In Human Resources, attrition refers to any reduction in a company's workforce resulting in job vacancies. Attrition includes retirement, resignation, termination, promotion, or death.
We would all love to have employees that stay with the company from day one to day one million, but that simply isn't going to happen. People will leave for one reason or another, and when their role remains unfilled, that can be an issue.
Attrition is expected and an important metric for HR to monitor and plan for, ensuring the health and sustainability of the company.
Attrition vs. turnover: What's the difference?
Both attrition and turnover measure the rate of employee reduction but the difference lies in the vacancies. Attrition results in long-term vacancies (and a reduction in total headcount) that may or may not be filled in the future; turnover represents vacancies that get filled (and headcount remains the same).
| Attrition | Turnover |
| Open roles may or may not be filled | Open roles are typically backfilled |
| A natural or strategic workforce reduction | Workforce size remains stable |
| May signal aging workforce or a decrease in the overall workforce | May signal an unhappy workforce or poor hiring practices |
| Companies need a strategy for succession and organizational structure | Companies need a strategy to address high turnover to improve employee retention |
| Less strain on the company and HR | More strain on the company and HR |
Types of attrition
When determining an attrition rate, explore the types of attrition your company experiences. This will help you proactively address attrition and avoid negative business impact. Types of attrition may include:
- Voluntary attrition. Employees choose to leave for reasons like resignation or retirement.
- Involuntary attrition. A company chooses to terminate a position, which is beyond the employee's control. Reasons may include economic instability, restructuring, or employee performance.
- Internal attrition. An employee transfers or gets promoted within their organization, which may affect team dynamics, but not overall headcount.
- Demographic attrition. Employees of a particular gender, age group, ethnicity, or specific demographic leave an organization. This could signal larger issues that a company needs to address to avoid churn.
Why attrition matters for employers
Attrition has an impact on productivity, costs, reputation, and employee morale. High attrition rates can indicate underlying issues such as poor management or ineffective hiring strategies. If employers experience a high attrition rate, it could affect the business in the following ways:
- Turnover costs. Costs associated with recruitment, hiring, and training new employees to backfill vacant roles resulting from voluntary attrition.
- Decreased morale. High attrition rates can make it difficult for employers to maintain a positive workplace culture. Employees may feel the instability caused by churn and struggle to maintain cohesive teams.
- Loss of productivity. Fewer employees can mean less productivity, innovation, and collective knowledge to achieve goals, especially if senior-level employees leave the company.
For global teams, high attrition may signal issues with communication, onboarding, or benefits alignment across regions and time zones. Using an employer of record can help avoid these risks by letting country-specific experts handle recruitment, hiring, benefits , and pay for global companies.
How to calculate your attrition rate
Knowing your attrition rate provides a clearer picture of how well you retain employees and helps to forecast and plan for the future.
Follow this basic formula to calculate an attrition rate:
Attrition Rate (%) = Number of employees who left ÷ number of total employees × 100
For example, if your company has 500 total employees and 10 have voluntarily left, you will calculate like this:
10/500 = 0.02 x 100 = 2%
A company's size and industry can affect how to calculate attrition rates. A good practice is to calculate attrition rates annually, but calculating them quarterly or even monthly may benefit some companies.
When calculating, don't forget to separate by department, location, or job role so that HR can identify trends and opportunities for growth.
Common causes of attrition
Identifying the causes of attrition helps companies find practices that encourage employees to stay. A few common reasons for voluntary attrition include:
- Lack of career advancement or professional development opportunities
- Inadequate compensation or benefits
- Poor management or unclear expectations
- Burnout or lack of work-life balance
- Mismatched cultural or role fit
- Lack of diversity
For example, challenges inherent in remote work environments-poor communication and low employee engagement-may increase attrition in distributed teams. In this case, attrition can be mitigated by implementing a remote work strategy for managing employees like communication protocols, regular check-ins, and setting clear expectations for asynchronous work.
How can employers reduce attrition?
Companies can work to reduce attrition by implementing policies and processes that create a positive culture where employees feel valued. HR professionals should keep these tips in mind to improve attrition rates:
- Establish a process for giving and receiving regular feedback
- Acknowledge employees through recognition programs
- Offer flexible work arrangements to encourage a better work-life balance
- Invest in professional training and development for all employees
- Provide training and resources to support managers and improve leadership practices
- Benchmark salaries and benefits against market standards
- Ensure cultural alignment during recruitment for long-term fit
FAQs
Is some attrition healthy?
Yes. Natural attrition can help manage payroll budgets and eliminate underperforming roles, but high attrition can signal deeper issues that require attention.
What is a reasonable attrition rate?
It varies by industry, but a healthy attrition rate is generally 10% or less annually.
Should I track attrition separately from turnover?
Yes. Turnover includes roles that need to be backfilled, while employee attrition allows for long-term vacancies or a reduction in workforce.
How do companies manage attrition globally?
Global companies must consider the cultural, legal, and regulatory differences that affect attrition rates. In some cultures, employees may be more likely to job hop, leading to higher attrition rates as companies scramble to backfill positions. Countries with strict regulations may limit involuntary attrition, which can prevent restructuring or effective performance management. Companies with high attrition rates may need to update their policies and practices to better support distributed teams, so team members feel supported and valued.
How Pebl manages attrition
Attrition will happen-that's a given. All you can do is give yourself the best tools to handle it, and that means partnering with Pebl.
When you utilize our Employer of Record service, we act as the legal employer in the country. That means we're the ones who make sure employees have what they need to stay happy (and stay employed). We have country-specific experts in 185+ countries worldwide making sure that benefits, salary, and other compensation is competitive and tailored perfectly to the region in question. Start reducing your attrition by contacting us today.
Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided "as is," and no representations are made that the content is error-free.
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