Employee turnover and employee attrition are two important metrics to measure your company’s growth. They give clues to employers about recruitment insight and financial loss within an organization. While many believe that turnover and attrition are the same, these two actually have different meanings and cost a company differently. Since it is important for employers to know the distinction between employee turnover and attrition, here is all you need to know about the cost of employee turnover and attrition.
Employee attrition is described as a well-managed layoff, since it is done within a process of employment such as retirement, resignation, elimination of a position, personal health problems, and similar cases. It can be said that attrition is a positive representation of a company, as this is an expected thing where employee’s reasons commonly happen to all other companies as well. Moreover, when you have employee attrition, you can reduce costs when your business faces financial distress. Attrition is also better to be considered more on an amicable or cordial departure from an organization. However, a company cannot necessarily control staff attrition due to its natural and anticipated state; HR can only help reduce the cost of replacement when it is happening through promoting former junior employees.
On the other hand, employee turnover is rather a negative aspect for a company, which means a company has a negative reason for terminating employees. It could be a result of poor hiring decisions or discriminatory work environment. This can also be the case if employees have a negative reason for quitting their current employer. There are two sub-categories of employee turnover, namely voluntary turnover and involuntary turnover. Voluntary turnover refers to an employee deciding to leave his or her current employer because they have a better offer somewhere else. This can also happen if an employee feels that the current employer does not fulfill his or her needs. Involuntary turnover refers to when employees are terminated or fired due to poor performance, behavioral issues, or serious maliciousness.
As attrition and turnover have different perceptions, they cost differently for a company’s financial plan. For employee attrition, the cost will not give bad effect on a corporation’s bottom-line because it is synonymous with a company looking to reduce costs via layoff or retirement. The outlay of this activity can be minimized by a cost-cutting method.
On the contrary, the costs associated with turnover which include separation, loss of productivity, interviewing, training, and onboarding of a single employee is estimated to cost businesses approximately 40 – 60 percent of that individual’s annual salary, a survey reported. The replacement costs can be lower for entry-level roles but it can be significantly higher for professional, technical, and supervisory positions.
To prevent high turnover from happening, it is advisable that HR should understand the internal and external reasons why employees quit their current position. Here are three ways to maximize your workforce management in the face of attrition and turnover:
1) Employee Development
Development must be customized to the role and experience of each employee. It is important to consider the demands of the individual, the team, and the company. So, be careful in choosing candidates for development and understand that there is no one size that fits all. Pay more time on your best employees while keeping an eye on everyone else.
Maintain excellent employee relations by communicating efficiently. The employee’s immediate supervisor is responsible for communicating the rationale. Line managers should be trained, and discussion should be fostered. Development is most successful when it is linked to career planning, allowing employees to foresee their future at the company as a result of the development initiatives.
3) Proactive Initiative
Identify the reason for employee turnover if you engage in training and development. Employees usually leave a boss rather than a company. Poor supervisors cause employee disengagement and dissatisfaction, and they may unknowingly impede the company’s attempts to develop and retain high-performers.
From the standpoint of either the employee or the employer, there is no such thing as lifetime employment. However, strong communication, increasing line managerial skills, and tackling development in the strategic manner described above will result in the retention of the best people. Such an investment will result in increased production and success.