Employee attrition is the loss of employees due to various circumstances, excluding employer-initiated events. It can have a monetary cost due to training expenses, but can also be used to control labor costs. Retirement is a predictable cause, while other reasons can be harder to estimate. The attrition rate can negatively impact a business, but can also be used to benefit it by reducing labor costs without firing employees.
Employee attrition refers to the loss of employees under a variety of circumstances, such as resignations and retirement. The cause of attrition can be voluntary or unintentional, although employer-initiated events such as layoffs are not generally included in the definition. Each industry has its own standards for acceptable attrition rates and these rates can also differ between qualified and unqualified positions. Due to the expenses associated with training new employees, any type of employee attrition generally has a monetary cost. It’s also possible for a company to use employee attrition to its advantage in some circumstances, such as relying on it to control labor costs without issuing mass layoffs.
There are several ways a business can lose employees, most of which are typically considered to ensure that the organization is able to operate efficiently. Attrition refers to the loss of employees due to causes other than termination and other employer-initiated events. This means that an employer has no direct control over the number of people lost to employee attrition. Retirement is a major cause of employee attrition and since people tend to retire around a specific age, this is a factor that can be accounted for and planned for. Other causes of employee attrition, such as staff leaving due to prolonged illness, dissatisfaction with the company, or other reasons, can be more difficult to estimate.
The percentage of employees who leave a company in a given period of time due to attrition is sometimes referred to as the attrition rate, although that term can also include staff who are laid off. A high attrition rate can negatively impact a business due to the costs of training new workers, although higher rates are often more acceptable for unskilled workers than more skilled or trained ones. The attrition rate is often lower in industries that employ highly skilled workers, and companies often use lucrative employment contracts and other tactics to prevent some forms of attrition.
There are also circumstances where employee attrition can be used to benefit a company. In some circumstances, it becomes necessary for a business to reduce labor costs to remain profitable. One method of dealing with this type of problem is to fire a number of workers, although this can present morale problems for the remaining employees. If the attrition rate is known, simply hiring new employees cannot present a long-term method of addressing the same problem. Because some employees will retire or resign over time from attrition, a hiring freeze can eventually result in fewer employees and similar savings in labor costs.
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