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Everything You Need To Know About Employee Attrition

March 15, 2022

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If you’re staring down a glut of open positions at your company that just refused to be filled — AKA, employee attrition — you’re not alone.

The post-pandemic talent drain is alive and well, with companies facing a mass exodus of employees across multiple sectors. In fact, a recent Prudential survey indicates that 1 in 4 workers plan to look for a new job in a different company as the pandemic subsides.

While you may be feeling helpless (or even defeated) by your company’s numbers, the attrition sky isn’t falling. There are best practices that can help you understand why your employees are leaving.

First, ask yourself this: what are your departing employees searching for?

Whether it’s better work-life balance, a higher salary and benefits package, or more effective leadership and career feedback, the key to preventing voluntary attrition is tapping into your employees’ needs before they abandon ship. 

With that in mind, let’s talk about employee attrition and some of the actionable steps you can take to manage it in your company.

What is employee attrition?

When an employee stops working for a company — regardless of the reason — and their position remains open/unfilled for a long time or indefinitely, that’s employee attrition

There are two major categories of attrition: voluntary and involuntary.

Voluntary attrition

If an employee resigns on their own accord, that’s voluntary attrition

They might have been offered a new job elsewhere, need to move to another state or country, find their existing work environment to be boring or toxic, or simply don’t feel they can grow within the company.

One of the most common types of voluntary attrition is retirement. The good news? You can easily plan for it. (More on that in a bit.)

Involuntary attrition

Involuntary attrition is the exact opposite — it’s being asked to leave your position by the company itself. 

Involuntary attrition can be the result of mergers and acquisitions, structural changes, budget cuts, or unacceptable employee misconduct. In these cases, the company itself will initiate an employee’s exit.

What are the top reasons my employees are leaving?

Retirement

Retirement — the ten-letter word that for many has come to represent freedom. It’s the end goal for most, if not all, employees. 

So, when the opportunity to retire finally arrives, most employees pack up their desk and turn in their keys. While you can’t control whether or not an employee retires, you can mitigate the damage by planning ahead. 

One way to get started? Run an assessment of your employee demographics. 

If two-thirds of your workforce are set to retire within the next three years, you’ll  need to reassess your company’s long-term goals. Redistributing responsibilities ahead of time can help your company avoid a crater-sized talent gap should they choose to retire around the same time.

Personal reasons 

An employee may leave for personal, job-related reasons. Think: better salary, greater opportunity, or a more flexible position. They might also leave for personal reasons less directly related to the role, such as stress, mental illness, chronic illness, or COVID. 

While many of these reasons are outside of your control, there are a few you can prepare for. 

Take, for instance, the possibility of losing one of your top-performing team members.

If they’re eyeing a role with a four-day workweek, a $10k/year raise, 25% more vacation time, paternal leave, and lucrative employee wellness perks like spa days and bucket-list experiences, then the reason for their wandering eye is pretty clear.

If you want to retain your talent, it may be time to go back to the drawing board and see if you can preempt an unnecessary resignation. 

Employee health and wellbeing are predicted to have the greatest impact on the workplaces of the future (at 74%) making it an area worth paying particular attention to. 

Toxic work environment

Are there communication barriers around the office? Or confusion around job duties or performance goals?

What about hostile workmates, unbridled gossip trains, or that mysterious employee who views the contents of the staff fridge as their own (you know the one)? 

If you warily answered ‘yes’ to a few of those questions, you may be dealing with a toxic work environment

This is where mining information from your employees (whether via anonymous surveys, exit interviews, or more) can help you gain deeper insight into the sludge that’s weaseled its way into your work culture. And the sooner you understand what’s happening, the faster you can take  actionable steps to detoxify it.

Lack of effective leadership

The opposite of employee attrition is (drumroll, please…): employee retention. And empowering your team is at the heart of getting them to stay. 

In other words, employees want to feel heard and to know that their vision and voice matter. Involving them in key decision-making is one way to do that.

More importantly, ensuring everyone is on the same page and knows what is expected of them (and what they need to do to reach performance targets) are some of the hallmarks of effective leadership..

One of the best ways to keep everyone in the know is by creating a business playbook. Having a detailed guide that clearly states what each employee needs to succeed and thrive in their role will not only empower your team, but if an employee does end up leaving, they won’t be taking valuable institutional knowledge with them.

Insufficient role feedback and development

Your employees need consistent, substantive feedback during their tenure in their role. Make performance appraisals regular, specific, and most of all, clear. 

After all, most employees want to know that they’re doing an effective job.    

Positive affirmation is also key — your team wants to feel that you value them. Combine regular affirmation with clear opportunities for them to grow (and thrive) in their role, and you’ll likely find yourself with a happier, more content employee.

