Employee attrition, on the face of it, may seem like a legitimate part of a cutback program or a method to create efficiency. But before companies decide not to hire replacements, they need to understand the full ramifications of attrition–especially when it comes to unforeseen skill gaps. 

What Is Employee Attrition?

Employee attrition happens when somebody leaves their job and is not replaced, or is only replaced after a long time. Reasons for leaving can include getting fired, quitting, relocating, illness, and retiring. Employee attrition is also the effect of eliminating a job position. This can mean that tasks are taken on by remaining workers, or that the function that the employee served is no longer needed. 

What Is the Difference Between Employee Attrition and Employee Turnover?

Calculations for both employee turnover and attrition count the number of workers who leave both voluntarily and involuntarily. However, vacancies created by attrition are at some point deleted from the organizational chart. In comparison, vacancies left by turnover are meant to be filled as soon as possible by external hiring or talent mobility programs. 

Employee Retention vs. Employee Attrition

At first glance, these figures are inversely related, i.e. the rate at which a company can retain employees should be 1 – the rate at which a company loses them. But this is only part of the story, as the process of measuring retention is quite different than the one used for attrition. Here are some reasons why:

• Retention rates have a relatively long-term focus. Companies want to see how different actions and events affect the number of people who stay with the organization. In comparison, attrition is usually assessed on a monthly basis. This is because HR needs frequent updates to know how many new hires are required. 
• Most HR teams don’t count new hires during their first month of work in their calculation of the retention rate. Obviously, if the worker quits soon after being hired, which is common, then including them in retention rates distorts the calculation. On the other hand, if a new hire leaves, they are part of the attrition rate because a replacement must be found. 
• When a company fires an employee, it might be because they want to eliminate the position, and so there is no need to include them in the retention rate assessment. But such an employee is definitely part of the attrition rate.  

What Are the Different Types of Employee Attrition?

There are several categories of employee attrition. Voluntary attrition is when employees choose to quit their jobs, whatever their reason may be. Involuntary attrition is when the employer initiates the employee’s departure, whether through a direct firing, layoffs due to mergers and acquisitions, structural reasons, and the like. Internal attrition is when employees leave jobs in one department to take a job in a different department within the same company. And finally, demographic-specific attrition is when a certain group of people leave their jobs, such as women, ethnic minorities, people with disabilities, veterans, or older professionals. 

Why Does Attrition Happen?

Companies that do not refill a job position do so for a number of reasons. The work being done was for a purpose that is now obsolete, let’s say, in the case of a product that has been removed from the company’s catalog. Another instance is where the resources related to the position are no longer available, like raw materials that can only be bought from a supplier that has gone out of business. Sometimes, a job can be replaced by technology, or because a new technology is required that the current employee cannot or will not learn. 

Jobs can also be eliminated if the organization is adopting a new strategy, and the position is not needed; in such cases, entire divisions can be attrited. This was the case with many companies during the Covid-19 pandemic. Positions were cut without any clear idea as to when they would be refilled. This move was not a strategy in the sense that it was thoroughly planned, but it was still an organization-wide action meant to promote survival. The world eventually saw the effect of this, for example, in the crisis of understaffing at many airports. 

Attrition also occurs when it takes a long time to replace a worker. There are certain economic periods when recruiting is affected by there being a “buyer’s market” or “seller’s market” for employment. When it’s a seller’s market (i.e. there are many job openings available and workers can be more demanding), it might take a while to find a qualified candidate. During times like these, which tend to occur on a cyclical basis, it can be a good idea for a company to avoid voluntary turnover, especially for skilled workers. After all, there are many reasons why employees quit their jobs:

• A low level of employee engagement is often seen one step before quitting. When a worker realizes that their effort is not getting them anywhere, they at first lose motivation to be active. In the long term, they leave for something that promises more of a future.
• Poor management is another contributing factor to voluntary quits. The consequences of bad management are extensive, and include a negative environment, interpersonal conflict, a lack of clear direction, and low motivation.
• A strong trend in the HR world is that of employee burnout. Recent events like the Great Resignation have left many teams short-handed. The result is that more responsibility falls on fewer people, resulting in stress. Ironically, attrition can lead to a snowball effect as more employees quit due to pressure at work. 

How to Calculate Employee Attrition Rate

The formula for calculating your employee attrition rate is quite straightforward: 

Unreplaced employees/average headcount*100

First, count the number of employees who have left (and not been replaced) in a given period. Then divide that number by the total number of employees in that same period.
Take that number, multiply it by 100, and there is your attrition rate.  

Is Attrition a Good or a Bad Thing?

Sometimes, closing out a position is necessary. Rapid advances in technology often mean that machines replace people, and there is no economically viable way for an organization to keep related workers on the payroll.  

However, it is often the case that organizations eliminate jobs as a short-term solution and actually suffer more as a result. 

An organization’s attrition rate can have many negative effects:

• Reduction in performance and productivity
• A weaker company culture
• Poor levels of customer satisfaction
• Decreased morale and increased stress on remaining employees
• Lack of operational continuity
• Increased skill gaps
• Loss of institutional knowledge 

The longer it takes to deal with these issues, the worse the situation can become. When remaining employees need to take over for a position that has been cut, stress levels increase over time. 

In addition, increasing global skill gaps mean that companies will take longer to find replacements. According to the WEF, for example, Europe is facing a shortage of various professionals who rely on hard skills to do their job. A lack of such workers will mean:

• Extended times to find replacements
• Larger salaries for in-demand positions
• Higher turnover rates for positions where the employer does not offer a competitive salary and benefits
• A more expensive recruitment process (often based on a new hire’s salary)

This is why organizations need to be very sure that firing an employee is the best way to go. 

