Attrition: Definition, Types, Causes & Mitigation Tips

What Is Attrition? 

Attrition or churn is gradual workforce reduction through employee retirements, resignations, deaths or elimination of positions without immediately filling vacancies.  

Unlike turnover, attrition generally involves voluntary departures rather than dismissals or layoffs. It's viewed as a normal and anticipated process in organizations as employees transition into new phases of their lives or careers. 

Types of Attrition 

Voluntary 

Voluntary attrition occurs when employees choose to voluntarily leave their positions within an organization, rather than being compelled to do so through layoffs or other forms of involuntary separation.  

• Retirement: An expected form of voluntary attrition, retirement occurs when employees leave the workforce upon reaching a certain age or after achieving financial security, impacting the organization's experience and knowledge base. 
  
• Internal attrition: This type of voluntary attrition occurs when employees leave their current positions for other roles within the same organization, thus not affecting the overall headcount but potentially impacting team dynamics and departmental continuity. 
  

Involuntary 

Involuntary attrition refers to the process where an organization initiates the termination of an employee's position due to reasons beyond the individual's control, such as economic downturns, restructuring, or performance-related issues.  

Attrition vs. Turnover vs. Layoffs 

Attrition vs. Turnover

Attrition is a passive method of reducing workforces without the need for direct action like layoffs. Turnover, on the other hand, involves the active departure of employees from an organization, which can be either voluntary or involuntary. Voluntary turnover occurs when employees choose to leave, perhaps due to job dissatisfaction, better opportunities elsewhere, or personal reasons. Involuntary turnover happens when an organization restructures or another business-driven need.

Turnover is a critical metric for organizations as it reflects the overall health of the workplace environment and the effectiveness of its retention strategies. The average annual turnover rate is 30% in the United States, with average voluntary turnover at 23% and involuntary turnover at 11%, according to the SHRM Benchmarking: Human Capital Report, 2022.

Attrition vs. Layoffs

Layoffs are a form of involuntary turnover where an organization decides to terminate employees due to economic downturns, business restructuring or the need to reduce operational costs. Unlike attrition, layoffs are a deliberate action taken by an organization and often involve multiple employees. Layoffs can have significant emotional and financial impacts on the affected individuals and may affect the morale and productivity of the remaining workforce. 

Causes of High Attrition Rates 

High employee attrition rates are often the result of several key factors that, when unaddressed, can significantly impact an organization's operational efficiency and morale.  Common causes include: 

1. Inadequate compensation and benefits: While salary isn't the source of all employment satisfaction, low pay and non-competitive benefits, coupled with lack of pay parity and transparency can lead employees to seek greener pastures. Employee attrition can impact organizational stability and increase recruiting costs to find and train new talent. 
   
2. Work/life imbalance: Today’s employees value personal time and work/life balance more than previous generations. Employers who do not acknowledge this shift may find themselves with higher attrition rates. Overworked and underappreciated employees can seek out companies who place higher value on work/life balance, contributing to a workforce's dwindling satisfaction and engagement. 
   
3. Unrealistic workload expectations: Excessive workloads not only challenge an employee's capacity to maintain a healthy work-life balance but also significantly erode their job satisfaction, leading to increased attrition as individuals seek more sustainable employment environments. 
   
4. Ineffective management practices: Managers play a pivotal role in employee satisfaction and turnover. Difficult leadership styles and a lack of effective communication erode trust and confidence within teams. A scarcity of recognition for employees' contributions and achievements can also diminish their motivation and commitment to the organization. 
   
5. Misalignment with workplace culture: When an employee's values, beliefs, behaviors or work style are not in harmony with those of the organization, it can significantly impact an employee's sense of belonging and commitment, leading to increased attrition rates as individuals search for organizations where their values and are shared and promoted. 
   
6. Lack of career advancement opportunities: The absence of clear career advancement opportunities in an organization hinders the personal and professional growth of its workforce and significantly increases the likelihood of employee attrition, as individuals seek environments where they can continually evolve and contribute at a higher level. 
   

How to Calculate Attrition/Churn Rate 

Attrition rate is the number of employee departures during a month divided by the average number of employees. Multiply the result by 100 to get the percentage. 

Attrition rate = (# of departed employees / # of total employees)  * 100 

Example: (20 departed employees / 1,000 total employees) * 100 = 2% attrition rate 

For more information on how to calculate the number of employees at your organization, the number of separations, and the attrition rate, access SHRM’s “How to Determine Turnover Rate” how-to guide. 

