In today’s competitive business landscape, understanding employee turnover vs. attrition is essential for any employer, especially in fields like IT. These two concepts are often used interchangeably, but they represent different aspects of workforce management. Both turnover and attrition can significantly affect your business operations, employee morale, and retention strategies.
As an employer, being clear on the distinctions between these two and knowing how to manage them can help you foster a more stable and engaged workforce.
EMPLOYEE TURNOVER VS. ATTRITION
Employee turnover and employee attrition are terms commonly used to describe changes in a company's workforce. While both involve the loss of employees, the causes and implications are different.
Understanding both metrics is necessary for HR professionals because it helps them assess the health of their company’s workforce. While turnover can often be a sign of serious concerns within the company, attrition can be an expected part of the business cycle, particularly in industries like IT, where the demand for talent is constantly changing.
What is employee turnover?
In simple terms, employee turnover happens when employees leave a company and their positions are filled by new hires. This can occur for many reasons, such as employees quitting, being laid off, or being terminated.
It's important to note that dysfunctional turnover occurs when employees leave for avoidable reasons, such as poor management, lack of career growth, or an unhealthy work culture. This type of turnover is particularly damaging because it reflects deeper issues within the company and can lead to decreased morale and higher costs in recruitment and training. Identifying and addressing the causes of dysfunctional turnover helps maintain a stable and engaged workforce.
In a fast-paced industry like IT, turnover can hurt your business operations. When skilled professionals leave, it disrupts teams, delays projects, and can lead to increased recruitment costs. High turnover often reflects dissatisfaction within the organization, whether it’s due to uncompetitive salaries, a lack of career growth, or burnout.
What is employee attrition?
Employee attrition is slightly different. In the context of IT businesses, it generally refers to the gradual loss of employees over time due to factors like retirements or voluntary resignations. These departures happen naturally and aren’t necessarily tied to dissatisfaction with the company.
For example, an employee might choose to retire after a long career, or an individual might decide to leave the workforce to pursue personal goals. Unlike turnover, businesses typically don’t replace employees who leave due to attrition. As a result, companies experiencing high attrition may see a reduction in workforce size without the need to hire replacements.
While attrition doesn’t usually signal a problem, it does require careful planning, especially in an industry like IT, where knowledge and expertise are highly valued. Attrition can reduce the availability of experienced employees, leaving companies with a potential skills gap. In such cases, the business may need to take proactive steps to address the gap, such as retraining existing employees or focusing on long-term recruitment strategies.
HOW TO CALCULATE EMPLOYEE TURNOVER
Calculating employee turnover is relatively straightforward and involves a simple formula. Take the number of employees that left the company over a period of time and divide it by the average number of employees you had during that period. Multiply that number by 100 to make it a percentage, and you'll have your employee turnover rate.
If 10 employees left your company last year and your company had an average of 100 employees during that period, your turnover rate would be 10%. This rate can be helpful in identifying patterns and understanding if turnover is unusually high.
What is considered a high turnover rate?
A high turnover rate generally depends on the industry and company size, but a turnover rate above 15-20% annually is often considered high. In some industries, like retail or hospitality, higher turnover rates (30% or more) may be typical, but in more specialized fields, such as IT, a turnover rate above 10% could signal potential issues with employee satisfaction, management, or compensation.
To determine if your turnover rate is too high, compare it to industry standards and track any noticeable trends over time. If your turnover rate exceeds the average for your industry or if it continues to rise year after year, it may be time to investigate the reasons behind it and implement strategies to improve employee retention.
HOW TO CALCULATE EMPLOYEE ATTRITION
Calculating employee attrition is done with the same formula. Take the number of employees that left the company due to retirements or voluntary resignations over a period of time and divide it by the average number of employees you had during that period. Again, multiply that number by 100 to make it a percentage, and you'll have your employee attrition rate.
If five employees left your company over the past year, and your company had an average of 100 employees during that time, using the formula would result in an employee attrition rate of 5%, meaning you lost 5% of your workforce during the year.
A higher-than-average attrition rate in your company may signal that it’s time to start hiring again. Hiring a recruiter can be a great option for finding new hires with skillsets specialized enough to fill available positions.
REDUCING EMPLOYEE TURNOVER AND ATTRITION
A key strategy for reducing turnover for current employees is investing in employee engagement and career development. Employees who feel valued and have room to grow are less likely to leave. Offering training, growth opportunities, and a supportive work environment can boost morale and retention.
However, reducing employee turnover and attrition starts with hiring the right people. In the IT sector, this means staffing individuals who not only have the technical skills but also fit with your team's values and work style. At TSP, we specialize in IT recruitment services to help you find the right fit for your team.
Partner with us to find the right talent and reduce turnover and attrition in your IT team. Explore our IT recruitment solutions today.
