Definition: Employee Attrition refers to the employee’s departure process from the company in which employees leave the job due to unavoidable reasons and are not replaced for a long time. This means that the vacancies remain open for a long time or the role is eliminated completely, i.e. the company does not hire anyone else for that position.
It is an unexpected reduction in the workforce due to retirement, resignation, layoff or death. It indicates the rate of change in a company’s workforce during a specific period. It is a natural thing that workers leave the organization. Moreover, it is a cycle wherein employees permanently vacate their official position in the company.
In other words, employee attrition is the gradual but deliberate decrease in the size of the working staff over time. This implies that the rate of employees leaving the organization is faster than employees joining the organization.
Though employee attrition occurs organization-wide, it may occur in specific parts of the business. The reason is automation or the adoption of new technology.
What is the Attrition Rate?
The attrition rate is a metric that measures the rate at which employees leave the organization for any reason. In short, it gauges the pace of employee turnover, indicated as a percentage.
In a scenario where more and more employees quit the company, then there will be a rise in the rate of attrition. If the company wants to reduce this attrition, it is necessary to identify the primary cause of attrition.
Calculation of Attrition Rate
To calculate the rate of attrition, you need to divide the total number of employees who left the organization, and their position is unfilled by the average number of employees at the organization over a given period of time.
Types of Employee Attrition
- Voluntary: Employee decides to leave the company, then such attrition is voluntary attrition. In this case, the employee resigns due to personal reasons. This may include resigning or quitting the job due to health issues, accepting a new job offer etc.
- Involuntary: If the company decides to end employment, it is involuntary attrition. This takes place due to poor performance of the employee. Companies also do this to reduce staffing costs or to eliminate positions. This may include termination and layoff.
- External: An employee leaving the company to join another company is called external attrition. Generally, it happens when the employee gets the opportunity to take a position which is similar to or better than his current position, with better pay.
- Internal: When an employee accepts another position in the same company, either to work in another department or receive a promotion.
Causes of Attrition
- Compensation: When the employees feel they are underpaid, they are likely to leave your company whenever they get a better opportunity or higher pay than they are currently getting.
- Recognition: Recognizing employees is a very low-cost yet very high-impact activity. Employees often leave the organization when they feel unrecognized for their performance for a very long time. However, only a few employers take this into account.
- Career Progression: Opportunities for growth and development are a very important factor for retaining employees. If a company lacks to provide growth opportunities to its employees, then they leave the organization.
- Company Culture: The culture and politics of an organization also play a significant role in retaining employees. When the work culture is positive, open, employee-centred, friendly and flexible, people love to stay in the company for a long time.
- Stress: If the work is pressurizing, target-based, and employees feel overloaded with the work, then they end up leaving the company. This happens because when the employee feels stressed, his work-life balance disturbs, which pushes him to leave the job.
- Job Dissatisfaction: Attrition is the outcome of the non-fulfilment of expectations of employees by the employer. Every person has his personal and professional goals in life, which are associated with the company for which he is working. Expectations and interest mismatch is the main cause of dissatisfaction in the job.
A word from Business Jargons
Above all, attrition is the deliberate downsizing of the workforce of the company. It usually happens due to unsatisfactory pay, lack of opportunity, poor workplace conditions, retirement, death or illness, relocation and so forth.