What Is Considered a High Attrition Rate?

A desirable attrition rate varies by industry, but companies should desire a target below 10%. Typically, industries characterized by intense competition, rapid change, or demanding roles often observe higher attrition rates. These sectors encompass technology, hospitality, retail, and call center industries. Conversely, industries with comparatively lower attrition rates consist of healthcare, government, education, finance, and insurance. HR professionals should examine this rate in the context of those unique factors and longer-term trends to determine any new changes or variables that require attention. 

Consequences of High Attrition Rates

High employee attrition rates present a multifaceted challenge for organizations, frequently leading to significant disruptions in operations and work product continuity. Aside from the financial implications, high attrition can also be indicative of underlying problems within the company, ranging from cultural issues to ineffective management practices. Addressing attrition is not a mere exercise in number-crunching; it is a diagnostic tool for larger organizational health checks. Impacts correlated to high attrition rates may include: 

• Increased hiring costs: High employee attrition rates result in substantially increased recruiting and training costs as HR teams spend additional time and resources to find and retain top talent. 
• Lost expertise: High attrition also impacts the collective expertise and morale of the remaining workforce as teams lose the knowledge of colleagues, which are often not easily replaced with new hires. 
• Company culture erosion: A consistent, or mass churn of employees in and out of teams and organizations creates an uphill battle for building cohesive and intentional company cultures. 
• Trickle-down burnout: As attrition increases and more teams see employees leave, remaining staff often must pick up the slack, adding to their often already-full plates. This can lead to increased burnout and negative mental health consequences—and ultimately, even more attrition. 

How to Increase Retention 

Companies can take proactive steps to reduce attrition by enacting policies that help foster an environment where employees feel valued, supported, and engaged in their work.  

1. Provide clear career advancement and employee development opportunities: Employees are more likely to stay with a company that has a clear path for professional growth. Offer training, mentorship programs, and promotion opportunities. Provide ongoing learning and development opportunities. Encouraging employees to acquire new skills and knowledge demonstrates an investment in their future. 
2. Offer competitive compensation and benefits: Ensure that salaries, benefits, and perks are competitive within your industry. Fair compensation is crucial in retaining talent and acknowledging their worth. Conduct periodic reviews of compensation and benefits to ensure you remain competitive. 
   
3. Provide training, support, and feedback loops for managers: Implement comprehensive training programs for managers, provide them with ongoing support and resources, and establish effective feedback loops that encourage open communication and continuous improvement in leadership practices. Consider establishing channels for anonymous surveys and skip-level meetings so employees have a chance to share feedback on their managers. 
   
4. Identify key metrics and appoint champions to promote a positive workplace culture: Create a strong workplace culture that promotes respect, inclusivity and collaboration. A positive culture enhances employee satisfaction and loyalty, making them more likely to stay. 
   
5. Encourage work/life balance: Enact and promote policies that support a healthy balance between work and personal life. Flexible work schedules, remote working options, and adequate PTO/vacation time can contribute to employee well-being and more equitable workplace norms. 
   
6. Implement regular feedback and recognition programs: Establish a system for regular feedback and recognition. Acknowledging employees' hard work and contributions fosters a sense of value and belonging. 
   

Best Practices: What to Do When Employees Leave 

When an employee sets their sights on new horizons, the onus is on the organization to respond gracefully. Here's a set of best practices to keep in your arsenal: 

Conducting Exit Interviews 

Exit interviews are a treasure trove of information: they offer insights into why employees are leaving and what the company could have done better. Used effectively, this data can become the foundation for actionable change. 

Offboarding with Dignity 

Ensure a smooth and respectful offboarding process. It might seem counterintuitive, but a positive leaving experience can turn an ex-employee into a brand ambassador and potential boomerang candidate. 

Knowledge Transfer 

Deploy strategies to transfer the knowledge of departing employees with others within the organization—such as mentorships, shadowing, or comprehensive documentation—to mitigate the loss of institutional knowledge. 

Bringing Leadership into the Conversation 

Organizational leaders need to be part of the dialog on attrition. Sharing data and strategy insights can help leadership understand the underlying factors and allocate resources for attrition reduction. To inform those discussions, implement robust data tracking methods that capture the nuanced factors leading to attrition. This data can help drive informed decision-making that aligns with employee retention goals. 

The Path Forward 

Understanding and addressing employee attrition is imperative for the sustained health and success of any organization. By recognizing the underlying causes and implementing thoughtful measures to combat them, companies can proactively cultivate workplaces that work for all.