Turnover vs. Attrition: Key Differences Plus How To Calculate Each
Turnover and attrition are two basic HR metrics that companies should monitor on a regular basis. The data helps HR and management understand how long employees typically stay with an organization, and provides insight into what may or may not drive retention.
Companies are more likely to retain employees when they feel engaged, productive, and understand how their job plays a role in the company’s overall success. According to Deloitte, companies that thoughtfully deploy “people analytics,” (use employee data to help optimize business and management decisions,) achieved a three-year average profit 82% higher than other companies.
When employees leave at a high rate, it increases cost for the company and creates a gap in knowledge transfer which can ultimately have a negative impact on employee morale and work environment. As a result, this can also have a detrimental impact on the company’s financials or “bottom line”.
The terms “turnover” and “attrition” are often used interchangeably, but there are key differences. Let’s explore what these differences are and what their impact may be on an organization.
Contents
What is turnover?
What is attrition?
Key differences between employee turnover and attrition
How to calculate turnover rate vs attrition rate
Tips to reduce attrition and turnover in an organization
FAQ
What is turnover?
Simply put, employee turnover reflects how many employees end their employment with a company, whether they leave by choice, “voluntary”, or at the direction of the organization, “involuntary”.
Turnover is the number of employees who leave during a particular period of time, typically over a one year period. Turnover can also be measured by individual departments, demographic groups, and other subcategories within an organization.
When turnover occurs, the company often backfills the position and it is not left vacant long-term.
There are many reasons why employees leave an employer, including:
Voluntary turnover
- Compensation and benefits that are not in line with the market
- Ineffective management/leadership
- Poor work/life balance
- Job scope and content
- Work schedule
- Difficult co-workers/negative work environment
- Personal reasons
- External factors, such as the job market, the economy, etc.
Involuntary turnover/terminations for cause
- Policy violation
- Poor performance
- Excessive absenteeism
- Job abandonment.
- Often indicates underlying issues within the organization, such as dissatisfaction, poor management, lack of growth opportunities, or a toxic work environment
- Considered a negative metric
- Involves active efforts by the organization to replace departing employees
- High employee turnover can have a significant financial stress on an organization. The cost of recruiting, hiring, and training new employees can be substantial
- Turnover often leads to disruptions in workflow and productivity, due to lack of knowledge transfer and the time it takes for new employees to be adequately trained and acclimated
- A pattern of turnover can negatively affect employee morale. Employees may feel unsure about the future of their job and organization. Additional work may be placed on employees after other employees leave the company. Low morale could also negatively impact employee productivity.
What is attrition?
Employee attrition is another HR metric that reflects the number of employees who leave an organization. It can be voluntary or involuntary.
With involuntary employee attrition, an employer discharges an employee in order to reduce labor costs. In these scenarios, the employee does not initiate the separation of employment – the company initiates it. Employees terminated by involuntary attrition are not terminated for cause, such as a policy violation, etc. Rather, it occurs for circumstances outside of the employee’s control, such as layoffs, reorganizations, merging or elimination of positions, etc.
Voluntary attrition can include retirement, employee relocation, acceptance of a new job with a different company, lack of growth or promotional opportunities and personal reasons, just to name a few. Companies typically do not replace or backfill jobs affected by attrition, regardless of whether the attrition was voluntary or involuntary.
The job is sometimes left vacant long-term, combined with other positions, replaced with a brand-new position, or even eliminated. As such, attrition typically leads to a reduction in a company’s overall number of employees.
Additional examples of attrition Include:
Involuntary attrition
- Layoffs
- Elimination of positions
- Merging of positions.
Voluntary attrition
- New job, career changers
- Retirements
- Employee relocation
- Personal life changes.
- Natural and gradual reduction in the size of the workforce over time
- Considered a normal part of any workforce
- Not typically calculated as a rate or percentage as it is a passive process
- Not necessarily negative or indicative of issues within the organization
- Does not always involve the immediate replacement of departing employees
- Allows for long-term succession planning
- Can lead to cost savings in recruitment and training. With fewer new hires required, organizations can allocate resources to other areas of development.
Key differences between employee turnover and attrition
Employee turnover and attrition both occur when an employee leaves the company. With turnover, it appears as a result of several different actions such as discharge, termination, resignation, or job abandonment. Employee attrition often happens when an employee retires or when the employer eliminates the position.
The major difference between the two is that when turnover occurs, the company backfills the job. In the case of attrition, the employer may choose not to fill the vacancy for an extended period of time or eliminate the job altogether.
If the turnover at a company is high, it often indicates that a large number of employees are leaving, whether voluntarily or involuntarily. High turnover rates could be a sign of a disengaged workforce, limited growth opportunities, or even poor hiring decisions. Companies will ultimately need to address the root causes in order to control turnover over the long-term.
