People analytics

How to reduce your organizations’ employee attrition rate

Whether you’re hiring savvy professionals or junior-level specialists, there will always be a recruiting price to pay. Training costs, administrative and recruiter hours, placement on external job boards, and HR marketing are one of the key factors that influence the talent acquisition. In 2019, Glassdoor estimated that it takes around $4.000 to hire a new employee in the US.

To cut costs on recruitment and onboarding, companies focus on creative workforce retention and engagement techniques. Metrics like employee (staff) attrition, staff turnover, and retention rates help HR professionals evaluate the current organization’s state and build effective strategies to workforce retention.

In this post, we’d like to talk about employee attrition as one of the inevitable processes at any organization. We’ll also explain how you can lower the attrition rates with budget-friendly and simple tricks.

Employee attrition vs employee turnover: what’s the difference?

Attrition and employee turnover are slightly similar and, as a result, are sometimes confused with each other. In both cases, these concepts mean the process when employees leave the company. While employee turnover means leaving because of negative reasons like corporate culture discrepancies and toxic management, employee attrition happens because of natural reasons like retirement or passing away.

To calculate the attrition rate, use this formula: divide the number of employees that left the company within a year to the overall number of employees and multiple that number to 100.

Staff attrition rate = Amount of attritions/total number of employees x 100

Let’s say at the beginning of the year you had 800 people. Throughout 2020, you hired 150 people and 130 people left. That means that the total number of employees in 2020 was 950 (800+150).

Then your staff attrition rate is equal 13,7: 130/950*100

You might wonder, what a good attrition rate is? Generally, 10% staff attrition rate is considered optimal. With such rates, you aren’t likely to experience sudden workforce shortage or unexpected company’s growth. If your figure is bigger than 10%, it’s high time to figure out the reasons why people leave and how you can retain them.

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Reasons for employee attrition

1. Voluntary redundancy

Voluntary redundancy is the number one reason for staff attrition. It’s a natural workforce flow that includes leaving the company because of retirement, health issues, moving to another city, studying, family reasons, or passing away.

2. Company’s initiative

In exceptional cases, companies initiate the dismissal of employees. Common reasons for involuntary redundancy include company’s mergers and acquisitions, staff downsizing, structural replacements, employee’s misconduct, or violation of corporate rules.

3. Industry specifics

For some industries, it’s natural to experience higher attrition and turnover rates because of seasonal work, high-volume hiring, contractor work. Such industries include ecommerce, construction, agriculture, and hospitality. These businesses tend to have seasonal spikes, so they employ much of their workforce on a short-term, contract basis. As a result, businesses in this niche

4. Internal attrition

This kind of staff attrition is probably the most positive among all the other ones. When employees join another department or move to another country or city to work for another company’s branch, it’s considered internal attrition.

5. Lack of diversity

The recent survey by Glassdoor shows that 76% of employees and job seekers assess companies by their workforce diversity and inclusion. Diversity impacts personnel attrition as well.

Sometimes it makes sense to pay attention to demographic specifics of employees that decide to leave your company and analyze how you can improve your working conditions for them. Here are some of the diversity types to consider:

Racial (for example, do you have equal right for, Asian people?)
Age (do you mitigate ageism at your workplace?)
Gender (do you have an equal number of women and men on top management positions?)
Disability (do you provide comfortable and safe working conditions for people with disabilities?)
Cultural diversity (do you encourage open-minded attitude towards different cultures?)

How to deal with high attrition rates at your company

Optimize the onboarding process

Did you know that positive employee onboarding experience increases your chances to retain workforce up to 82%?

Unfortunately, onboarding often fails because HR managers share incorrect information about working conditions, responsibilities, and corporate culture during candidate interviews. Or, after a candidate joins the company, there’s lack of mentor support or help from colleagues to aid newcomers in performing their duties well.

Here’s how you can improve your onboarding process to make your employees stay with you longer:

Set the right expectations about your organization and current employees, so everyone feels comfortable dealing with diverse cultures, ages, and so on.
Provide a clear roadmap to starting a job at your company from the day one. You can automate the onboarding process with tools that help you build checklists and wiki notes. As a result, you’ll be able to scale your onboarding flow with other HR managers and newcomers to the company.
Involve line managers to the onboarding process as they’re the most competent and aware of all working details. This initiative also helps build a mentorship culture, where managers work towards employee development and retention.

Avoid laying off completely

Sometimes you need to lay off your employees due to unexpected crisis or seasonal stagnancy. However, you can always make a compromise like offering a temporary pay reduction, switching employees to a part-time job, offering unpaid vacations, or moving them to less-paid roles within a company for a specific period.

When COVID-19 hit in spring, most of hospitality and restaurant businesses opted for similar measures to keep their workforce in place and still function, even though with lower turnover.

Go for long-term hiring

Make it clear: once you hire an employee, you’ll do your best to make your cooperation last. Demonstrate your reliability with transparent career development roadmaps, learning initiatives to help employees reach their professional goals, and regular feedback like NPS.

Once you notice the signs of high attrition, it makes sense to survey your employees at a company-wide level or organize 1:1 meetings to sync up personally and determine wellbeing of your workforce.

In conclusion

It’s important to distinguish employee attrition from staff turnover. Even though these terms basically mean the staff reduction, attrition defines a natural employee flow within a company due to retirement, passing away, moving to another place. Sometimes, negative factors like downsizing or lack of diversity impact staff attrition as well.

To track employee statistics manually is a daunting process. Here at HRForecast, we offer a variety of HR analytics tools to help you securely gather, store, and analyze valuable workforce data. Check them out or drop us a line to find out about our customizable HR solutions.