HR Resources

Employee Attrition and How to Prevent It

Goodbyes are never easy. When an employee leaves a company, there are always some emotions involved on both ends. As the employer, you probably feel a little bit apprehensive about finding a replacement, and maybe even a little sad to be losing a specific employee. As the employee, you’re hoping to leave in a graceful and respectful manner. In short – both parties are hoping for the relationship to end on a high.

attrition-rate

Here we explore employee attrition: what it is, how it’s different from employee turnover, why it should be tracked, and how you can improve it.

What is employee attrition?

The official definition of employee attrition is that it is an “unpredictable and uncontrollable, but normal, reduction of the workforce due to resignations, retirement, sickness, or death; loss of material or resource due to obsolescence or spoilage.” This reduction in workforce could be due to employees going into retirement, moving away to a different city, or in the worst case, the death of the employee. It is a key hiring metric for companies of all sizes to keep track of.

Employee attrition vs. employee turnover

Due to their similarity, attrition and turnover are frequently mixed up. After all, both happen when someone leaves your company. However, that’s where the similarity stops.

The main difference between the two is that with employee attrition, the company does not decide to hire for the position again. If they want to replace the employee that left, then it becomes turnover.

In other words, the employee leaves the company in both cases, but with turnover, the company actively seeks out to find a replacement. 

Another thing to keep in mind is that the reasons leading to an employee leaving a company in the case of employee attrition can be voluntary or involuntary. With voluntary attrition, the employee wants to move across the state, spend more time with their family, start their own business, etc. Involuntary attrition happens when the company needs to lay off the employee because of budget cuts, the lack of need for the position or some other reason. In both cases, the company does not fill the position again – if they do fill the position again, it is considered employee turnover.

Employee turnover can be both voluntary and involuntary as well. With voluntary turnover, the employee leaves on their own because they have a better offer, higher salary, more responsibilities, etc. With involuntary turnover, you fire the employee because of a bad culture fit, poor performance, etc. In either case, the company will be looking for a replacement immediately.

Is employee attrition a bad thing?

If a valued employee leaves you, it can be hard to not take it personally, especially if you’re a new founder. However, there are some good sides to employee attrition that are worth remembering.

Firstly, if an employee is leaving you because they have to move on with their life, goodbye will not be nearly as unpleasant as if they were leaving involuntarily. You can part on good terms and perhaps even reunite in the future.

Secondly, if you’re in a tight spot when it comes to money, this could be a relief until you’re ready to hire someone new for the same or similar role. The aveage employee exit costs about 33% of their annual salary, so while you’ve still got a cost, it is 2/3rds less than it would otherwise have been.

Thirdly, the employees leaving might not have been a good fit to start with, in terms of culture, performance, values, or something else. In this sense, the attrition could actually be beneficial.

However, there are negative sides to employee attrition as well.

First off, you’ll lose valuable employee knowledge.

Secondly, this could mean more workload for the employees that stay. As attrition usually means that the position is not filled (at least not immediately), the employees that remain have to cover the workload of the person leaving you.

Thirdly, the employees could be leaving you because of reasons that are directly your fault, such as lack of challenges in the workplace, poor employee experience, or bad fit caused by a misleading job description.

How to prevent employee attrition

Although the reasons for attrition are often something you cannot prevent, there are a few things that you can do to lower the chances of it happening.

Carefully evaluate your needs and create a hiring plan before setting out to hire any new people. Look into your future needs and try to only hire for those roles that you see staying in your company structure. While rapid growth spurts are all the rage with today’s startups, do your best to think of viable growth plans for the future.

how you can cut the cost and risk of employee attrition

The second thing you should do is come up with a worst-case scenario and plan. For example, you have to axe an entire department because you cannot sell anymore in a certain part of the world or you’re suddenly prevented from doing business. Think of what happened to the hospitality industry because of the coronavirus pandemic.

Make sure to have a plan that goes beyond firing everyone and calling it a day. Make sure to have a contingency plan in place. For example, reducing salaries for a certain period of time or forcing people to take vacations instead of laying off everyone.

Another crucial thing to do is to be as truthful and honest in your job ads as possible. When you promise candidates certain conditions but the reality is vastly different, attrition is inevitable. When creating your job ads, think carefully about the responsibilities and traits for a certain position instead of copying other job ads from the internet.

Finally, find ways to assess company culture fit at the very start. Oftentimes, an employee will be great at doing their job but will not feel like they’re a part of the company. While they may seem like they’re doing great, they could be looking for a way out.

If you do have to let your employees go because of reasons you can’t control, do it the right way. Be transparent, honest, and vulnerable – they’ll respect you more for it in the long run. 

Are there signs that I can look out for?

There are ways to tell that you have high chances for increased employee attrition in the future. It’s important to “feel the pulse” of your workplace and be around to notice things happening.

–   The employee is absent all the time. This could mean that they are ill or that they are actively applying and interviewing for other roles. While you can’t be too snoopy, try to figure out the reason for being absent if it happens too often.

–   The employee is not engaged. Although they seem to be doing a great job, they are not very happy and seem to be doing mindlessly.

–   The employee is unproductive. They’re not hitting their KPIs because they don’t like the job or they’re spending their time applying for other jobs.

The biggest takeaway is to stay in touch with your managers and even employees to notice these changes in real-time.

Conclusion

While employee attrition isn’t necessarily a bad thing, you should do your best to monitor the pulse of your workplace to stop it in its tracks as early as you can. Similar to turnover, it’s an important metric that tells a lot about your employer branding, hiring practices, and overall workplace culture.

September 1, 2020