Resources and Attrition

The money saved from lower salary costs does not always make a long-term difference to the health of the company. In this article, Harvard Business Review claims that layoffs have a wide range of negative effects on a company, for example:

• A betrayal of trust as employees find that hard work does not mean loyalty from the company
• No corresponding increase in long-term profitability 
• A lack of positive response from shareholders
• No immediate financial improvements
• An increased chance of filing for bankruptcy 

In contrast, retaining talent often has a positive impact on company survival. Experienced employees discover innovative ways to deal with the threats that cause other companies to lay off workers. They also tend to reorganize existing resources and find less expensive ways of doing business. 

What Are the Best Ways to Reduce Employee Attrition?

The key to reducing your employee attrition rate is to keep employees happy. That means taking good care of them, but also, hiring the right people in the first place, and asking the right questions when they leave. Important feedback and lessons can be learned from beginning to end with every employee, which will ultimately impact your attrition rate. 

Here are essential steps that you should take to avoid an attrition rate that is unnecessarily high:

1. Career growth opportunities: Providing learning and development programs makes employees feel invested in, cared about, and less likely to walk away. Employee development programs are seen as the main factor behind chances for advancement, which is historically one of the most important influences on a worker’s decision to stay with their employer (or look elsewhere). In addition, companies should enable growth opportunities for workers who participate in L&D through internal promotion and skills-based hiring programs.
2. Feedback: Give employees a chance to share what’s on their mind on a regular basis, whether that’s through an anonymous form or one-on-one meetings with HR or managers. Feedback is an essential workplace activity that does not need to be a negative experience if there is an emphasis on being constructive.
3. Competitive pay package: It sounds obvious, and it’s true: Employers who pay a bit more than their competition are at an advantage when it comes to holding onto their people. At least in the short term, companies that offer good pay will hire more quickly and minimize the exorbitant costs of recruitment.
4. Employee benefits: It is equally important to offer the benefits employees need, whether that’s health insurance, paid time off, disability, life insurance, maternity leave, and the like. But remember that not all benefits need to be in the form of compensation. For instance, employee recognition initiatives are a low-cost approach that can increase engagement and performance while highlighting organizational role models.  
5. Employee wellness: Maintaining a work-life balance leads to happy employees. A flexible mindset is required here, whether that means allowing employees a remote working arrangement, managing their own schedule, letting them bring their dog to work on occasion, subsidizing meal or gym memberships, and so on. The participation of direct managers, as well as a strong set of leadership skills, is vital here.
6. A thorough exit interview: Something can be learned from every exit interview. Use the opportunity to hear about what didn’t work and detect any problematic trends. These insights can be highly valuable in rectifying issues for going forward, which can lower your attrition rate. 

Countering Employee Attrition with Learning and Development 

As we mentioned, one of the most effective measures against employee attrition is career growth opportunities. But, for companies that are under pressure to improve performance, layoffs might seem like a faster, more efficient solution. 

Part of this attitude is a result of the challenges of measuring ROI for L&D programs, and of creating effective career development programs in the first place. These are two separate, but related, issues. 

It is a major challenge for HR and L&D teams to build customized learning initiatives, particularly for large companies. Every employee will have strengths and weaknesses in various areas. For example, there are all kinds of leadership skills, such as self-awareness, communication, and persuasion. Chances are that many of the leaders in any company have some, but not all, of these skills. Yet when HR must train hundreds of managers, it becomes very difficult to:

• Assess every employee to determine their areas of weakness
• Find the best trainer, coach, or mentor to help them build a particular skill  
• Arrange, run, and assess each program for each employee

Instead, many companies choose to offer “one size fits all” courses, which are simply easier to organize. It is common for workers to be sent to a leadership course that covers a variety of topics, which is a waste of time for those employees who are already proficient in certain areas. The result is a leader who does not get to focus on the skills they need but spends time on learning skills they already have. 

From an ROI perspective, this means that the organization is investing in a course that is partly not necessary. But there are other problems. Many employees require soft skills training, which is subjectively evaluated. What is the financial return when an employee improves their leadership skills? This is a calculation that is important for understanding L&D return on investment, but quite difficult to put into practice. 

The Importance of Personalized L&D

The answer to this challenge is a career development program that is based on a capable talent development platform. These technologies allow HR teams to build customized learning initiatives by:

• Compiling a granular selection of courses. For instance, instead of a course in communications, the platform would include written, verbal, presentational, and non-verbal skills. 
• Matching skills to needs. With a wider list of available topics, employees and the HR professionals who are assisting them can find exactly the courses required. 
• Administering programs across the organization. A single platform is all that is needed to allocate courses, receive feedback, and update performance records. Some technologies include valuable assessment functions that allow the grading of employee course performance, even for soft skills, and of the quality level of the course. 

Growthspace for Attrition Skill Gaps

For companies that have lost skills to attrition, Growthspace is essential. Growthspace’s precision skill development platform connects employees at all levels to experts who can upgrade their skills, quickly and efficiently. Organizations that hold on to current workers can also reskill and upskill more easily with Growthspace. It’s simpler to add a related skill to an employee’s ‘inventory’ than it is to teach remaining workers how to do an unfamiliar job from scratch. No matter what retention strategy your company follows, Growthspace can help fill in the gaps.