What is Attrition?| Attrition Rate Meaning & Definition| Akrivia HCM

What is attrition?

Attrition is a business term used in the workplace that refers to the loss of employees due to any reason(voluntary or involuntary)which can negatively impact an organization. It’s crucial for every business to understand why people leave so they can take preventive measures to minimize the attrition rate. 

What are the different forms of attrition?

Types of Attrition

There are three main types of attrition:

  1. Voluntary attrition – Employees who leave the organization for any reason. This can be due to personal reasons such as relocating or switching careers, or professional reasons such as dissatisfaction with their current role or company culture.
    Few examples of voluntary attrition:

    • Career growth/Better job opportunity.
    • When an employee decides to move abroad/ relocation.
    • When an employee find the workplace toxic(Mistreated, Overpressure, Underrated)
    • Due to health reasons.
  2. Involuntary attrition – This type of attrition comes when an employee is laid off due to employee misconduct or company downsizing. In some cases, involuntary attrition can lead to wrong termination if it happens for discriminatory reasons.
    Few examples of involuntary attrition:

    • Poor performance.
    • Layoffs.
    • Misconduct by employee.
    • When an employer decides to reduce the workforce.
  3. Internal attrition – is when an employee of one department gets promoted to another department within the same company. But when a high internal attrition rate occurs within a year, it indicates a failure in certain aspects and requires further investigation.
    The HR department needs to find answers to these questions.

    • Does the manager lack the necessary skills?
    • Does the work environment seem unfriendly?
    • Do they fail to meet their goals?
  4. Demographic attrition – Demographic-specific attrition is a type of attrition that occurs when a company loses employees because of their age, ethnicity, gender, race, and ability. Demographic attrition can be a severe problem for companies that affect the workplace culture. Employees should be able to work in an environment where they feel comfortable and supported, which can help reduce the risk of turnover.

What are the reasons for attrition?

Reasons for Attrition

The reasons for attrition can vary, but they often include:

  1. Personal motivation
    Employees may seek employment elsewhere or a change in personal life. Exit interviews can help you stay in touch with former employees and ensure they remember your company when looking for future work opportunities.
  2. Professional motivation
     It is a type of attrition where employees leave a company when there is a lack of career advancement opportunities or dissatisfaction with their salaries. A company’s human resources department is vital for helping manage this type of attrition by helping to secure the best possible candidates and retain valuable employees.
  3. Challenging work environment
    Your company culture is a big part of what makes your company unique. It’s important to ensure that employees feel welcome and comfortable in their roles to contribute fully to your business.One way to create an inclusive workplace culture is by providing a safe space for diverse employees. This can be accomplished by using an employee engagement system to ensure that all voices are heard. This helps eliminate any form of discrimination, whether intentional or not.
  4. Job not being suitable for an employee
    Incompatibility between a position and the employee hired to fill the job can be indicative of poor hiring practices, leading to attrition. This is especially true if the candidate was enthusiastic about joining your company but has lost interest after just a couple of months on the job. A review of your onboarding process may reveal that you have failed to match the position to the skills of your new hire. For example, you have just hired someone for a customer service position, and they have no experience in that area. In that case, you should ensure you give your new hire the necessary training in order to avoid them leaving their job before you even have time to train them properly.

What is the attrition rate?

An attrition rate, also called a churn rate, is the percentage of people who leave a company or organization in a given period. A company with a high attrition rate indicates that most employees leave. It would help if you regularly examined your attrition rate to ensure you are not losing a deserving employee.

How do you calculate the attrition rate?

“The attrition rate measures how many people leave an organization in a given period. This can be calculated by the formula mentioned below:
Number of employees leaving within the month / Average number of employees x 100”

What is Customer Attrition?

Customer attrition is when a customer discontinues business service with a company. Many factors can cause customer attrition, such as:

  • The cost of doing business with the company is becoming too expensive for customers to afford.
  • The quality of service or product provided by the company declining over time

What is the difference between employee and customer attrition?

Employee attrition occurs when employees leave their jobs for various reasons. There could be multiple reasons for an employee to leave his job, such as working conditions, change in career path, or better salary offered by another company. Customer attrition occurs when customers choose not to purchase certain products or services from a particular company. Customer attrition may arise due to poor quality products, lack of customer service, and poor pricing, among others.

How to reduce employee attrition?

There are many different ways to reduce employee attrition, and the best way to do so depends on your unique circumstances. For example, suppose you’re a small business owner with only a few employees. In that case, it will be a good idea to focus on creating a culture that fosters friendships among employees and encourages them to stick around. However, if you’re a large corporation with thousands of employees, you might need more formalized programs like training courses or employee incentives. To reduce attrition, you need to understand why your employees are leaving, and you can then work on the issues that cause them to leave.

Here are some tips for reducing employee attrition:

1. Create an employee satisfaction survey and ask employees to complete it anonymously, so they feel more comfortable being honest about their feelings. This will lead to high morale, leading to low turnover and attrition rates.

2. Encourage employees thinking of leaving to meet with you in person or over the phone to talk about what’s going on in their lives outside of work and how that could affect their job performance.

3. Make sure there are opportunities for growth within your organization so employees don’t feel stuck in one role forever; this will help them be happier overall, which will lead them to stay at your company longer than before too!

4. Offer flexible work schedules so people won’t feel trapped into staying late at night just because they can’t leave early enough.

5. Make sure you have great benefits. If your employees know they’re getting good benefits at work, for example, medical insurance or other perks—they’ll feel less pressure to leave the company.

6. Be fair with paychecks! If employees know that everyone is being paid fairly regardless of gender or race (or anything else), then there won’t be any issues between coworkers about compensation packages.

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