What is Attrition?

Employee attrition is a term used to describe the gradual reduction of staff in a company or organization. It refers to the natural process of employees leaving a company and being replaced by new hires. But what does it mean for you as a business owner? 

This article will explore attrition, why it happens, and how it can affect a company's bottom line.

What is Attrition Rate?

Attrition rate measures the number of employees who leave a company over a specific period. It is different from turnover rate, which refers to the number of employees who leave a company over a specific period, regardless of whether they are replaced.

What Causes Attrition?

There are various reasons why employees may leave a company, including:

1. Career Advancement Opportunities

One of the most common reasons for attrition is the lack of career advancement opportunities within a company. Employees want to feel like they are developing in their careers, and if they believe they aren’t being given the opportunity to grow, they may start looking for opportunities elsewhere. By providing training, mentorship, and a clear path to career advancement, you can show your team that you're invested in their future.

2. Poor Management

Another significant factor that can contribute to attrition is poor leadership. Never underestimate the power of employee recognition and regular feedback. Take time to celebrate wins, acknowledge hard work, and provide constructive feedback to help your team stay motivated. 

When people feel seen and heard, they're more likely to stick around, remain loyal, and give their best every day. Employees who feel undervalued and unsupported by their managers may be motivated to find an environment they feel is healthier and  more supportive.

3. Compensation and Benefits

We all want to feel like we are being fairly compensated for our work. A competitive wage and benefits are essential for employee satisfaction in the workplace. A comprehensive compensation and benefits plan will attract loyal, motivated, and engaged candidates. Plus, it may reduce the turnover rate of people in a company. If employees feel they are not being paid enough or that their benefits package is lacking, they may start looking for other job opportunities.

4. Work-Life Balance

But it's not all about money. Maintaining a healthy work-life balance is vital for employee retention. Create opportunities that encourage employees to take time off, recharge their battery, and maintain a healthy balance between work and their personal life. If employees feel like they are constantly overworked and have no time for their personal lives, they may start looking for a job that offers better balance. 

5. Company Culture

There is no doubt that company culture plays a significant role in long-term employee satisfaction and fulfillment. Developing a positive and supportive environment where workers feel valued and appreciated isn’t just the right thing to do, it can foster a better culture for all. If a company's culture does not align with an employee's values (or is potentially toxic), they may start looking for a different work environment.

How Does Attrition Affect a Company?

High attrition rates can significantly impact a company's bottom line in a variety of ways including: 

1. Increased Costs

The cost of replacing an employee can be substantial. Companies must spend time and resources recruiting, hiring, and training new staff. Gallup estimates that finding a replacement for a single employee requires up to two times the worker's annual salary. In addition, the loss of institutional knowledge and experience can also negatively impact a company's efficiency and profitability.

2. Decreased Productivity

When employees leave, it takes time and resources for new hires to get up to speed. This can lead to a decrease in overall output, affecting a company's ability to meet its goals and targets.

3. Difficulty Retaining Top Talent

High attrition rates make it challenging to retain top talent. When employees see their colleagues leaving, they may start to question their own job security and start looking for other opportunities. This can lead to a loss of valuable workers who are essential to a company's success.

In today's technological world, former employees are not afraid to leave reviews of their job experience on the internet for all to see. A potential new hire may view these comments and decide to take a position elsewhere.

How Can Companies Reduce Attrition?

Reducing attrition is essential for companies that want to maintain a stable and productive workforce. Here are some strategies that companies can use to minimize attrition:

1. Offer Competitive Compensation, and Benefits

One of the most effective ways to reduce attrition is to offer competitive compensation and benefits packages. This includes fair salaries, bonuses, and benefits such as health insurance, retirement plans, and paid time off. Companies should regularly review and adjust their compensation and benefits to ensure they remain competitive in the market.

2. Provide Opportunities for Career Growth and Development

Employees want to feel like they are growing and developing in their careers. Companies can reduce attrition by providing opportunities for career advancement. Create a path to growth with training programs, mentorship opportunities, and promotions.

3. Offer Flexibility (If You Can)

In a recent survey, it was found that over 60% of workers who left their companies stated that greater work-life balance and better personal well-being were part of their decision to take a job with a different organization. By offering a hybrid or hybrid-remote work model, you’re allowing employees to reduce their commute, spend more time with family, and have more flexibility when handling emergency situations. For those who are unable to offer this type of flexibility, actively encouraging employees to use their hard earned PTO can make all the difference.

4. Recognize and Reward Employees

Every worker wants to feel appreciated and recognized for their hard work. Companies can reduce attrition by implementing recognition programs and rewarding employees for their contributions. This can help boost motivation and lead to higher job satisfaction and lower turnover rates.

Justworks Can Help

A company is only as strong as its team. Although attrition is a natural process that occurs in every company, high attrition rates can significantly affect a company's bottom line.  By taking time to understand the causes of attrition and implementing strategies to reduce it, companies can maintain a stable and productive workforce while retaining top talent.

Are you eager to gather data on your own workforce? Justworks has your back. Joining Justworks PEO means you’ll have intuitive HR tools and an easy-to-use platform at your fingertips. And when you’re part of Justworks PEO, you’ll get access to our new People Analytics tool, too! Increase your insights and strengthen your strategies with People Analytics and run your business with more confidence. Ready to work smarter, not harder? Get started with Justworks today!