And that the reduction is not adjusted with the additional requisite workforce as a necessary replacement.

Attrition, in the HR terminology, is regarded as the rightsizing, what was formerly known as the downsizing, of the organizational number of employees by decreasing the existing workforce strength for certain strategic reasons.

It is the numbers that become grounding down due to lessening the whole sum of the people working on processes in a business organization.

When your company loses an old customer base either because of the consumers’ old ages at the stage or for the reasons of fewer people opting for your product or service, attrition may take place.   

What is employee attrition? [Voluntary and Involuntary]

There are two types of employee attrition,

Voluntary Employee Attrition

Employee Attrition can be voluntary as well as involuntary. The cases about either retirements or resignations when an increase in a particular period and the workforce very required number is not fulfilled with the new recruitment process – freezing the new hiring in other words, hence the retirement is involuntary and the resignation, or the if the company fires employees, is voluntary attrition (employee attrition).

Involuntary Employee Attrition

Involuntary attrition may not be much destructive as a voluntary one. That the voluntary attrition might be on part of the employee or the employer. If some people leave for any reason, the people who remained at work face workloads if new hires are nonexistent. Such workload may further invite attrition – more employees leave – more than speculative.

Or if the case pertains to firing or firing the employees reducing the workforce, therefore it might decrease the employee morale graph on the organizational performance and goal accomplishment chart. Too, it may call for a limited promotional chance for the rest of the workers, intolerance, suffocation within the organization, and individual chit-chat about strategic leadership along with the consequences like having an unhappier work environment.

What are the reasons for attrition?

Attrition may take place due to following reasons:

  • Deficient growth prospects
  • Plausible lacking working and workplace conditions
  • Sometimes inadequate pay packages invite people to leave
  • Death
  • Ailment
  • Work-life balance issues
  • Employee relocation
  • Retiring employees
  • Termination of employees as a strategic decision
  • Resignations due to any reason
  • Not happy with the current role
  • Better opportunities outside the organization
  • Lack of adequate coaching and feedback system
  • Employee-Manager conflict
  • Any other personal reasons

What is the attrition rate?

The attrition rate is the rate at which the employees leave the organization.

What is customer attrition?  

Customer attrition is the reduction in a number of your customer base due to any reason. This is also called a churn rate. This can happen due to revenue decline because of a drop in demand in the market for your product or service. Or, government duties increase on certain commodities’ taxes may invite troubles for your production house, hence losing existing customers (or losing employees so far as the HR cases are concerned) and not bringing new ones because of old features you could not update concerning your offerings into the market with the people having choices of alternate things against you.

A decline in your customer service might be the cause of attrition in the market for you as well. Moreover, quality and updates can be the reasons which may leave you behind in the market in comparison with your substitute service providers.

What are the key types of attrition?

Following are the four types of attrition:

  • Voluntary Attrition: If employees leave willingly due to any reason
  • Involuntary Attrition: When an employee is terminated
  • Internal Attrition: Once employees are moved at the internal level
  • Demographic specific attrition: It is after same age gender or ethnic origin people leave              

Which type of attrition is dangerous most?

Two types of attrition, among the four, are dangerous:

Voluntary attrition

This type of attrition takes place when employees choose to leave your organization. And the reasons behind this could be:

  • Poor management on the employer’s part
  • Employee dissatisfaction due to their unfulfilled needs and wants

In this sort of attrition the reasons may be rectified to keep your worthy human resource from leaving by betterment in management practices like shared vision and personal mastery, and trying know to fulfill the employee needs and wants to convert the scenario into a win-win situation. An exit interview shall help employers to get into the very details of the reasons behind leaving employees and take the corrective actions for that case or next cases in the to-be exit queue.

Demographic attrition  

Here if some internal bias issues are creating some specific group pointing fingers at, it must be looked into for diversified management prospects to avoid chaos at the internal level among groups and a discouraging approach to such attitudes may work through equity administration between the employees avoiding the making of groups and lobbies. Strong watch as well as HR Admin level interest is all that is requisite to solve the said.       


Why does the employee attrition rate matter?

The attrition rate in your company matters a lot because of the following mentioned factors:

HR Turnover is expensive for organizations causing 120% to 200% - as per research - of the annual salaries, not only in respect of the hiring costs, but you can rarely replace a human resource in terms of the vast experience of the certain period with you knowing your workplace dynamics - which a new hire, though experienced, would take a definite enough time to cover.

Workforce substitutions may be unavoidable at certain times, but having good enough succession planning would help.

Moreover, burnout employees may be the consequence of leaving employees in terms of the additional workloads the remained employees may cater to.

