What is employee attrition?
Employee attrition is the shrinkage of your workforce. It happens as your people retire, resign, or are laid off, and you don’t replace them.
People leaving their jobs is an everyday occurrence. It’s even called the ‘employee lifecycle’ because it comes to an end somehow. No employee goes on forever.
Employee attrition becomes a business headache when it is ‘unwanted attrition’ – losing talented, high-performing, high value employees – for reasons that could have been prevented.
Employee attrition vs employee turnover
Employee attrition is not the same as employee turnover, even though both involve people leaving the organisation.
Employee turnover happens when employees leave their jobs and are replaced by different people – either internal or external candidates. The number of employees remains the same. It’s calculated as the percentage of employees that leave an organization in a set time period.
A company can have a high turnover rate, but still be growing, because it’s not losing people.
However, while some level of employee turnover is expected, excessive turnover costs a company a lot of money, in rehiring, onboarding and ramp time.
Employee attrition doesn’t account for refilled vacancies, just those that are lost. A company may be refilling one in three vacant positions, but those two remaining vacant positions mean attrition is ongoing.
Even though there is a difference between employee turnover and employee attrition, they have something in common: both attrition and turnover data provide insight into the causes of why people leave, enabling you to make improvements that help retain your people.
Types of employee attrition
There are two main types of employee attrition: involuntary and voluntary. Let’s look at these in more detail:
- Involuntary attrition
In this scenario, the employee doesn’t want to go. The organisation has made the decision to part company with them. This may be due to:
- Redundancy: the employee’s position is being eliminated
- Layoffs: there’s not enough work to support the number of employees
- Termination: the employee’s performance may be poor, or their conduct unacceptable, and they are asked to leave
Often, business leaders decide to proceed with laying off employees rather than redeploying or retraining them, to save money. This often turns out to be a false economy: layoffs affect the morale and engagement of remaining employees who may be burdened with extra work, and in turn burn out and go off sick, or leave themselves – voluntarily.
- Voluntary attrition
In this second scenario, it’s the employee who wants to leave, or who is at the end of their working life. Common reasons for employees leaving of their own volition include:
- Dissatisfaction with current employer – perhaps a poor employee experience
- Finding a new job
- Wanting a change of career
- Family reasons
- Health reasons
Just one or two employees retiring won’t make too many ripples in an organisation, particularly with sound succession planning. A bigger attrition problem is a significant sector of your workforce who are of the same age retiring together.
When people of a particular demographic – gender, age, minorities, people with disabilities etc. leave unexpectedly. This may flag up incidents, inadequacies, or attitudes incompatible with those demographics and require immediate investigation.
What causes voluntary employee attrition?
Some of the reasons for unwanted attrition include: Lack of opportunity to grow and achieve career goals
- Inability to get work done efficiently
- Pay not fair
- Lack of recognition for work
- Lack of support, not being valued, disrespected
- Employee values don’t chime with company values
- Workload too heavy to be able to achieve work life balance
The above are all typically things that build up over time, and the trigger can occur at any stage in an employee’s lifecycle.
In order to reduce unwanted attrition, you need to understand the what, the why and the how:
- What has caused it?
- Why has it happened?
- How can we prevent it happening to our other high-performing employees?
What is an acceptable level of attrition?
While high levels of employee attrition can be a red flag signalling there are problems in the organisation that require pinpointing and addressing, attrition itself is a fact of working life, and isn’t all bad.
In fact, it opens doors to lots of opportunities:
- In the short term, companies may be able to save on labor costs by not replacing employees who leave
- Employees who may have been quiet quitting, disruptive, problematic or negative, or maybe just not a happy cultural fit are removed from your organisation
- New brooms: once attrition issues have been identified and addressed, you can hire new people who sweep in and bring fresh innovation and energy to the business
Acceptable attrition rates vary heavily by industry and by role, depending on how competitive their markets are, the skills in demand and talent mobility. Fast-moving sectors such as the tech industry and consulting may have a higher acceptable attrition rate than more stable sectors, such as government or healthcare.
Larger organisations generally have more resources to be able to handle employee attrition better than smaller organisations, which need a lower rate for stability and continuity.
Economic conditions and local job markets also impact employee attrition rates. Attrition may be higher in a highly competitive job market with plenty of opportunities, whereas areas with talent shortages or limited job opportunities may see lower rates.
But how do you calculate employee attrition?
Calculating employee attrition
There’s a simple formula for calculating your attrition rate:
Attrition Rate (%) = (No. of Employees That Left During Period / Average Number of Employees for Period) * 100
You take the number of employees who left the workforce in a given time period (definitely annually and more, depending on size), divide it by the average number of employees, then multiply by 100.
Why it’s important to understand attrition drivers
You’ve done the calculation above. Your employee attrition rate needs to be improved. How are you going to do that?
The answer is to use exit surveys. These are a great way to understand at scale why employees are leaving. But unless this data is combined with employee feedback from other stages in the lifecycle or with operational data such as staff turnover figures, it’s difficult to identify actions to improve the situation.
When employees leave, you need to measure key topics identified as exit drivers. This will help you to:
- Understand the main reasons why employees left the organisation
- Help you to take action to retain employees in the future
Additionally, former employees can be outstanding ambassadors for your organisation, or even future employees (i.e., “Boomerangs”). So it’s important to understand whether employees are leaving feeling positive or negative about their experience, and whether they’d consider returning.
Key drivers of the employee experience you can measure at the time of employee departure include:
Growth is a fundamental human need. Seeking further development opportunities is still emerging as a top driver for finding alternative employment.
