When you consider attrition vs turnover, they both involve an employee's departure from the organization. However, while one is less worrying, the other doesn't always result in a positive outcome for the organization. Let's look at the relationship between attrition vs turnover in more detail.
What's the Difference Between Attrition Vs Turnover?
Attrition occurs when employees leave your organization voluntarily or involuntarily, and you don't make an effort to replace them. In most instances, employees leave the organization because they have reached retirement age or are moving to a different location. On the other hand, turnover happens when employees depart from your company and get replaced.
Employee Turnover Rate Vs Attrition Rate
The best way to understand attrition vs turnover is to look at the attrition rate vs turnover rate. To start off, here's the attrition turnover formula:
(Number of employees who have left ÷ average headcount) × 100
The reporting period for both the attrition rate and the turnover rate can be per year, quarter, or month. When figuring out how to calculate turnover rate and attrition rate, you should first work out the average headcount. You can calculate the average headcount for the turnover rate by adding the total number of employees at the beginning with the total number of employees at the end. You then divide the resulting figure by two.
A Closer Look At Employee Attrition
The main distinction between attrition and turnover is that the employee leaves your company voluntarily in most instances. Attrition happens because of natural life events, and it generally can't be prevented. Examples of employee attrition include:
- Going back to school
- Illness and death
- Elimination of positions (layoffs)
When a company elects not to replace the employees that are leaving, it means it's slowly downsizing. This isn't always a bad thing because it can help reduce the financial pressures experienced because of a large workforce.
By downsizing, a company reduces employee costs by paying fewer wages and not having to cover additional recruitment expenses. In addition, a company can downsize naturally through attrition with minimal impact on employee morale.
Reducing Employee Attrition Rate In the Workplace
Still, attrition can have a negative impact on an organization. For instance, when the company doesn't replace the talent they are losing, they may be placing a greater burden on the remaining employees. When employees take on more job duties, this can lead to burnout and lack of motivation.
In addition, eliminating roles in your company leaves gaps in your team's competencies, and it's not always realistic to expect the remaining members to run a well-oiled operation. Attrition can also impact employee satisfaction because there are fewer opportunities for career advancement within the organization.
While employee attrition is a fact of life, there are still ways to prevent excessive attrition. For instance, you can prevent involuntary attrition by avoiding layoffs. Instead, you should consider negotiating with employees to reduce pay and offer unpaid vacation time to stay afloat. Making efforts to retain your workforce also helps you to stay current by minimizing the loss of employee knowledge and skills.
A Closer Look At Employee Turnover
A high employee turnover rate is problematic for organizations and usually happens for the following reasons:
- Poor working experiences
- Lack of professional development opportunities
- Poor relationship with senior management
- Discrimination and exclusion at the workplace
- Workplace aggression
- Poor pay or lack of employee benefits
- Getting fired
Compared to attrition, turnover happens because employees are pushed to leave due to negative elements within the company's work culture. As mentioned, sometimes there's not much a company can do to reduce attrition, but there are many ways to reduce the turnover rate.
Typically a company's employee turnover rate is considered above average if higher than 10% or 15%. Some industries tend to have higher turnover rates due to inherent issues like seasonal business and low wages.
Employee turnover has some benefits, but generally, it's in a company's best interest to reduce the turnover rate. Employee turnover can be beneficial because it eliminates low-performing team members while freeing up positions you can fill with top talent.
On the flip side, employee turnover has negative consequences. Employee recruitment and training are expensive, and if a company keeps spending money on hiring new people, this will hinder productivity and affect profitability and growth. Most importantly, a high employee turnover rate is a reflection of deeper problems within your organization that need fixing.
Reducing Employee Turnover Rate in the Workplace
As mentioned, there are several ways that employees can reduce employee turnover:
- Identify precursors to employee turnover. Employers can prevent a high turnover rate by analyzing the workplace environment to identify signs associated with increased turnover. Typically, the signs include absenteeism, which indicates that employees are hunting for greener pastures. Noticing other issues, such as low productivity and disengagement, willmotivate you to make the necessary changesto improve the workplace culture.
- Improve your hiring process. The best way to prevent employees from leaving is to ensure employees that are a good fit the first time around. You must use thorough pre-employment screenings to assess candidates and ensure they are suited for both the role and the company culture. In addition, the onboarding process should be as efficient as possible so that new hires can step into their roles without hiccups.