Too, employers are faced with reputation challenges when turnover or high attrition rates are more prevalent, than their competitors, inviting more troubles like employer value proposition (EVP) and employer brand name encounters, etc.

Thereupon, the recruiters often face difficulties hiring the employees having worked with the employer consisting high turnover and attrition rates history.   


Attrition Vs. Turnover

These two words, turnover and attrition, are used interchangeably but differ. The former is the employees leaving but hiring takes place as replacement of human capital requirement as quickly as possible, and that can be because of better employee prospects availabilities into the job markets. But the latter requires an in-depth root cause treatment.

Turnover is a short-term metric and the attrition is not immediately filled up signaling red.

Generally speaking, higher the attrition rates are meant to be employees are turning over quickly, and lower the same explains a better idea of employee retention with the employer.


How to Calculate Attrition Rates?

The attrition rate is calculated at the end of the calendar or fiscal year. It is calculated as the number of employees who have left at the end of the year, divided the number by the total number of employees the company had at the beginning of the year; and multiplied by 100.

Attrition Rate Formula

How one can calculate the Annual attrition rate?

Early attrition rate can be calculated through the same formula but the only difference is that if an organization’s HR needs to look into the specific period for attrition, the number of employees leaving and retained are taken for that particular period for calculations.

Why early attrition is important?

Early attrition is important because it helps organizations to review the situation in detail and predict the next stages of work plans in the light of HR or employee turnover and attrition; hence make strategies accordingly. 

What happens if your organization is facing high or low attrition rates?

If your organization is facing a high attrition rate that is around 20% per annum level, at that stage your HR needs to direly look into the figures and facts about that higher side of attrition rates!

Similarly, if 15% of your new hires leave you in the first six months, that need your recruitment team members to review their process if they hired interested people as per criteria mentioned in your adverts or some other factors to see into what had been neglected should have been rectified in future. 

And if lower ones, no worries at all, your human resources are retained and want to be retained with you.

How many employees quit their jobs per month or year in the United States?

As per published by the US Bureau of Labor Statistics, as of March 29, 2022, the US is facing employees leaving their jobs in several sectors, and this figure is now touching 3 million each month. This figure is an overall average ratio of different industries. Of which, among others - the highest industry facing such rates is leisure and hospitality having as much rate as 5.6, retail equal to 4.9, trade transportation and utilities as more as 3.7; and Federal equal to 0.8 and Government as lowest as 1.1. (Source)

What are other research statistics in terms of Attrition?

  • The monster survey told that in the United Kingdom the attrition rates as approx. 15% per year.
  • Linked-In surveyed and given the figurative metrics of attrition equal to 10.9% in the year 2018. Moreover, it further disclosed software and technology businesses’ attrition rates of as much as 13.2% annually, and e-learning at 11.6%.
  • XpertHR survey showed an overall average for sales and marketing as high as 31% in the year 2019. For HR employees 17.2% turnover rate; the engineer’s attrition rate is 8.8% attrition rate. (Source)
  • Not meeting consumers’ expectations, companies may face bad experiences shared by the people as much as 95%, of which 54% of people share bad experiences with more than five people.  
  • People start doing business with competitors as much as 89%
  • In the US due to poor customer experiences $83 Billion are lost every year!
  • 60% of customers leave companies due to perceived indifference among salespersons
  • 70% people leave companies relationship due to sales persons’ poor service
  • Customers rating their salespersons exceptional are more likely to be retained as much as 10 to 15 times more.

How can the attrition rates be reduced?

All you have to do in need is to go into the very details of the ever-changing trends and metrics accordingly to get ready at the individual, team and organizational levels to deal with any unpredictable scenario of business operations amid ordinary as well as turbulent times while improving your people, processes and practices for the betterment of organizations and its worthy workforce that is people. What is more, you may introduce and enhance the below-mentioned programs:

  • Right people recruitment
  • Compensation and benefits improvements
  • Promotion of employee engagement
  • Employee Recognition
  • Career growth opportunities offering
  • Reskill your people for new roles, especially amid the COVID-19 pandemic and in post-pandemic scenario
  • Employee wellbeing
  • Make feedback a routine practice
  • Ensure employee health and safety
  • Paid time off
  • Life and disability benefits
  • Work from home - Remote and flexible working options
  • Make diverse working models matching your business portfolios and employees’ strengths
  • Exit interviews
  • Alumni network devising and engagement
  • Make your employee satisfaction a priority
  • Make the aspirations and needs of your employees fulfilled
  • Emotional identification and management of employees and customers
  • Anything else appropriate you deem for your concern