What is my company’s attrition rate and why does it matter?

How do I calculate my attrition rate?

Freaking out over having to crunch numbers and do math? Take a deep breath — it’s easier than you think.

Calculating your company’s attrition rate (or churn rate) uses a basic formula. But ideally, your attrition rate should be below 10%.

So, let’s look at how you calculate attrition rate and walk through an example together.

Basic attrition rate formula

Attrition formula example, step-by-step

Step 1: Tally a headcount of all employees, starting from the beginning of the year.

To make this simple, let’s say you started 2021 with 300 employees. But over the year, you hired 28 more employees. 

That means, your total average number of employees for 2021 was 328 employees.

Step 2: Determine how many employees left during the year (for voluntary and involuntary reasons).

Out of 328 employees, 27 of them left for voluntary or involuntary reasons.

Step 3: Calculate your attrition rate

Now take the number of employees that left your company (27) and divide this by the total average number of employees for 2021 (328).

Employee attrition rate 2021 is 27/328 X 100 = 8.2%

Now, 8.2% is a decent figure. But the lower you can get the percentage, the better. Even with an optimal attrition rate, that doesn’t mean there isn’t room for improvement or that your rate will remain low over time.

Step 4: Create a plan of action to lower your attrition rate 

  • Set appropriate internal and external benchmarks to lower your attrition rate as much as possible.
  • Create an exit interview (or comb through them) to discover why employees are voluntarily leaving.
  • Frequently check in with your current employees on what they think needs to change.
  • Offer career growth opportunities.
  • Offer in-demand incentives, bonuses, or rewards for your team.

Employee attrition vs. employee turnover: What’s the difference?

You might be wondering how employee attrition is different from employee turnover

The two might seem similar, but… not quite.

With employee attrition, a company decides not to replace or fill the vacant position with a new employee. Instead, they’ll opt to eliminate the position. 

With employee turnover, however, a company tries to replace the employee as quickly as possible, and the role is not left vacant. 

Think of employee turnover as a short-term metric, whereas attrition is a long-term metric that can give you insight into why employees might have left — and why you may be struggling with employee retention.

Are there best practices to reduce voluntary attrition in my company?

Lean into flexibility

Every employee has different needs. The sooner you discover what those needs are (cue the importance of an employee survey and regular communication), the better. 

Considering a flexible work option can help boost employee morale, motivation, productivity, and create a sense of belonging in a work environment that values them. For example:

  • Work-from-home or remote working opportunities.
  • Flextime.
  • A condensed schedule (we’re looking at you, four-day workweek!). 
  • Reduced hours.
  • Work sharing (where two or more employees share the same role).

Set clear expectations from the beginning

From the job list to the onboarding process — and during initial and ongoing employee training — your employees need to know what you expect of them. Details such as what their role entails, what key performance targets they should be aiming to hit, and what they can do in their capacity to drive the team towards success are all great pieces of info to have easily available. 

Check-in with your employees frequently 

If you want to know how your employees feel about their role/the work culture, it’s best to ask them outright — and do it often.

An annual company-wide town hall or a biannual meeting might not be enough to help you get an accurate picture of your ever-shifting workplace. To know what’s going well and what needs changing, it’s crucial to create a space where this feedback is welcomed. 

Not only will you gain a clearer sense of your employee’s level of motivation or morale, but you’ll also build a stronger rapport that shows them you want to get to know them. Checking in demonstrates that your company wants to know what’s working (or what isn’t working) for them and that you’re willing to make appropriate changes.

Conduct exit interviews

Not all resignations are preventable, and you may not even know why an employee left to begin with.

This is why exit interviews can be a valuable tool in your attrition-fighting toolbox.

It’s important to note that feedback you receive from an exit interview won’t single-handedly solve your employee retention issues — regular employee feedback during their tenure with your company is often far more effective.

But you can tailor the exit survey to what you want to genuinely understand about your employee’s departure. Here are some potential questions to include:

  • Why are you leaving the company?
  • How did you feel about your duties and responsibilities?
  • Did you feel prepared and equipped to do your job effectively?
  • What could we have done better to improve your work experience?
  • How would you describe our workplace culture?

Ready to lower your employee attrition rate?

While you can’t always predict employee resignation, there are proactive steps you can take to prevent some forms of voluntary attrition and ultimately keep your employee attrition rate low.

Regular communication, a commitment toward garnering frequent employee feedback, and providing easy access to every resource your employees need to succeed — your company’s policies, hierarchy, performance goals, and more — are all effective ways of keeping your attrition rate as low as possible.

