People often confuse employee attrition and turnover and make them out to be the same thing, but they’re not. While both attrition and turnover mean employees leaving, both have different impacts on the organization. High employee turnover is a bad sign, but there are ways it can be prevented using the right strategies. Gallup reports that 42% of employee turnover is preventable yet often overlooked.
Here, we will explain attrition and turnover and how they differ.
What is Employee Attrition?
Employee attrition is when employees leave the organization, but the vacant positions are not required to be filled immediately.
- Voluntary attrition reduces the workforce gradually and can result from resignations, retirements, or sometimes death.
- Involuntary attrition happens when employees are required to leave the organization for reasons beyond their control, such as economic conditions, restructuring, etc.
Organizations generally strive to maintain a low attrition rate; anything less than a 10% attrition rate is considered acceptable. When it is over 10%, employers need to address employee departures and keep employees engaged to prevent them from leaving.
Calculating Employee Attrition Rate
The attrition rate is the percentage of employees who leave an organization in a specific period and is calculated by dividing the number of departures by the average employee count and multiplying by 100.
Attrition Rate
(Total Number of Employees Who Left / Average Number of Employees) * 100
This means we have to find the average number of employees first before calculating the attrition rate. For example, if a company has 100 employees at the start of the year and 96 employees by the end of the year due to employees leaving without their roles being replaced, the number of employees leaving is 4.
In that case, the average number of employees will be calculated by adding the number of employees at the start and the number at the end of the year and dividing the sum by 2. So the average number of employees here will be:
Average number of employees: Employees at start + Employees at end / 2
(100 + 96) / 2 = 98
Now, to calculate the attrition rate
(4 / 98) * 100 = 4.082 %
What is Employee Turnover?
Employee turnover refers to the number of employees leaving the organization who are replaced with new employees. Like attrition, turnover is also of two types: voluntary and involuntary.
- Involuntary turnover refers to employees fired due to poor performance or layoffs.
- Voluntary turnover means leaving for other opportunities, such as better pay or benefits.
Calculating Employee Turnover Rate
Turnover rate measures the percentage of employees who leave the company (voluntarily or involuntarily) and are replaced within a specific period.
It is calculated by dividing the total number of employees who left an organization by the average number of employees, and multiplying the number by 100.
Turnover Rate
(Total number of employees who left / average number of employees) * 100
Let’s take the example of a company with 150 employees at the beginning of the year; 10 employees left by the end of the year, but new hires replaced 4 of the employees in the same year. Here is how we will find the turnover rate.
Average number of employees: Employees at start + Employees at end / 2
(150 + 144) / 2 = 147
Now, to calculate the turnover rate
(10 / 147) * 100 = 6.8%
Key Differences Between Employee Attrition & Turnover Rate
Below are the key differences between attrition and turnover.
| Attrition | Turnover |
|---|---|
| Departing employees are not replaced immediately | New hires replace departing employees |
| Involuntary attrition due to reasons beyond control, such as economic downturn | Involuntary turnover due to poor performance, misconduct, and layoffs |
| Gradual workforce reduction over time | Departing employees are replaced, so there isn’t a reduction |
| No hiring or replacement cost | Increased impact on hiring costs |
What High vs. Low Attrition & Turnover Rates Mean
Understanding what high and low attrition or turnover means proves to be very helpful in assessing and analyzing workforce culture, health, and business efficiency.
Below, we explain how low and high attrition and turnover impact the workforce and organization.
Attrition Rate
- ⬆High
An aging workforce (due to employee departure from retirement)
Employee disengagement
- ⬇ Low
Workforce stability
Employee satisfaction
Turnover Rate
- ⬆ High
Hostile work environment
Below-market compensation
Non-competitive benefits
Low employee satisfaction
Poor leadership
- ⬇ Low
Higher employee satisfaction
Competitive total compensation
Strong leadership
Positive work culture
Job security and satisfaction
While attrition and turnover are both reductions in the workforce, they happen for different reasons and have different impacts on the organization.
Knowing what metrics you need to track to measure both attrition and turnover helps you know how your organization is performing and building its team. It is essential to be aware of the causes of attrition or turnover in your organization.
When you know how low and high rates affect your organization, you are more likely to take preventive measures and maintain the ideal attrition and turnover rates to avoid organizational disruptions.
Author: Charlotte Evans
Charlotte is an Human Resources Information Systems and Martech expect, Charlotte has worked for major brands in the industry including FactorialHR and Tooltester. Originally from Manchester, UK, with a Bachelor's degree from the Manchester Metropolitan University, Charlotte currently lives in Barcelona, Spain.
