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What is the difference between employee turnover and employee attrition?

Employee churn is the best way to describe both employee turnover and attrition rates. What differentiates the two types of employee departures, what do they mean for your bottom line, and how can they be controlled?

 

Employee Attrition vs. TurnoverEmployee attrition - employees leaving due to natural causes - can be tough to combat, but there are some ways to reduce your employee attrition and turnover rate.

Attrition and turnover are sometimes used synonymously, when in fact they mean two different types of employee churn.

 

Both attrition and turnover decrease the number of employees on staff, but attrition is typically voluntary or natural — like retirement or resignation.

 

Turnover focuses on both voluntary and involuntary departures. While turnover includes employees who leave of their own volition, it also refers to employees who are involuntarily terminated or discharged. With turnover, HR is tasked with replacing employees, whereas spots left open from attrition may remain unfilled.

 

 

The Cost Difference Between Attrition and Turnover

Just as the definitions between attrition and turnover are different, the costs associated with them are too.

 

Attrition is often viewed as a way that companies can decrease labor costs. Take for instance more severe forms of attrition—like layoffs—which are often deployed as a labor reduction technique. If an employee leaves naturally, and their spot no longer needs to be filled, organizations can freeze hiring to reduce staffing costs.

 

There is overlap between the two types of churn though.

 

Some attrition can cost as much as turnover. When a voluntary resignation requires a replacement, it’s not cheap to fill the position. In fact, the average cost-per-hire to fill a vacant position due to turnover or preventable attrition is $4,129. In other words, if you an organization has 20 employees turning over each year, that means attrition and turnover costs about $82,580 each year.

 

For organizations above a normal attrition or turnover rate, these expenses add up drastically.

 

 

The Average Turnover and Attrition Rates

How do you know if your organization has normal attrition or turnover rates?

 

In 2017, the Bureau of Labor Statistics (BLS) found that 15.1% of the total U.S. workforce voluntarily quit a position, retired, was laid off or discharged. Other studies have shown that 10% is a good baseline number to aim for with regard to employee turnover rates, but rates vary quite widely depending on the industry. 

 

Which 4 industries have the highest rates of turnover? find out!

 

Three Causes of Preventable Attrition and Turnover

Financial Stress

According to the Consumer Finance Protection Bureau, money and financial wellness can be a significant stressor for employees, and one that perpetuates avoidable attrition and turnover rates.

 

A financially stressed employee is likely on the look-out for a better paying opportunity. Financial stress may be more common than you think, consider these three fast facts:

 

  1. According to a study conducted by Financial Finesse, 66% of the 12,000 respondents they polled said they felt stress because of their day-to-day personal finances and 60% expressed concern about meeting future financial goals.
  2. A 2017 study from the American Psychology Association found that ‘money’ is the second highest stressor for Americans.
  3. A survey conducted by CareerBuilder states that nearly 80% of Americans are living paycheck-to-paycheck, and roughly 50% of people can’t take care of a $400 emergency without borrowing money from someone or dipping into their 401(k).

Stagnancy

According to a study by BambooHR, one of the reasons why turnover occurs is due to the lack of professional advancement. Does your organization offer upward mobility? Grooming high-potential employees to take on more significant roles within the organization is one strategy for minimizing the cost of attrition and turnover. People will stay with you if they have a chance to grow with your company.

 

Dissatisfaction with job parameters

Another reason your employees quit is from poor work/life balance. Inflexibility from a workplace is a significant issue, and one growing even faster in a young work environment. With the rise of on-demand job opportunities, there are more ways for workers to choose their own schedules and pay rates, which is making the industry a growing competitor to typical 9-5 jobs.

 

 

Professions like bartenders have high employee turnover and employee attrition rates.Precursors of Employee Departures

There may be signs that your employees are gearing up to leave you. The 2017 Retention Report by Work Institute analyzed over 240,000 exit interviews to pinpoint precisely how preventable employee turnover is. Their study revealed that over 75% of the reasons employees leave their jobs are preventable. What are the signs?

 

Absenteeism

As many as 10% of U.S. employees who miss work due to on-the-job stress may be absent from work for 21 days or more a month. Almost another quarter may not show up on the job due to stress for as many as 20 days a month. Increased absenteeism could be an indicator that your employees are interviewing and applying elsewhere. Not to mention unplanned absenteeism is expensive — roughly $3,600 per year for each hourly worker and $2,650 each year for salaried employees.

 

Disengagement

According to Gallup, engagement - or lack thereof - can be directly related to turnover. Of all engaged employees, 37% are looking for jobs or watching for opportunities compared to 56% of not engaged and 73% of actively disengaged employees. Once your team starts to tune-out, be prepared for them to put in their notice.

 

Decreased productivity

Can you tell your employee’s output is lower than usual? One study by the University of Warwick estimates that unhappy employees are 10% less productive compared to happy employees. Noticing a decline in productivity can be an indicator they are headed for the door.

 

 

How to Prevent Attrition and Turnover

Understanding turnover and attrition, and the precursors of departures, help organizations come up with a game plan to prevent and slow it from occurring.

 

Perform —and act— on exit interviews

Exit interviews are typically reserved for voluntary separations. They are a way to drill down on why employees left, and how you can prevent turnover in the future. It’s important to ask the right questions to make a useful exit interview. Some great examples are:

  • How is/was your relationship with your manager?
  • Were the job functions in line with your pre-hire expectations?
  • Did this job align with your personal goals?
  • Did we provide the tools you needed for success?

Create a financial wellness program

We already know your employees want to feel financially secure. To address this, many employers have begun to research and implement financial wellness programs to help alleviate the everyday stress associated with money pressures. And, according to Schwab Retirement Plan Services, 93% of millennials (who are currently the largest demographic in the workforce) would take advantage of a financial wellness program at work.

 

Differentiate from the competition

A growing competitor for many industries is the on-demand economy. As employees become liberated to make their own schedules, control their payment structure, and be their own boss, workers are flocking to the trade. By identifying portions of your business that can evolve with the changing workforce, and provide more individuality, you can remain competitive.

Free eBook: Reduce Your Company's Turnover


Written by Karl Pawlewicz

Karl is the content editor at DailyPay. His feet are on the ground in New York City, but his head is in the clouds looking for the latest trends in employee wellness and employee engagement. Got a good story to tell? Email him: karl.pawlewicz@dailypay.com


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