Employee attrition, employee turnover, and employee churn, three HR terms that are closely linked. Oftentimes, they are used interchangeably, and though they are closely related, they are not the same. Attrition, turnover, and churn all represent the loss of a team member, however, each term represents a different scenario, and each one can impact your company in different ways. So, what differentiates the types of employee departure, what do they mean for your bottom line, and how can they be controlled? Understanding what employee attrition, employee turnover, and employee churn are and how to manage them can help you run your business more smoothly. Let’s look more closely at each one to gain some clarity on these important HR terms.
What’s the difference Between Attrition Turnover and Churn?
Employee attrition, employee turnover, and employee churn all refer to an employee’s departure from your company. For the first two, the difference between them lies in the context, in other words, in the reasons for the employee’s departure. Employee churn refers to the total number of attrition and turnover combined.
Defining Employee Attrition
For an employee’s departure to be considered attrition it must meet two criteria, first, the employee’s departure must be voluntary. Second, the company must make the decision not to rehire, or re-fill the position. In other words, employee attrition refers to a company’s strategic decision not to replace an employee who leaves voluntarily. If you terminate an employee involuntarily and decide not to backfill, that is considered restructuring. Layoffs and restructuring events aren’t voluntary, and therefore can not be counted as attrition. If an employee leaves voluntarily and you decide to replace them, that’s considered a turnover. Since attrition happens voluntarily as opposed to a lack of job satisfaction, it’s not normally thought of as a negative, but rather a normal part of the employee life cycle. Common reasons for employee attrition include:
- Making a career move or change
- Life events such as retirement.
- Moving to another town or state
- Passing away
- Returning to school
- Starting a family
To measure attrition at your firm, compare your employee total at the beginning of a year, quarter or month to the total number at the end of that period. For example, if you started the quarter with 100 people and ended it with 90, that quarter’s attrition rate is 10 percent.
Defining Employee Turnover
Employee turnover is directly related to the job satisfaction of your workforce. To be counted as turnover, there are a few factors that must be considered concerning an employee’s departure. First, you’ll need to consider whether the employee left their position for what they considered a better job with another company or if they were terminated. And second whether or not the decision has been made to replace the employee. Only positions that vacate and are subsequently refilled can be counted as turnover. Turnover can be more accurately described as the rate at which an organization replaces departing employees over any given time period whether they are voluntary or involuntary departures. Unlike attrition, a high employee turnover rate can indicate problems within an organization. Some common reasons for employee attrition include:
- Poor employee fit or bad hire
- Hostile work environment
- External promotion
- Skewed work/life balance
- Lack of opportunity
To measure turnover within your company, divide your year, quarter, or month employee departures by average headcount. Then, multiply the result by 100 to get a percentage. For example, if you averaged 100 employees over a one-year period and 15 employees left, your annual turnover rate is 15%.
Defining Employee Churn
Employee churn refers to the combined numbers of an organization’s attrition rate and turnover rate. Churn rates can be comprised of both voluntary and involuntary departures. It is important to monitor your company’s employee churn rate because it impacts productivity, business performance, and growth. A company’s churn rate can be calculated by dividing the number of employees who have lefts by the total number of employees remaining during a year, quarter, or month then multiplying by 100 to get a percentage. For example, if four employees quit the organization, and there are a total of 200 employees remaining then their monthly churn rate is 2%.
Preventing Attrition and Turnover to Reduce Churn
There are preventable forms of attrition, and nearly all types of employee turnover can be prevented by creating a positive work environment and a company culture that encourages employees to stay long-term.
Make Great Hires
The first step in reducing turnover is increasing the quality of your hires. Take time during the hiring process to ensure that each candidate you hire has the necessary skills to perform the job well and will make a strong contribution to your team.
Offer Growth Opportunities
In our recent hourly candidate survey, we discovered that 38% of respondents listed training and development as a top factor in job satisfaction. Most employees aspire to increase their skills and move up the career ladder. If left to stagnate in one position for too long, it’s likely that they will begin searching for a new position at a company where they can find advancement. Providing employees with a clear career path allows them to see a future with your brand and helps to build long-term loyalty.
Create a Culture of Recognition and Rewards
Studies show that employee recognition is a key factor influencing employee engagement. Few things will send a top performer to your competitors’ career page faster than feeling unappreciated and undervalued. Establish a regular practice of recognizing and rewarding great work. Create programs within your company that quality employees know that you recognize their contributions and are willing to reward them for top performance.
Offer Work-Life Balance and Flexibility
40% of respondents in our hourly candidates survey listed flexibility and flex schedules as top job satisfaction factors. Providing employees with flexibility gives them the peace of mind that they will be able to meet both work and life needs and may help encourage them to stay with the company rather than looking elsewhere for flexibility.
When studying your organization’s churn rate, it’s important to note that regardless of why employees leave, it’s in your best interest to manage employee attrition, minimize turnover and reduce churn each year. But, before you can focus on retaining top talent, you’ll first need to attract and hire top talent. Here at Work4, we’ve helped companies around the world to create efficient volume hiring processes to help them make quality hires at scale.
From employer branding to candidate nurturing and quality candidate lead sourcing, we have a product that’s right for your company. Contact the experts at Work4 to see what solution works best for your company.