With attrition, employees are retiring or resigning, but usually are not replaced. If a company’s attrition rate is high, then its overall workforce is getting smaller. It could indicate an aging workforce, which means being proactive about succession planning and knowledge transfer.
A term related to turnover and attrition is “employee churn”. Employee churn is the combination of all turnover and attrition cases combined. Employee churn is another metric that should be monitored.
How to calculate turnover rate vs attrition rate
Calculating the turnover rate
Companies often measure turnover rate as a percentage. It’s calculated by dividing the total number of employees who depart in a year (or another time period) by the average number of employees at the organization during the same period. For instance, if an organization with 100 employees experiences 10 departures over a year, your turnover rate would be 10%.
Calculating the attrition rate
To calculate the attrition rate, take the number of employees that left/were eliminated during a specified time period and divide that by the average number of employees during that time frame. Then, multiply the result by 100 to achieve the attrition rate. For example, if 25 employees in one year left by attrition, and the average annual headcount was 2,000, then 25 divided by 2,000 is 0.0125 times 100 is a 1.25 attrition rate.
Tracking turnover metrics can help companies make more informed and proactive decisions about ways to change and improve retention and ultimately reduce employee churn.
Tips to reduce attrition and turnover in an organization
According to the U.S. Bureau of Labor Statistics, the average annual turnover rate in the U.S. stands at a humbling 47.2%. This means nearly half of the workforce is in a state of constant flux, with employees leaving and new ones coming in. The implications of high turnover can be profound. Being proactive is critical.
- Hire the right people: Job descriptions need to provide an overview of actual job duties and responsibilities so candidates have a good idea of what the job entails. This will help build a strong, diverse, and qualified candidate pool from which the hiring manager can choose.
- Compensation: It’s crucial to keep up with the market rate by providing competitive compensation packages. Pay and benefits are the primary motivator for individuals to accept job offers and show up for work every day. It’s also a top reason why professionals switch roles.
- Employee appreciation and recognition: Employee appreciation and recognition: Expressing gratitude through simple gestures, such as verbal or written thank-you notes for the work employees put in every day can go a long way. Providing new challenges and opportunities is another great way to recognize them.
- Offer flexibility: Employees are increasingly concerned with job flexibility for a better work/life balance. This may include telecommuting, compressed work-week, part-time, or flex scheduling. The type of flexibility will vary based on the nature of the job, but consider flexible options when the business can accommodate them.
- Develop career paths and opportunities to grow: One of the major factors driving people to leave organizations is lack of career growth. Employees should receive and provide input on annual career development plans. This helps employees see their long-term growth potential and allows them to take ownership of their careers by providing their input into the process.
- Focus on onboarding: First impressions are everything! Develop an inviting and structured onboarding process so employees feel welcome and see that the company is organized and ready for them to begin.
- Be transparent: Communication can “make or break” any relationship, personal or professional. Companies that have open communication and cultivate that environment can help with employee retention. Communication could take on forms like departmental meetings, one-on-one meetings between managers and their team members, employee engagement surveys, and a consistent reinforcement that open communication is encouraged. Communication, and cultivating a work environment where employees feel it is “safe” to share ideas and be heard may be one of the most important factors in employee satisfaction and retention.
- Conduct exit interviews: Conducting exit interviews to solicit employee feedback is critical when trying to determine why employees are leaving and if there are any patterns.
- Analyze existing turnover to find issues: The ability to collect and analyze turnover and attrition data is critical to finding, developing, and retaining your best employees. It’s becoming significantly important for HR professionals to have data analysis skills to help interpret the metrics to communicate and summarize the data results to upper management and executives. This will also help HR develop recommendations on how to reduce turnover and attrition and help facilitate a long-term plan to help do so.
Key takeaways
Turnover and attrition are human resource terms that are oftentimes confused. Employee turnover and attrition both occur when an employee leaves the company. Turnover, however, is from several different actions such as discharge, termination, resignation or abandonment. Attrition occurs for voluntary and involuntary reasons as well, such as when an employee retires or when the employer eliminates the position.
As outlined in this article, the big difference between the two is that when turnover occurs, the organization looks for someone to replace the employee. In the case of attrition, the employer leaves the position unfilled long-term or eliminates the role.
The challenge for employers is to keep attrition and turnover rates low. Success lies in knowing the employees’ values, aspirations, and motivations, and running the company with a human touch. A valued and rewarded employee is happy, satisfied, and less likely to leave.
FAQ
Turnover covers employee departures that are either voluntary or involuntary, while attrition is used to describe departures that are voluntary or occur naturally, like retirement or the elimination of a job role. The term ’employee churn’ indicates the total number of turnover and attrition cases combined.
In summary, attrition and retention are two opposite concepts that describe the movement of employees in and out of an organization. Attrition measures the rate employees leave, while retention measures the % of employees who stay with the organization over time.
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