It’s measured with: meaningful career development discussions, regular conversations about performance, giving opportunities to improve skills
This is having the ability to get work done. When employees, especially for high performers, don’t feel enabled this can be a great source of frustration.
It’s measured by looking at how: the job makes good use of skills and abilities, the processes support productivity, managers help to remove barriers and workspace and technology supports productivity.
Receiving fair pay and recognition for individual contributions at work is the backbone of the employee and employer relationship. When these don’t align, they can compound other perceived issues in the employment relationship.
It’s measured by looking at fair pay, benefits that meet employee needs, and meaningful recognition.
Employees must be valued, respected and not overloaded with work. Today’s workforce increasingly seeks job opportunities where they have the flexibility to manage their workload alongside their personal life.
Support is measured by: Trusting relationships, managers treating teams with respect, the amount of support to adapt to organisational changes, how much managers care about well-being.
Our 2023 Employee Experience Trends Report found that being employed isn’t just about having a job – it’s a part of a person’s value system. Many employees choose to work for organisations whose culture aligns with their own personal values.
When employees feel that their organisation embodies these values, they’re 27% more likely to have higher engagement scores, and 23% more likely to indicate their intent to stay for at least 3 more years.
Measure values with: open and honest communication, pride in the company’s impact on the world, checking management behaviour is consistent with company values.
It’s essential people can balance work with their personal life. Employees who don’t feel they have a good work life balance are unlikely to see a long-term future with the organisation.
Measure whether workload is manageable and flexible enough to meet work and personal needs.
How to prevent regrettable attrition
What is regrettable attrition?
The ability to retain top talent is absolutely crucial and integral to the success of any organisation.
So when high performers, new hires, people working in-hard-to-fill positions, or senior leaders leave, it’s pretty painful and has a negative impact on the organisation. This is regrettable attrition — and it refers to when people leave willingly.
Now, there are plenty of reasons why valued employees — senior, high-performance, new or otherwise — might leave. Perhaps it’s the culture? Or maybe they’re not satisfied with their job.
Whatever the reason, it’s important to ascertain why and insert appropriate measures to ensure it doesn’t happen again. It’ll also give you vital information to help reduce voluntary turnover and keep attrition low.
Below are some steps you can take to help reduce regrettable attrition in your organisation.
Implement an exit survey solution and focus on regrettable attrition
Asking pertinent questions that cover the six exit drivers is a great way to gain insight into what didn’t work and why an employee is leaving. It’s the classic ‘learning from mistakes’ exercise that delivers insights to help rectify the issues and make sure they don’t recur.
When reviewing your data, be sure to look at trends and drivers of your regrettable leavers. You may find that drivers for this population differ from the population as a whole. This will help you target the right actions to improve retention in this critical group.
Offer training and development programs
Promoting professional growth is essential, and employees who feel their company has invested in them are more loyal and less likely to leave.
New hires in particular want to quickly ramp up and begin contributing at a high level, and training and development programs can be critical to their success.
Create a career plan that includes the possible highlights for an employee’s future if they remain on board.
Ensure proper employee benefits and pay
Employees want more than just a paycheck. They want benefits and perks that add real value to their lives. The most sought-after benefits include:
- Health insurance
- Paid time off
- Disability and life insurance
- Flexible and remote working options
People working in hard-to-fill positions – who tend to be more readily targeted by your competitors – need to receive competitive compensation in order to ignore those pesky recruiter calls!
Recognise your employees
Employees want to know they’re appreciated and that their hard work is seen and recognised. Meaningful recognition boosts employee morale and drives employee engagement – and engaged employees are less likely to look for alternative job opportunities.
High performers in particular tend to crave recognition. Often, they are putting in more hours and delivering greater value than others. In addition to monetary rewards, make sure that they are recognised for their outstanding contributions.
Workload: focus on employee well-being
Employee wellness has a major impact on every business. Looking after employees and managing their workload can transform their lives and make them happier, more productive, and less stressed.
Senior leaders in particular are at risk of burnout. Often working long hours with many priorities, these individuals may look to depart when their physical and mental wellbeing begin to decline. Be sure to support leaders with the resources they need to help them navigate their challenging roles.
Create a company culture of belonging
Workplace belonging is a top employee experience driver linked to engagement and well-being. Our 2021 report found a sense of belonging emerged as the strongest driver of employee engagement – ahead even of typical drivers like trust in leadership and ability for career growth.
Foster a sense of belonging among your employees, so that they:
- Feel like a valued member of the team
- Feel supported in adapting to organisational change
- Believe that they can be themselves at work
- Believe that their company is one where everyone can succeed to their full potential, no matter who they are
Create and engage an alumni network
An alumni network creates an extended workforce of contractors and potential return employees. A thriving alumni network is a great advertisement for your business. Plus, they’re more likely to refer others to your company as new hires.
When you cultivate a positive, inclusive work environment, communicate effectively, enable career development, offer competitive pay and benefits, and care for employee well being, your employees will feel valued, supported, and empowered to contribute to your company’s success – and motivated to stay.
Retain your top performers with in-the-moment insights
Worried about losing your best? Now you don’t have to be.
With our exit solution, understand why your top performers leave and drive actions across the organisation to reduce unwanted attrition.
- Get up and running quickly with a best-in-class employee exit program that’s not only built into the Qualtrics™ XM Platform™, but is also fully customisable and requires no coding
- Access real-time employee exit insights, providing the data you need to understand why talent is leaving, and action planning tools to help you close the experience gaps you find
- Create real-time alerts for at-risk staff and leverage feedback from previous employees to drive improvements across the entire employee lifecycle, and then monitor the impact of changes
It’s never been more important to retain your best people. Ready to get started?