Employee attrition refers to the loss of employees through a number of circumstances, such as resignation and retirement. The cause of attrition may be either voluntary or involuntary, though employer-initiated events such as layoffs are not typically included in the definition. Each industry has its own standards for acceptable attrition rates, and these rates can also differ between skilled and unskilled positions. Due to the expenses associated with training new employees, any type of employee attrition is typically seen to have a monetary cost. It is also possible for a company to use employee attrition to its benefit in some circumstances, such as relying on it to control labor costs without issuing mass layoffs.
There are many different ways for a company to lose employees, most of which are typically taken into account to ensure that the organization is able to operate efficiently. Attrition refers to the loss of employees due to reasons other than firing and other employer-initiated events. This means that an employer has no direct control over how many personnel are lost to employee attrition. Retirement is one major cause of employee attrition, and since people tend to retire around a specific age this is a factor that can be accounted and planned for. Other causes of employee attrition, such as personnel who quit due to prolonged illness, dissatisfaction with the company, or other reasons, can be more difficult to estimate.
The percentage of employees that leave a company in a given period of time due to attrition is sometimes referred to as the churn rate, though that term can also include personnel who are fired. A high churn rate can adversely affect a company due to the costs of training new workers, though higher rates are often more acceptable for unskilled laborers than more highly skilled or trained workers. Churn 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 company to cut labor costs to remain profitable. One method of dealing with this type of issue is to to lay off a number of workers, though this can present morale problems for the remaining employees. If the attrition rate is known, then simply not hiring new employees can present a long term method of dealing with the same problem. Since some employees will retire or resign over time through attrition, a hiring freeze can eventually result in fewer employees and a similar savings in labor costs.