Attrition vs. Turnover vs. Retention: What’s the Difference?

What is Attrition?

Attrition is the process of losing employees over time due to natural causes such as retirement, resignation, or even more unexpected circumstances such as an accident or death. Typically when a company loses an employee due to attrition, they don't plan on refilling that position — a defining characteristic.

Attrition can also be broken down further into voluntary and involuntary attrition:

• Voluntary attrition: resignation or retirement — an employee quits for personal reasons or pursues a new or better job opportunity
• Involuntary attrition: death, illness, or termination — the employee is not choosing to leave of their own volition

Regardless of the specific reason for leaving, once the employee is gone, their role goes unfilled and is eventually eliminated.

Your employee attrition rate, therefore, is a measure of how many people have left your company in a specified period of time. To calculate it, you divide the number of people who have left by the average number of employees in a given period and then multiply by a hundred. Here's what the formula looks like:

Attrition Rate = (Relevant Employee Departures / Total Employees) x 100

What is Turnover?

Turnover is the rate at which departing employees leave a company and are replaced. It's similar to attrition, but it also factors in how quickly a position is filled after an employee leaves. Unlike with attrition, the position remains open with the intention of getting a new person into the role as quickly and efficiently as possible.

It’s a catch-all term that encompasses both voluntary and involuntary employee churn, similar to attrition. This number can be further broken down into external or internal turnover:

• External turnover: Employees who leave the organization and are replaced by new hires.
• Internal turnover: Employees who either leave the organization or move into a new role and are replaced by existing employees within the organization; either way, there's some degree of internal mobility.

The calculation for turnover rate is basically the same as attrition rate. If you're attributing different reasons for turnover than attrition (for example, excluding retirements or deaths), then you would have to separate out those employee departures before calculating. Here's the formula:

Turnover Rate = (Employee Departures / Employee Headcount) x 100

Attrition vs. Turnover

To recap: turnover is different from attrition because it takes into account the number of positions filled after an employee leaves. Attrition, on the other hand, generally only factors in departures where roles aren't going to be filled or replaced.

A high attrition rate isn't always a bad thing. Employee attrition can be a sign that your workers are doing well, finding new professional opportunities, and departing amicably. It can also be a way to reduce headcount and labor costs if your business is downsizing without raising alarm or impacting employees directly through a layoff or furlough.

On the other hand, rising turnover rates typically indicate poor retention and suggest potential issues with recruitment processes or internal policies. If you're seeking to fill positions but employees keep leaving anyway, that might speak to larger issues with company culture, toxic leadership, burnout, compensation, or something else. By tracking your employee turnover rate, you can find out if there's a systemic issue and explore solutions to keep workers happy and engaged.

Reasons for Employee Turnover

Some common reasons why employees might be voluntarily leaving and driving up your company's turnover rate are:

• Lack of career growth opportunities: Employees might leave for more responsibility or the opportunity to grow their professional skills in a different job. "No opportunities for advancement" was the second-most-cited reason why employees left their jobs in 2022, according to Pew Research.
• Toxic workplace culture: If the company isn't taking steps to create an inclusive and motivating work environment, employees might feel like they can't get ahead or be their best selves. More than half of employees said they quit their jobs in 2021 because they didn't feel a sense of belonging at work, according to McKinsey.
• Low pay and benefits: If a company isn't offering competitive salaries or benefits packages that meet the industry standard, employees may look elsewhere for more opportunity. Almost 75% of HR professionals surveyed by the Society for Human Resource Management said that inadequate compensation was the top reason why employees leave their company.
• Onboarding: If a company doesn't have an effective onboarding process, it can take longer for employees to adjust and get up to speed. This may lead to frustration and dissatisfaction with the job early on, sparking turnover.

What is Retention?

Retention is the act or process of maintaining talented, hard-working employees within your organization. A high retention rate is usually a sign that your company culture, employer branding, andemployee experience are strong, attractive enough to draw in new employees and keep them around for the long haul.

It gives an understanding of employee engagement, job satisfaction, and team culture — and, if those are trending positively, translates into a better overall experience for customers and more efficient operations. A business that can't retain its employees will have to bear the costs associated with constantly training new people, which can be expensive and time-consuming.

Retention rate is calculated by subtracting the number of employees who left from the total number of employees, then dividing that by the starting total, and multiplying by 100. Over a 12-month period, for example, the formula looks like this:

Retention Rate = (Employee Headcount at Year Start - Employee Departures) / Employee Headcount at Year Start x 100

Retention Rate vs. Attrition and Turnover

Retention is the inverse of your attrition and turnover rates — it shows how many employees were able to stay on board despite any external or internal factors that may have caused them to leave. For example, if your turnover rate is 25%, then your retention rate is 75%.

Reasons for Employee Retention

The best way to improve retention is to understand the factors that lead to greater retention and engagement. Here's what usually influences employees to remain with their organizations:

• Good compensation and benefits: People need to feel like their pay and fringe benefits are competitive with what other companies are offering. This can be a huge selling point for prospective employees, as well as an incentive to stay on board.
• Clear paths to career advancement: Offering clear paths to advancement, such as promotions and succession planning, can give employees the motivation they need to stay with your organization. Even after several years with a company, employees are more likely to remain with their employer after making an internal move than those who stay in their existing role, according to LinkedIn.
• Flexible work options: Allowing employees the chance for workplace flexibility, such as by working remotely or adjusting their hours, can go a long way in keeping them satisfied. Out of 30,000 people surveyed by Microsoft, 71% said they wanted flexible work to remain an option.
• Culture of engagement and inclusion: Creating a culture where employees are engaged, valued, and heard is essential for retention. Engaged workers are more likely to remain with their companies, according to Gallup. This can be done through effective communication, feedback and recognition programs, and general transparency throughout the organization.

Increase Retention Through Employee Wellbeing

One of the biggest essentials that employees look for in a company nowadays is tangible care and support for their wellbeing. Our State of Work-Life Wellness 2024 found that 87% of workers would consider switching companies completely if their employer didn’t focus on their wellbeing.

But how can you best demonstrate this kind of care? Not by increasing their salaries or in-office perks, but by creating space for employees to fulfill their needs. For some, that could look like a flexible work policy. For others, that could mean participating in a fun fitness challenge or a corporate volunteering initiative with coworkers.

No matter what it looks like in your workplace, make sure you’re offering employees the resources and the opportunities to look after their wellness needs. At Wellhub, we connect you with thousands of gyms, studios, and trainers to make work-life wellness more attainable for your team members. Chat with one of our wellbeing specialists to find out how you can help support your employees!