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Article

Everything You Need To Know About Employee Attrition

March 15, 2022

Jump to a section
Share it!
Sign up for our newsletter
You're all signed up! Look out for the next edition of The Manual Weekly coming Wednesday am!
Oops! Something went wrong while submitting the form.

If you’re staring down a glut of open positions at your company that just refused to be filled — AKA, employee attrition — you’re not alone.

The post-pandemic talent drain is alive and well, with companies facing a mass exodus of employees across multiple sectors. In fact, a recent Prudential survey indicates that 1 in 4 workers plan to look for a new job in a different company as the pandemic subsides.

While you may be feeling helpless (or even defeated) by your company’s numbers, the attrition sky isn’t falling. There are best practices that can help you understand why your employees are leaving.

First, ask yourself this: what are your departing employees searching for?

Whether it’s better work-life balance, a higher salary and benefits package, or more effective leadership and career feedback, the key to preventing voluntary attrition is tapping into your employees’ needs before they abandon ship. 

With that in mind, let’s talk about employee attrition and some of the actionable steps you can take to manage it in your company.

What is employee attrition?

When an employee stops working for a company — regardless of the reason — and their position remains open/unfilled for a long time or indefinitely, that’s employee attrition

There are two major categories of attrition: voluntary and involuntary.

Voluntary attrition

If an employee resigns on their own accord, that’s voluntary attrition

They might have been offered a new job elsewhere, need to move to another state or country, find their existing work environment to be boring or toxic, or simply don’t feel they can grow within the company.

One of the most common types of voluntary attrition is retirement. The good news? You can easily plan for it. (More on that in a bit.)

Involuntary attrition

Involuntary attrition is the exact opposite — it’s being asked to leave your position by the company itself. 

Involuntary attrition can be the result of mergers and acquisitions, structural changes, budget cuts, or unacceptable employee misconduct. In these cases, the company itself will initiate an employee’s exit.

What are the top reasons my employees are leaving?

Retirement

Retirement — the ten-letter word that for many has come to represent freedom. It’s the end goal for most, if not all, employees. 

So, when the opportunity to retire finally arrives, most employees pack up their desk and turn in their keys. While you can’t control whether or not an employee retires, you can mitigate the damage by planning ahead. 

One way to get started? Run an assessment of your employee demographics. 

If two-thirds of your workforce are set to retire within the next three years, you’ll  need to reassess your company’s long-term goals. Redistributing responsibilities ahead of time can help your company avoid a crater-sized talent gap should they choose to retire around the same time.

Personal reasons 

An employee may leave for personal, job-related reasons. Think: better salary, greater opportunity, or a more flexible position. They might also leave for personal reasons less directly related to the role, such as stress, mental illness, chronic illness, or COVID. 

While many of these reasons are outside of your control, there are a few you can prepare for. 

Take, for instance, the possibility of losing one of your top-performing team members.

If they’re eyeing a role with a four-day workweek, a $10k/year raise, 25% more vacation time, paternal leave, and lucrative employee wellness perks like spa days and bucket-list experiences, then the reason for their wandering eye is pretty clear.

If you want to retain your talent, it may be time to go back to the drawing board and see if you can preempt an unnecessary resignation. 

Employee health and wellbeing are predicted to have the greatest impact on the workplaces of the future (at 74%) making it an area worth paying particular attention to. 

Toxic work environment

Are there communication barriers around the office? Or confusion around job duties or performance goals?

What about hostile workmates, unbridled gossip trains, or that mysterious employee who views the contents of the staff fridge as their own (you know the one)? 

If you warily answered ‘yes’ to a few of those questions, you may be dealing with a toxic work environment

This is where mining information from your employees (whether via anonymous surveys, exit interviews, or more) can help you gain deeper insight into the sludge that’s weaseled its way into your work culture. And the sooner you understand what’s happening, the faster you can take  actionable steps to detoxify it.

Lack of effective leadership

The opposite of employee attrition is (drumroll, please…): employee retention. And empowering your team is at the heart of getting them to stay. 

In other words, employees want to feel heard and to know that their vision and voice matter. Involving them in key decision-making is one way to do that.

More importantly, ensuring everyone is on the same page and knows what is expected of them (and what they need to do to reach performance targets) are some of the hallmarks of effective leadership..

One of the best ways to keep everyone in the know is by creating a business playbook. Having a detailed guide that clearly states what each employee needs to succeed and thrive in their role will not only empower your team, but if an employee does end up leaving, they won’t be taking valuable institutional knowledge with them.

Insufficient role feedback and development

Your employees need consistent, substantive feedback during their tenure in their role. Make performance appraisals regular, specific, and most of all, clear. 

After all, most employees want to know that they’re doing an effective job.    

Positive affirmation is also key — your team wants to feel that you value them. Combine regular affirmation with clear opportunities for them to grow (and thrive) in their role, and you’ll likely find yourself with a happier, more content employee.