- Fire low-performance workers. This may seem counteractive, but the sooner you get rid of employees that don't fit, the sooner you can find a new employee that will stay with you longer because they're an excellent behavioral and cultural fit for the company.
- Review compensation and benefits. One of the main reasons employees leave companies is that the pay and benefits do not reflect the current fair-going wage. It's essential to perform a quick analysis to discover what competitors offer and then pay employees what they're worth. It's also important to show employees they are valued by recognizing their hard work and offering commensurate rewards.
- Maintain open lines of communication. Employees are more motivated to leave their current job if they feel the employer does not prioritize their concerns. As such, you should always maintain an open-door policy, so employees are free to approach you and be heard.
- Encourage work-life balance. Today, employee well-being in the workplace is now more critical than ever. That means providing employees with a flexible work environment forbetter work-life balance. This explains why remote working has become so popular. It's a win-win situation because employees get more time to focus on their personal lives while employers benefit from increased productivity.
- Focus on employee engagement. Disengagement is one of the top signs of high turnover, and it can have severe consequences on the company's productivity and profitability. The goal for every employer is to have a workforce that's highly involved and motivated about their work and workplace. There are several ways to achieve such a workforce, including investing in employees' well-being with solutions like employee assistance programs (EAPs).
- Create employee development plans. Employs value workplaces that offer opportunities for development and growth. You can support your employees' career goals by developing tailored employee development plans and providing resources, such as financial assistance to help with career advancement.
- Prioritize employee happiness. An employee's satisfaction may seem insignificant, but it can impact your profitability in the long term. The best way to ensure employee happiness is by valuing the things that matter to employees and showing employees that their input is appreciated.
Attrition Vs Turnover: Which Metric Is More Important?
Tracking both attrition and turnover metrics is essential because the data will tell you which changes you need to implement in your organization to ensure better outcomes.
However, tracking turnover metrics is more critical because it has a more significant impact on your bottom line. Lack of awareness of turnover rate sets you up for failure because the damage would already have been done by the time you realize you need to act.
On the other hand, keeping tabs on turnover allows you to be proactive instead of reactive. Industries are ever-evolving, and noticing what's going on with your employees enables you to make decisions that align with their career goals consistently.
Overall this helps management strengthen workplace culture, improve employee experience, and inspire loyalty. Ultimately, that's the secret to a better retention rate, higher productivity, and increased revenue.
The Bottom Line
Although some people use employee attrition and turnover interchangeably, there are slight differences between the two. Typically the factors behind attrition are of little concern, while it's in every employer's best interest to find out the factors behind the business's turnover rate. That way, employers can optimize the existing work culture and improve their practices to boost employee performance.
Frequently Asked Questions (FAQs)
What is the difference between employee attrition and employee turnover?
The key difference between employee attrition and employee turnover lies in the reasons behind the departure. Employee turnover often occurs due to poor performance, poor management, or a disengaged workforce. On the other hand, attrition is usually due to personal reasons like retirement or voluntary attrition, where an employee leaves without the company actively replacing them.
What are some common reasons for employee turnover?
Common reasons for employee turnover include poor hiring decisions, lack of career development opportunities, financial stress, and poor management. Sometimes, employees may also leave for higher-paying jobs, contributing to staffing costs and labor costs for the company.
How does employee turnover affect labor costs?
Employee turnover can significantly increase labor costs. The average cost of replacing an employee can be high, including the costs of recruitment, training, and the loss of institutional knowledge. These costs can accumulate over a period of time, affecting the company's bottom line.
What are some effective employee retention strategies?
Effective employee retention strategies include offering competitive salaries, providing career paths and career development opportunities, and creating a positive work environment. Addressing issues like financial stress and poor management can also help in retaining employees.
How does a disengaged workforce contribute to employee churn?
A disengaged workforce can be a major factor in employee churn. Disengaged employees are less likely to be productive, which can lead to poor performance and, eventually, voluntary or involuntary departure. This can result in a loss of institutional knowledge and increased staffing costs over a specific time period.
How can poor performance be addressed to reduce turnover?
Poor performance can be addressed through regular performance reviews, constructive feedback, and providing opportunities for skill development. Addressing the root causes of poor performance can help in reducing turnover and improving employee engagement.