Employee Turnover vs Attrition – What Are They & How Are They Different?
After working for some time in a company, you notice a couple of your colleagues are taking their leave. You may have heard talk about turnover and attrition over at the Human Resources office and wondered, “What does it all mean?”
When looking at employee turnover vs attrition, there’s one main difference between the two. It’s the reason of leave. In terms of employee attrition, your co-worker may have left to retire or your employer decided to cease their position.
On the other hand, another colleague may be leaving out of termination or resignation and will be replaced. Either way, it’s considered employee turnover.
Employee attrition and turnover rate calculations are crucial to determine where your company stands in its employee retention.
Stick around to learn more about how to differentiate between employee attrition and turnover.
Table of Contents
- What is employee attrition?
- What is employee turnover?
- Why do companies measure employee attrition and turnover?
- Why measuring turnover is more important
- How is employee turnover calculated?
- How is employee attrition calculated?
- Signs you’re dealing with a toxic employee
- How to deal with a toxic employee
- Frequently asked questions
What is employee attrition?
Employee attrition is when employees depart the company and are not replaced immediately or at all. This usually occurs due to natural events or causes such as retirement, company downsizing, or employee health complications.
Compared to employee turnover, attrition is a more mutual departure on both parties’ ends. In other words, you won’t see much disagreement when the employee leaves the company.
Examples of employee attrition
To demonstrate employee attrition, imagine a retail company installing automated cashiers in its stores. Subsequently, the human cashiers are likely going to get laid off.
Another example could come from a company not performing so well in terms of profit numbers. In turn, it’s unable to fund employees’ salaries and has to lay them off.
What are the types of employee attrition?
Employee attrition can come in several forms depending on each case. Luckily, HR experts have grouped these forms into three.
Involuntary employee attrition
Involuntary employee attrition usually comes from the employer’s side. The company could decide to lay off a worker because it removed their position altogether.
In this case, a company may want to better assess its financial performance. On the other hand, the organization’s use of AI replacement could provide a more cost-efficient result.
Voluntary employee attrition
Voluntary employee attrition comes from the employee’s side. Now, voluntary attrition could entail a company’s unpleasant work environment or personal reasons.
The latter could be that the employee is relocating or experiencing an illness. Take note that these employees aren’t promptly replaced afterward.
Retirement employee attrition
Retirement employee attrition occurs when a chunk of employees has decided to retire. We say chunk because you can’t simply count a couple of seniors per year into the attrition count since that’s too small a number.
Having said that, retirement employee attrition differs from its employee turnover counterpart in that it doesn’t replace the retired employee immediately.
If you’re in a company and notice a large ethnic-specific group resign, this could result in demographic-specific attrition.
This attrition isn’t limited to the ethnic background of a group but may also involve specific gender groups, veterans, age groups, or differently-abled people.
Whatever the cause of this type of attrition may be, the best course of action is to release employee surveys. This will assist you in figuring out why it’s happening and how you can try to fix the issue.
Internal transfers attrition
Internal transfers may not count in your attrition rate when calculating for the whole company. Nevertheless, it’s still worth examining why the employee left a certain department for the other.
Is it a loss of interest? Uncomfortable workspace? Or inadequate management? Answering these questions will give you more insight into your employees’ decisions.
Causes of employee attrition
Employee attrition could be rooted in several causes from resignations to layoffs. Now, why do these resignations come up in the first place?
Inadequate work-life balance
Well, this voluntary form of attrition may come from a poor work-life balance. There could be various reasons underpinning this issue such as the job’s oversized requirement, company culture, or management pressures.
Statistically speaking, the biggest barrier of all is personal perfectionism. It accounts for 32.8% compared to the rest when it comes to the reasons for poor work-life balance.
Now, this work-life balance factor may also depend on the industry. For instance, a lawyer may struggle more with this issue compared to a substitute teacher.
Inadequate job pay
Salaries are an integral part of job satisfaction. That being so, the base salary isn’t the only motivator for employees. Each month could bring bonuses or increases due to inflation.
Once salaries are not up to expectation, you can predict a high attrition rate coming.
From an employer’s standpoint attrition is a costly business. Replacing could take some time, due to the high cost it may imply. In some cases, it can cost around half an employee’s annual income.
Lack of sense of belonging
As social creatures, humans want to feel a connection. This connection is especially crucial since work takes up a large portion of your day.
After all, employees are three times more likely to anticipate their work day if they feel part of the community.
Contrastingly, lacking this sense of belonging can make an employee feel distant from work. Consequently, they’ll be more likely to look for other opportunities elsewhere.
In terms of attrition, employers might find it difficult to replace the said employee.
What is employee turnover?
Employee turnover is the rate of employees departing ways with the company per a given period of time. Now, to avoid confusion with attrition, in employee turnover’s case, the employees leaving will be replaced by the company.
That being said, employee turnover can both include voluntary and involuntary leave. It may also include retirement, where the company will decide to replace that employee.
Examples of employee turnover
Let’s say your co-workers Tom and Alyssa depart from the company. Alyssa is a data analyst and decided she wants to resign due to a toxic work environment. Meanwhile, Tom is a marketing manager and found a better career opportunity elsewhere.
In both cases, Alyssa and Tom factor into the company’s overall employee turnover. The employees decided to resign but were then replaced by new workers.
What are the types of employee turnover?
Employee turnover accounts for several scenarios. For this reason, in HR knowledge, turnover is categorized into different sections.
Involuntary turnover is when an employer terminates an employee. This termination is then included in the company’s turnover rate.
From a third perspective, you may assume that the employee did not wish to be terminated. Nevertheless, that’s not always the case. Some employees may attempt to get fired to become eligible for insurance unemployment benefits.