What is my company’s attrition rate and why does it matter?

How do I calculate my attrition rate?

Freaking out over having to crunch numbers and do math? Take a deep breath — it’s easier than you think.

Calculating your company’s attrition rate (or churn rate) uses a basic formula. But ideally, your attrition rate should be below 10%.

So, let’s look at how you calculate attrition rate and walk through an example together.

Basic attrition rate formula

Attrition formula example, step-by-step

Step 1: Tally a headcount of all employees, starting from the beginning of the year.

To make this simple, let’s say you started 2021 with 300 employees. But over the year, you hired 28 more employees. 

That means, your total average number of employees for 2021 was 328 employees.

Step 2: Determine how many employees left during the year (for voluntary and involuntary reasons).

Out of 328 employees, 27 of them left for voluntary or involuntary reasons.

Step 3: Calculate your attrition rate

Now take the number of employees that left your company (27) and divide this by the total average number of employees for 2021 (328).

Employee attrition rate 2021 is 27/328 X 100 = 8.2%

Now, 8.2% is a decent figure. But the lower you can get the percentage, the better. Even with an optimal attrition rate, that doesn’t mean there isn’t room for improvement or that your rate will remain low over time.

Step 4: Create a plan of action to lower your attrition rate 

  • Set appropriate internal and external benchmarks to lower your attrition rate as much as possible.
  • Create an exit interview (or comb through them) to discover why employees are voluntarily leaving.
  • Frequently check in with your current employees on what they think needs to change.
  • Offer career growth opportunities.
  • Offer in-demand incentives, bonuses, or rewards for your team.

Employee attrition vs. employee turnover: What’s the difference?

You might be wondering how employee attrition is different from employee turnover

The two might seem similar, but… not quite.

With employee attrition, a company decides not to replace or fill the vacant position with a new employee. Instead, they’ll opt to eliminate the position. 

With employee turnover, however, a company tries to replace the employee as quickly as possible, and the role is not left vacant. 

Think of employee turnover as a short-term metric, whereas attrition is a long-term metric that can give you insight into why employees might have left — and why you may be struggling with employee retention.

Are there best practices to reduce voluntary attrition in my company?

Lean into flexibility

Every employee has different needs. The sooner you discover what those needs are (cue the importance of an employee survey and regular communication), the better. 

Considering a flexible work option can help boost employee morale, motivation, productivity, and create a sense of belonging in a work environment that values them. For example:

  • Work-from-home or remote working opportunities.
  • Flextime.
  • A condensed schedule (we’re looking at you, four-day workweek!). 
  • Reduced hours.
  • Work sharing (where two or more employees share the same role).

Set clear expectations from the beginning

From the job list to the onboarding process — and during initial and ongoing employee training — your employees need to know what you expect of them. Details such as what their role entails, what key performance targets they should be aiming to hit, and what they can do in their capacity to drive the team towards success are all great pieces of info to have easily available. 

Check-in with your employees frequently 

If you want to know how your employees feel about their role/the work culture, it’s best to ask them outright — and do it often.

An annual company-wide town hall or a biannual meeting might not be enough to help you get an accurate picture of your ever-shifting workplace. To know what’s going well and what needs changing, it’s crucial to create a space where this feedback is welcomed. 

Not only will you gain a clearer sense of your employee’s level of motivation or morale, but you’ll also build a stronger rapport that shows them you want to get to know them. Checking in demonstrates that your company wants to know what’s working (or what isn’t working) for them and that you’re willing to make appropriate changes.

Conduct exit interviews

Not all resignations are preventable, and you may not even know why an employee left to begin with.

This is why exit interviews can be a valuable tool in your attrition-fighting toolbox.

It’s important to note that feedback you receive from an exit interview won’t single-handedly solve your employee retention issues — regular employee feedback during their tenure with your company is often far more effective.

But you can tailor the exit survey to what you want to genuinely understand about your employee’s departure. Here are some potential questions to include:

  • Why are you leaving the company?
  • How did you feel about your duties and responsibilities?
  • Did you feel prepared and equipped to do your job effectively?
  • What could we have done better to improve your work experience?
  • How would you describe our workplace culture?

Ready to lower your employee attrition rate?

While you can’t always predict employee resignation, there are proactive steps you can take to prevent some forms of voluntary attrition and ultimately keep your employee attrition rate low.

Regular communication, a commitment toward garnering frequent employee feedback, and providing easy access to every resource your employees need to succeed — your company’s policies, hierarchy, performance goals, and more — are all effective ways of keeping your attrition rate as low as possible.

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Everything You Need To Know About Employee Attrition

March 15, 2022

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