What is the Difference Between Employee Attrition and Turnover?

Understanding the difference between employee attrition and turnover is critical for managing your workforce and controlling costs. While both terms describe employee churn—a reduction in your workforce—they represent distinct types of departures with different financial implications and required HR actions. Attrition is often a voluntary or natural reduction in staff that is not replaced, while turnover encompasses all departures, both voluntary and involuntary, that typically require filling the vacant position.

What is Employee Attrition?

Employee attrition occurs when someone leaves the workforce for voluntary or natural reasons, and the position is eliminated or left unfilled. Common examples include retirement, resignation for personal reasons, or a decision not to return from a leave of absence. From a strategic standpoint, attrition can sometimes be used to reduce labor costs without the need for layoffs, as the role is essentially absorbed by the remaining team. However, this isn't always cost-free. If a high-performing employee resigns and their responsibilities are critical, the remaining team's productivity can suffer, leading to indirect costs.

How is Employee Turnover Defined?

Employee turnover includes all employee separations, both voluntary (quitting) and involuntary (termination or layoffs). The key differentiator from attrition is the organization's response: with turnover, the company usually plans to backfill the role. This makes turnover inherently more expensive. The cost to replace an employee is significant, ranging from one-half to two times the employee's annual salary, according to industry assessments. These costs include recruitment fees, training time, and lost productivity.

What Are the Average Attrition and Turnover Rates?

How do you know if your churn rates are normal? As of recent data, the average monthly turnover rate across industries was approximately 3.9%. However, post-pandemic trends indicate that total annual employee turnover could be about 20% higher than pre-pandemic averages. Rates vary significantly by industry, so it's crucial to benchmark your organization's rates against relevant industry data to assess your standing.

What Are the Main Causes of Preventable Churn?

Based on our assessment experience, a significant portion of employee churn is preventable. Key drivers include:

1. Financial Stress: The 2022 PWC Employee Financial Wellness Survey found that financially stressed employees are twice as likely to seek a new job. With a majority of Americans living paycheck-to-paycheck, competitive compensation and financial wellness programs are critical for retention.
2. Lack of Career Advancement: Employees will stay with a company that offers a clear path for growth. A lack of upward mobility and professional development is a primary reason talented individuals seek opportunities elsewhere.
3. Poor Work-Life Balance: Inflexible work schedules are a major contributor to turnover, especially among younger generations. The demand for better work-life balance makes companies with rigid structures less competitive.

How Can You Reduce Attrition and Turnover?

Proactive strategies can significantly reduce preventable employee departures. Key actions include:

• Conduct Effective Exit Interviews: For voluntary separations, use exit interviews to understand the real reasons for departure. Ask specific questions like, "How was your relationship with your manager?" or "Did the job align with your personal goals?" to gather actionable data.
• Implement Financial Wellness Programs: Since financial stress is a major driver, offering programs like On-Demand Pay (which gives employees access to their earned wages before payday) can alleviate pressure and improve loyalty.
• Boost Employee Engagement: Disengagement is a strong precursor to turnover. Fostering a positive culture, providing clear goals, and ensuring employees feel valued can lead to substantial reductions in absenteeism and turnover.

To effectively manage your workforce, you must distinguish between attrition and turnover, address the root causes of preventable departures like financial stress and lack of advancement, and implement proactive retention strategies such as exit interviews and financial wellness programs.