Employee attrition, also known as employee turnover, refers to the rate at which employees leave an organization and are replaced by new employees. Attrition can be voluntary when employees choose to leave on their own or involuntary when employees are terminated or laid off by the employer.

Employee attrition can significantly impact a business, both financially and operationally. High attrition levels can lead to increased costs for hiring and training new employees, reduced productivity and morale, and a loss of institutional knowledge.

In 2022, with a minimum of 5.43% and a max of 16.9%, the average employee turnover rate across all industries was 9.31%. It’s worth noting that the COVID-19 pandemic has significantly impacted employee turnover, as many employees have reassessed their priorities and job opportunities in the wake of the pandemic.

Costs of Employee Turnover

Employee attrition can have hidden costs for businesses beyond the apparent cost of hiring and training new employees. Here are five hidden costs of employee attrition:

  • Reduced productivity: When employees leave, their knowledge, skills, and expertise leave with them. This can lead to a loss of productivity as remaining employees try to pick up the slack or new employees are brought up to speed.
    Decreased morale: Employee attrition can have a negative impact on the morale of remaining employees. They may feel overworked or stressed by the extra workload or become demotivated if they see that their colleagues are leaving.
  • Hiring and training costs: Hiring and training new employees can be expensive. Employers may need to pay for job postings, background checks, and other recruitment costs. Once new employees are hired, they may require training, which can take time and resources away from other important tasks.
  • Loss of institutional knowledge: Experienced employees may have developed knowledge of the company’s operations, clients, and processes that is difficult to replace. When they leave, this institutional knowledge may leave with them, making it harder for new employees to get up to speed.
  • Impact on customer relationships: When employees leave, it can have a negative impact on customer relationships. If the employee had developed strong relationships with clients, their departure may lead to a loss of business or a decrease in customer satisfaction.

Employers can reduce employee turnover by improving the work environment, offering competitive salaries and benefits, providing professional development and advancement opportunities, and creating a positive company culture. Understanding why employees leave an organization can help employers address underlying issues and improve retention.

Typically, businesses that put employee retention first often fare better in challenging economic times, and developing a successful people strategy during a recession helps establish organizational resilience that can sustain success over the long term.

If your organization is struggling to retain team members, please consider contacting our team of human resources professionals.