It is normal for a company to see its employees come and go. And there are a whole set of reasons for every employee to leave their workplace. These can be because of employee turnover or employee attrition. Therefore, it becomes the job of the HR leaders to learn about the key metrics: attribution vs. turnover. And understand the fundamental distinctions and their causes. Both of these recruitment metrics relate to the reduction of the workforce, and they can forewarn HR leaders about the company’s development.
Both of these key metrics get confused with one another. Through this post, we’ll dive into the major differences and causes of attribution and turnover. How do they impact a workplace? and why it is important to keep them separate.
What is employee attrition?
Employee attrition is caused when the employees of an organization leave their workplace for reasons such as retirement, layoffs, illnesses, continuing studies, and so on. These do not show any negative outcomes for the workplace. As the employees retire from the company with a cheerful spirit, this indicates the healthy work culture of a company.
Otherwise, employees are laid off when a company has to shrink its employee size. Or maybe there’s no need for the designation at the organization. In this case, the employer can save money by reducing headcount costs.
In the case of employee attrition, the company doesn’t fill the vacant position as it doesn’t need one. The employee attrition rate can determine a company’s growth or if there’s a need to change the approach of its business style.
What is employee turnover?
Employee turnover reflects the company’s image negatively. When people leave a company because they’re unsatisfied with the work environment or are fired because of a poor hiring decision, it reflects employee turnover.
Employee turnover usually happens because of resignations from employees because they find better opportunities or their work culture is incompetent to give them challenges.
The employer turnover rate tells the company that it needs to call the shots on changing the guard or making an optimum hiring decision.
What’s the difference between attrition and turnover?
Attrition and turnover are the key metrics used interchangeably. But there are many fundamental differences. While one needs an altered work culture approach in a company, the other doesn’t demand any developments.
Attribution is the method through which a company finds a way to cut costs. For example, if a company wants to shrink its headcount, it’ll not hire more people for the voluntarily left job. Or, it can lay off some employees when the work is completed. Therefore, a high attribution rate for a company can help save its budget.
However, there are some potential disadvantages to high attribution rates. For instance, more work burdens fall upon colleagues’ shoulders. Or, if an employer leaves the company due to a mishap such as an accident or death, a company loses a talented employee. Also, sometimes shrinking the cost doesn’t indicate a company’s growth, as one reason is that the business is hard to dive through the latest competition.
An employee attribution rate can be calculated as the employee numbers that are left during a period divided by the average employee numbers in the same period. And the whole sum is multiplied by a hundred for the percentage.
Attribution rate = Number of employers that left in a period/ Average employees numbers X 100.
For example, if a company has 60 total employees in January and 7 people leave during the month. Then, the attribution rate of the company will be
Attribution rate = 7/60 X 100 = 11.66%
In a turnover, the employer seeks to fill the vacant positions. Employers tend to leave the company for any of the following reasons: resignations due to less work-job satisfaction; better job opportunities; lay-offs because of incompetent professionals; and so on.
Hiring new employees drains money from the company as it’s costly to find replacements. Moreover, the company has to spend money on training new hires, which delays productivity.
The turnover rate is calculated by dividing the total number of leavers by the average employee number, and the result is multiplied by a hundred.
Turnover rate = Number of resignations/ average employee numbers X 100
An average employee number is calculated by adding total employers at the period’s beginning and total employees at the month’s end multiplied by 2.
The average employee numbers = (employee numbers at starting/ employee numbers at the end) / 2
For example, if a company gets 13 resignations in a month, and there were 40 employees at the start of that month and 50 employees at the month’s end, The turnover rate of the company will be
13/(40+50)/2 X 100 = 28.8%
Why is turnover important?
Employee turnover calculations should be given extra attention by human resources. This is because it determines the growth of a company. If a company has a high retention rate of right-minded and motivated employees, its prosperity will be unmatched. But, if the turnover rate is high, the company can suffer from overbearing hiring and training costs and any extra time that the staff devotes to training new employees.
Knowing the employee numbers leaving a company voluntarily or involuntary is also important. The voluntary employee turnover rate makes it clear to human resources about the issues in the company. For example, if an employee feels that his skills are undervalued and he is not getting challenged in his job role, he might want to look for work that excites him. In such a case, the company can offer him another designation that tunes in with his skills.
Employee turnover, in the case of the most efficient and well-deserved employees, can make a company look bad. This person worked a lot for the company’s progress and didn’t get appreciated for the work they did, making the work environment and employer’s attitude look worse for the rest of the workforce.
Therefore, studying the employee turnover rates and their reasons is critical. The turnover rate describes a company’s work ethic, work-life balance, culture, and values.
Causes of employee attrition and turnover
There can be many reasons for an employee to leave their workplace. And nobody’s going to stick to one company for a lifetime. As life progresses, people get new opportunities or they have to take decisions such as migration, studying, and so on.
The causes of employee attrition and turnover can be voluntary or involuntary. However, in attrition, the company doesn’t fill the void for the designation, whereas, during employee turnover, a company has to hire a person in a short time to get the wheel moving.
The reason for employee attrition
- Layoffs to reduce the workforce
- Migrating to another location
- Continuing studies
The reason for employee turnover
- Poor work environment
- Employee incompetency
- Not getting challenged
- Better work opportunities
- Poor hiring decisions
- Poor work-life balance
- Resignation because of lack of appreciation or feedback
Employee turnover and employee attribution are confused with each other. Although in both cases, employees leave a company. They have different causes and outcomes. HRs need to calculate both turnover and attribution rates to save a company from overspending and going through the hiring-training phases repeatedly.
Frequently asked questions
Which is more important: employee attrition or turnover?
Many companies consider the turnover rate of a company more important than its counterpart. This is because, with employee turnover, a company needs to go through a hiring and training process, which is costly in comparison to giving a raise to the existing headcount. Also, if an employee leaves a company on bad terms, the words that he spreads about the company degrade its image. This directly hits the progress of a company.
What is employee retention?
Employee retention is when employees stay in a company for a longer period of time and take a positive part in bringing growth to the organization.
Why do HRs need to know the rates of employee turnover and attrition?
HRs are the people who directly communicate and solve the pain points of employees working at the company. By analyzing the percentage of these key metrics, they can seek out solutions to reduce them. They advise bringing positive changes and practicing new leadership habits in a workplace that can help an organization’s growth.