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What is employee attrition?

Attrition is a term commonly used in the business world to describe the reduction in the size of a company's workforce due to various factors such as resignations, retirements, layoffs, and terminations.

Attrition at work is an important metric that organizations monitor closely to assess the health of their workforce and identify any potential areas of improvement.

Almost 50.6 million people left their jobs in 2022, making the understanding of attrition of staff more valuable than ever.

In this article, we will explore the concept of attrition, delve into its causes and impacts, and discuss potential solutions to address this crucial issue.

What causes attrition?

Several factors contribute to attrition, and understanding these can help organizations devise effective retention strategies. Reports from Payscale, LinkedIn, and Glassdoor & Indeed found that compensation was the main reason behind employee turnover.

Let’s go deeper to the causes of attrition.

Career advancement

Employees may leave an organization in search of better growth opportunities or a higher salary in another company. Career development may be of higher importance in an organization as it impacts the lifespan of their employees.

Work-life balance

A poor work-life balance can lead to employee burnout and dissatisfaction, ultimately prompting them to seek employment elsewhere. The stress that employees suffer every day at work can drive them to search for a new job with a better work-life balance and more respect for their time.

Lack of recognition

When employees feel undervalued or unappreciated, they are more likely to look for opportunities where their contributions are recognized. Feeling engaged with their workplace will boost their creativity and help the company thrive.

Company culture and engagement

Unhealthy company culture, lack of employee engagement initiatives, or a toxic work environment can contribute to attrition. Employees want to feel safe and informed about their organization in order to work more effectively and achieve their goals.

The impacts of attrition

Attrition can have several significant impacts on organizations. It can increase the costs, harm productivity and impact your organization at all.

Let’s take a closer look at the impacts:

Higher costs

The cost of replacing an employee can be substantial. The Society for Human Resource Management (SHRM) suggests that the average cost of replacing an employee is six to nine months of that employee’s salary. This includes expenses related to recruitment, onboarding, training, and lost productivity.

Loss of productivity

When an experienced employee leaves, it takes time for the replacement to get up to speed, leading to a temporary decrease in productivity. It will take some time for a new employee to reach the same level of productivity as their predecessor, which is important.

Negative impact on morale

Frequent turnover within a company can have detrimental effects on employee morale and overall stability. When employees witness a constant stream of departures, it can create a sense of uncertainty and unease.

This can result in decreased motivation and productivity among the remaining employees, as they may feel disengaged and demotivated due to the lack of continuity and trust within the organization.

Loss of institutional knowledge

Employees who have been with the company for a long time often possess valuable knowledge and expertise about the organization. When they leave, this institutional knowledge may be lost, which can hinder business operations and decision-making.

Managing attrition

To combat attrition and retain talented employees, organizations can consider implementing the following strategies:

Focus on employee engagement
Engaged employees are more likely to stay with an organization. Encourage open communication, create opportunities for professional growth, and recognize and reward employees’ contributions.

Improve work-life balance
Foster a healthy work-life balance by promoting flexible work arrangements, providing support for personal well-being, and encouraging employees to take time off when needed.

Invest in learning and development
Offer opportunities for training and skill development to help employees grow both personally and professionally within the organization.

Enhance company culture
Foster a positive and inclusive company culture that values diversity and promotes respect, collaboration, and psychological safety.

Conduct stay interviews
Regularly engage in conversations with employees to understand their needs, concerns, and aspirations. This can help identify areas for improvement and mitigate potential attrition risks.

By understanding the causes, impacts, and potential solutions related to attrition, organizations can proactively address this issue and create a conducive environment that promotes employee retention and growth.

What is positive attrition?

Positive attrition is when an employee’s departure benefits the organization.

This typically involves individuals who underperform, make frequent errors, struggle with collaboration, or deliver poor customer service. Their excessive use of leave time can also be a factor.

Their exit can improve productivity and workplace atmosphere, making it a positive change for the company.

How to calculate employee attrition rates

The attrition rate is a measure of employee turnover within an organization over a specified period. High attrition can indicate workplace issues, but how can you calculate it?

This is an easy step-by-step calculation to quickly find out your attrition rate.

  • Note the initial number of employees.
  • Record the number of employees who left and were hired during the period.
  • Add the number of employees who left to the number of new hires to get the ending number of employees.
  • Calculate the employee average by adding the starting and ending numbers and dividing by two.
  • Divide the number of employees who left by the employee average to get the attrition rate in decimal form.
  • Multiply the decimal by 100 to convert the attrition rate to a percentage.

Ready to practice?

Let’s say you had 50 employees initially, and 5 were fired or left the organization.

You managed to hire 3 more, so 50-5 (+3) equals 48.

To calculate the average number of employees, we add the starting and ending numbers (50+48=98) and divide by 2 (98/2=49).

Now that we have this number, all we need to do is divide the number of employees who left by the employee average (5/49=0.102) and multiply the result by 100 to find the percentage of attrition rate (0.102×100=10.2%).

Paying attention to the onboarding process and employee satisfaction throughout their years of working for you can help decrease attrition rates and enhance your employer brand.

On the other hand, managing attrition can be helpful in creating a future that will support your organization and the well-being of your employees.

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