Axcet HR Solutions Blog

Axcet HR Solutions is committed to helping small business owners build their businesses. We do that by providing valuable content through our blog and Resource Library.

Attrition vs. Turnover: What’s the Difference?

Attrition vs turnover

When’s the last time you thought about employee attrition versus turnover or wondered to yourself, “Is attrition the same as turnover?” If you’re like most small business owners, it was probably the last time you had an employee give their two weeks’ notice. At that time, you were likely only worried about whether to hire another employee to fill the position and the terms “attrition” or “turnover” were not at the forefront of your thoughts. However, learning the difference between attrition and turnover is the key to using these metrics to improve your long-term employee retention.

The Difference Between Attrition and Turnover

Knowing the difference between attrition and turnovers can save your company money. According to Gallup, the cost to replace an employee that quits or is fired can be as much as three times that employee’s salary. In 2021, the average weekly earnings of an employee were $990 or $51,480 annually according to the Bureau of Labor Statistics (BLS). Keeping in mind those BLS statistics, that would be nearly $155,000 to replace that employee! Losing employees can get costly, especially if you’re a small business.

Understanding Employee Attrition

Attrition on its most basic level is defined as a “gradual decrease”. When we talk about employee attrition, we aren’t simply talking about employees who leave for better job offers. We’re also talking about employees who leave due to retirement or for their own personal reasons - like moving to another geographical area. The company typically knows about the employee’s departure ahead of time, especially in the cases of retirement. Attrition implies that an organization does not have direct control over how many employees are lost for various reasons.

The key to understanding if the departure is considered attrition relies on two facts; one – that the departure must be voluntary, and two – that the employer decides the terminated employee’s position will not be backfilled. Involuntarily terminating an employee then deciding not to backfill the role would be considered restructuring. Conversely, when an employee decides to leave of their own volition and then you do decide to replace them – that’s turnover.

Why Exit Interviews are Worth it

Understanding Employee Turnover

Employee turnover also refers to a reduction of the workforce. However, rather than it being a catchall for everyone who leaves your company, it only refers to those who leave the organization that you intend to replace – both voluntarily and involuntarily. This encompasses all termination scenarios, such as an employee being terminated, getting a better job offer somewhere else, or leaving due to career stagnation/inability to advance. Additional reasons for employee turnover can also include:

When employees leave due to any of the above reasons, it can reflect poorly on your business and may indicate the need for cultural and managerial changes to improve employee retention. A major difference between employee attrition and employee turnover is that an employee leaving due to turnover results in the need to immediately hire someone else to fill the position, and the departure is usually sudden and unanticipated.

Related Reading: Stay With Me; Why Good Employees Leave >>

Calculating Employee Turnover and Attrition Rates

The formulas for employee turnover and employee attrition are the same. The difference lies in how you interpret the data. If turnover is high, it means that many employees are leaving the organization – either voluntarily or involuntarily. High turnover can indicate workforces that are disengaged, aren’t offered sufficient growth opportunities, or could even be as simple as making a wrong hire.

High attrition typically indicates the level of people retiring or resigning – and always indicates that these employees will not be replaced. Knowing your attrition rate as an organization can be invaluable information for your organization. It can help you understand the direct and indirect costs of new hires when isolating that personnel in the below formula. It can even help you understand your organization in a broader perspective to implement effective workplace plans for the transfer of knowledge as key employees leave the company that you don’t intend to backfill. Overall, tracking attrition can be a fantastic way to stay ahead of the needs of your organization.

To calculate your attrition and/or turnover rate, you need to know how many full-time employees have left or separated from your business in a specific time period, whether they are categorized as having left due to turnover or attrition, and the average number of employees you had employed during that same time period. This equation can be represented by:

[(Number of Separated Employees {either attrition or turnover-related})] / [(Average Number of Employees Typically Employed)] * 100 = Company Attrition/Turnover Rate

For this example, let’s say that for the last six months, you’ve kept an average of 125 full-time employees on your payroll. During that same six-month period, you lost 35 employees for various reasons that are either classified as attrition or turnover (but not both!). Your equation would be:

(35/125) * 100 = 28%

In the above example, the employee attrition/turnover rate would be 28%. The United States Bureau of Labor Statistics reports the separation rates for 2016 through 2020 as ranging from 42.6% to 57.3%, respectively. This is an average rate over the last five years of 46.5%.

When calculating these metrics, it is important to remember that employee attrition and turnover are generally considered a normal part of the lifecycle of a business. They aren’t inherently considered negative and don’t always reflect poorly on the company’s hiring practices or culture.

Related Reading: When Employees Lose Trust in Their Boss >>

Lowering Employee Churn

The trick to lowering employee churn is to identify the reasons employees left. If it’s due to poor training, improving the training program and making managers and experienced employees available as mentors may help. If the reason is due to harassment or discrimination, an investigation should be performed to determine where the harassment or discrimination is emanating from, then implementing classes or workshops on those topics. Once the fixes have been implemented, it’s important to monitor both your attrition and turnover rates to determine if it’s working or if further changes or training are needed.

By understanding employee turnover and attrition, you can better anticipate your workforce needs, improve retention, lower costs and increase your company's productivity to better serve your customers.

New call-to-action