Voluntary turnover involves the resignation of an employee. Although a voluntary turnover may put a damper on your overall turnover rate, it can still provide useful information.
Understanding why employees leave can give you more insight into how to avoid this incident again. You can try to implement better work practices to avoid further resignations piling up.
As its name suggests, retirement turnover occurs when an employee voluntarily leaves or retires after reaching the age of 67. It’s only considered a turnover if the employer decides to replace the retiree’s role.
Now, this form of voluntary turnover may seem unavoidable to employers. Nonetheless, a healthy work environment can go a long way in delaying the inevitable. Keeping older employees engaged in their jobs may help keep the company’s turnover rate steady.
Causes of employee turnover
The reason your company’s employee turnover rate may be high or low mainly depends on the kind of turnover experienced.
Voluntary employee turnover
As an employee, you may decide to part ways with a company due to several reasons. You may have found a better opportunity to flourish in your career.
Alternatively, the work environment may be inflexible and unengaging, which essentially restricts your full potential in the role.
Another reason could be dealing with financial stress. For instance, the job may not be providing you with enough money to fund your family’s needs.
Additionally, you may be feeling like the position you occupy isn’t giving you enough knowledge and expertise in the industry. This may then hinder your way up the career ladder.
Involuntary employee turnover
Now, if you’re dealing with involuntary turnover, then the causes could vary in multiple degrees from poor performance to misconduct.
Having said that, involuntary turnover rates are statistically much lower compared to voluntary turnover. The latter comes in at 13%, while the prior 6% in the U.S.
In terms of executive or managerial roles, the involuntary turnover rate was measured at 30% and 32%, respectively.
These days, companies try their best to reduce involuntary turnover rates through pre-employment tests. These help determine where the employee’s skill level stands and whether it fits with the company’s job profile.
The tests also don’t necessarily have to be limited to job expertise. They can also include personality and behavior tests to predict an employee’s attitude in the workplace. This may help prevent future encounters of inappropriate behavior such as tardiness and incompetence.
Why do companies measure employee attrition and turnover?
Fortunately for HR workers, data is easier to obtain after automation and applicant tracking systems. These tools are exceptionally helpful in providing an overview of the company’s employee life cycle.
The data obtained is crucial in determining where the company stands in terms of profit loss. Imagine owning a company where suddenly you notice a large slump in employee turnover due to lots of resignations. Naturally, your company will then experience a substantial loss.
Aside from that, your organization’s turnover or attrition rate can be used as a benchmark to compare you with other competitors in the industry.
Why measuring turnover is more important
Unlike attrition, employees counted in the turnover rate must be replaced. This places the company at a higher risk of slow growth opportunities and disengaged employees. That being so, turnover rates are what most applicants search for rather than attrition.
A high turnover rate will likely put off potentially successful candidate, which worsens your company’s chances of advancing.
How is employee turnover calculated?
To calculate the turnover rate, you can use the following formula:
Turnover Rate = (Total number of employees departed/Company’s average headcount) x 100
To calculate the turnover rate, you’ll want to pick a year and find the number of employees who departed in that year.
We can assume that over 50 employees left due to turnover. In this case, the calculation will go as follows:
How is employee attrition calculated?
The formula for calculating employee attrition is the same as the employee turnover one. Instead of factoring in the employees that left and were replaced, you’ll be including the number of employees left with attrition.
That can include employees that left due to the company laying off workers or retirees that have not been replaced.
Overall, a 10% or lower attrition and turnover rate should be what you aim for.
Signs you’re dealing with a toxic employee
Employee attrition and turnover may at times be synonymous with toxic employees. Pinpointing a toxic employee could potentially help employers identify the root cause of their company’s turnover or attrition.
It can foster an “us vs them” environment that’ll ultimately make employees lose their sense of belonging. With that in mind, creating a sense of belonging among colleagues can decrease your risk of turnover by 50%.
They don’t respect their co-workers
Showing respect is one of the first requirements for building trust among co-workers. Leaving respect out the door by criticizing, demeaning, and bullying may lead to increased attrition and turnover rates among employees.
The rate may become even more severely affected if the toxic employee holds a managerial position.
They’re unwilling to be held responsible for their actions
If an employee tends to always victimize themselves and never take responsibility for their actions, then you’re probably dealing with a toxic employee.
They may place the blame on their co-workers and complain about lacking any control over their actions. If this sounds familiar, take note.
How to deal with a toxic employee
There’s no other way to deal with a toxic employee than to face them privately. Expect a lot of pushback on their end. When facing them try to keep a record of their responses.
If disciplinary actions and constant meetings have not changed their behavior much, then you, as an employer, could consider terminating the employee.
Employee attrition can be both good and bad. It can be good in that laying off some workers has gained the company better performance. In regards to bad, attrition could be a costly process and may give the company a bad image.
One of the main reasons for employee turnover is a lack of employee progression. Additionally, turnover can result from poor workplace culture and no efficient management. That being so, when employees feel a sense of plateau in their job, they’ll likely search for better opportunities.
Similar to turnover, attrition is mainly caused by slow progressions in the job. When an employee feels like this job is a dead-end and won’t lead to a higher-paying position, then an attrition slump could be inevitable.
The rate measures the percentage of turnover. It’s calculated by dividing the number of employees who left by the average headcount and then multiplying the result by 100. Whether the percentage is too high or low depends on the industry.
When looking at turnover vs attrition, the main difference comes from the employer’s intention to replace the employee.
If the employer decides to immediately replace the departed employee, then it’s considered employee turnover.
In contrast, when an employer doesn’t immediately hire a replacement, it can be classified as employee attrition.
Attrition and turnover could be caused by retirement, resignation, and termination. Calculating both will provide an employer with key data on why your employees are leaving and what better way can you retain them.
Retention and Turnover