Regardless of the industry your business operates in, it’s normal for employees to leave from time to time.
The Muse’s 2023 user survey found 75% of employees plan to find a new job within the next 12 months, up from 65% in 2022.
If you’ve noticed these trends at your business, it can be helpful to evaluate them through the lens of two related but different HR metrics: attrition and turnover. While these terms are often conflated, there are key differences between the two metrics that can offer important insights into your business.
To do so, it’s first important that you understand the differences between attrition and turnover.
Difference between attrition and turnover
Attrition is a metric that measures the number of employees who leave your organization and whom you choose not to replace. The result is typically that a position is left open, merged into other positions, replaced with a brand-new position, or otherwise eliminated. Attrition typically leads to a reduction in a company’s overall number of employees.
There are three forms of employee attrition:
- Involuntary attrition: When a company releases an employee to reduce staffing costs and financial stress. Examples include position elimination, layoffs, or termination. It gets its name from the fact that it is involuntary from the employee’s perspective.
- Voluntary attrition: When an employee leaves the company because they got a new job elsewhere, changed careers, relocated with their family and loved ones, chronic health issues, chronic burnout, or toxic workplace culture. Here, voluntary refers to the fact that it is voluntary from the employee’s perspective.
- Retirement employee attrition: When a few employees or a significant chunk of your staff retires simultaneously.
Attrition can be caused by reasons that are both within and beyond a company’s influence. In order to meet its staffing requirements and succeed in the long term, a business must anticipate attrition as much as possible, and take steps to address and reduce it. Uncontrolled, high levels of attrition can cause serious problems for a business.
Like attrition, turnover refers to the number of employees who leave a company in a particular period, typically one year. But it can also apply to individual departments or demographic groups and other subcategories in an organization.
Turnover can be:
- Voluntary: When an employee actively leaves an organization. There are many other reasons for employee turnover, including getting a new job position, higher-paying job, workplace conflict, or disengagement.
- Involuntary: When an employer terminates an employee or permanently removes them from a particular group in the company. Some common reasons for this include toxic behavior or poor performance.
The key differences between turnover vs. attrition lies in the hiring and employer’s intention. Attrition happens when an employee leaves and the vacancy remains unfilled, while turnover happens when the worker leaves voluntarily or involuntarily and the employer needs to replace them with a new hire.
Attrition rate vs. turnover rate
To understand the difference between employee attrition rate vs. turnover rate, we’ll define the terms and explain the formula for calculating each metric.
Attrition rate or employee churn rate measures the rate employees leave your company. It’s often calculated by dividing the number of employees who left in a given period over the average number of employees in your company.
The resulting attrition rate is expressed as a percentage for the year (typically one year) or over a specific time frame.
For example, if your company has 1,100 employees at the start of a year and 900 at the end of the year, it means 200 left.
Here’s how to calculate the attrition rate:
- Number of employees who left: 200
- Average number of employees for the period: Add the number of employees at the start of the year (1,100) + number at the end of the year (900) divided by two. In this case, 1,100 + 900 = 2,000/2 = 1,000
- The attrition rate will be calculated as: 200/1,000 x 100 = 20%
Average attrition rates vary between industries and companies, so compare your rates with your competitors or peers. For example, in 2021, professional services organizations reported an average attrition rate of 14%.
It’s difficult to analyze attrition rates without reviewing the context of what’s happening in the industry, location, and globally. On average, anything less than 10% is considered low attrition. Attrition rates above 20% or more are considered high, meaning you should probe why and discover ways to retain employees.
Planned employee attrition has several benefits, including reduced costs, newer talent and ideas, and fewer complacent workers or negative influences. If unplanned, though, attrition can affect your company’s productivity or performance, increase costs of replacing talented workers, knowledge transfer, and hiring ability.
Turnover rate measures how often employees leave a company and are replaced by new hires, and is typically expressed as a percentage that can be calculated for a specific department or the entire organization. You can calculate it by dividing the number of employees leaving by the average number of staff in that period.
Keeping with the example above, let’s say you had 200 employees at the beginning of the year, ended with 1,100 employees, and 100 left the company that year.
Your turnover rate would be calculated as follows:
- Number of employees who left: 100
- Average number for the year: (200 + 1,100)/2 = 650
- Your annual turnover rate will be 100/650 x 100 = 15.38%
While it’s natural for organizations to experience turnover, keeping your company’s employee turnover rate low is critical. A high turnover rate means you need to study the reasons behind it and change your employee retention strategy.
It’s difficult to find industry-specific turnover rates, but Gartner says turnover rates could reach as high as 24% in the coming years, impacted by factors such as industry, location, role, and more.
LinkedIn data found HR had the highest turnover rate, at 14.6% — followed by research (13.1%) and product management (13.0%). Low turnover rates were common in technical roles, such as administration (7.8%), operations (8.8%), and accounting (9.4%).
The Society for Human Resource Management’s (SHRM) State of the Workplace report shows retention remains a top issue for HR departments, with large organizations reporting twice as many resignations as small ones.
Measuring turnover rate may bring positive benefits, such as hiring fresh talent, losing underperforming workers, and improving your company culture. The flip side is that you risk lowering your brand reputation, enduring lengthy recruitment cycles, and struggling to fill some positions.
How to reduce attrition and turnover in your business
How can you slow or reverse worrying levels of attrition or turnover in your business? Here are some tips to get started:
- Sharpen your employee value proposition by keeping compensation and benefits current, increasing career development opportunities, and nurturing a strong company and team culture.
- Make jobs sticky by investing in diversity, inclusion, belonging, meaning, and other relational ties.
- Prioritize employee satisfaction through employee engagement and recognition activities and good communication avenues to avoid having a disengaged workforce.
- Have a good talent-sourcing and recruitment process to pick candidates who see you as a long-term employer — not a stopgap.
- Conduct stay interviews to find out what it’ll take for employees to stay, then quickly follow up with appropriate actions based on what they share.
- Hold exit interviews when employees leave voluntarily to get insights into how they see your business.
- Act on issues to remedy them and change policies where possible to improve the workplace situation for everyone in the organization.
- Encourage positive social behaviors such as generosity and gratitude for employees to connect and appreciate one another and inculcate a sense of ownership of the company.
- Improve the employee experience by listening, caring for, and talking to your staff, getting to know their needs, expectations, and motivations.
- Learn about, train, and upskill your employees so they’re not stuck in their positions, but have multiple career advancement options.
- Have zero tolerance for bad management behaviors by improving how your leaders and managers handle employees.
Although often used interchangeably, attrition and turnover differ based on the employer’s intentions. The challenge for business owners is to keep attrition and turnover rates low. The secret lies in knowing your employees’ values, aspirations, and motivations, and running your company with a human touch. A valued and rewarded employee is happy, satisfied, and less likely to leave.