Attrition and Its Effects

Topics: Employment, Work, Work Pages: 20 (5306 words) Published: January 30, 2011
Table of Contents
What is attrition?3
What are signs of attrition?3
Calculation of Attrition Rates3
Attrition rates in India4
The highlights of the study in question are as follows:-4
Costs of Attrition7
Causes of Attrition9
Survey details and insights11
What can organizations do to retain employees16
Short-term Actions16
Long-term Actions17
Retaining the “Game Changers”18

What is attrition?
Attrition is the reduction in workforce by means of resignations, retirements and death. It is also known as total turnover or wastage rate. Turnover is defined as a change in the workforce due to accessions, quits, discharges, and layoffs. The difference between the two is that attrition is a function of a declining workforce, whereas turnover is the function of a stable or expanding workforce.

In the modern context, both these terms are used interchangeably. But, one thing is common; both attrition and rising employee turnover results in major organizational and financial stress. What are signs of attrition?

High turnover or attrition and low employee morale in all or part of the organization are two major indicators of an ineffectual work environment. Related workplace indicators that may exist in such a situation include * Rising conflicts

* Multiple complaints
* Low employee engagement
* Poor company health
* Diversity or inclusion objectives being unrecognized or going unmet * Employee indifference

These factors can reinforce or drive each other – a problem with one can create or exacerbate problems in all others. Calculation of Attrition Rates
Attrition rates are calculated based on a monthly, quarterly and yearly basis. The simple formula for calculation of 1. Employee turnover per month = (Number of separations during the month /Average number of employees during the month) * 100 2. First year turnover rate = (Number of employees who leave after less than 1 year of employment/ Number of separations during the same period) * 100 Though calculation of attrition rate remains a debatable area since there is no standard formula to calculate it. The following are reasons that can be attributed to the same. * The employee base changes each month. So if a company has 1,000 employees in April 2004 and 2,000 in March 2005, then they may take their base as 2,000 or as 1,500 (average for the year). If the number of employees who left is 300, then the attrition figure could be 15% or 20% depending on what base is taken. * Many firms may not include attrition of fresher’s due to higher studies or attrition within three months of joining. * In some cases attrition of poor performers may also not be treated as attrition. * Essentially the attrition number is also a PR or stock/analyst statement and is prone to 'dressing' up. (Source: Financial Express)

Attrition rates in India

The following chart gives a summary of the attrition rates in the various sectors in India.

An unabated level of attrition rate continues to plague the country. As noticed, this is spreading fast from IT and ITES to other service sectors such as civil aviation, financial services, retail and engineering, according to an Assocham Eco Pulse Study. (Source: Assocham Eco Pulse Study Report)

The highlights of the study in question are as follows:-
* The attrition rate in IT and ITes sector has slowed by 10% falling to the range of 25-30% as compared to 35-40 % rate in the year 2008. * The services sector, civil aviation, financial services and retail are facing difficulties in staff retention * The consolidation in the civil aviation sector has raised attrition to nearly 46 % as the pilots and cabin crews leave airlines due to job opportunities created in various local and international airlines * There is a rising job shift taking place at entry and middle level in the financial services sector. The attrition level...
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