Turnover vs Attrition: Key Differences Plus How To Calculate Each

It’s a critical metric for your business, but you unlock its true value by analyzing it alongside revenue growth, net revenue retention, and broader operational efficiency metrics. Customer attrition refers to the customers a business loses over a given period of time due either to canceling or failing to renew their subscriptions or contracts. While customer attrition is also known as churn, customer turnover, or defection, it’s primarily also referred to as “logo churn” in the SaaS industry. Furthermore, attrition rates often change when disruption occurs — we may see people staying put and ‘weathering the storm’ for a while in times of instability and uncertainty.

What causes high attrition rates?

The bottom line is, for SaaS companies, about a 5-7% annual churn rate (not monthly) is a good benchmark. But if you want a more specific benchmark for logo retention/attrition, you should look at companies with similar ACVs as your business. The 2022 B2B SaaS Benchmarks report from RevOps Squared highlights ACV as the biggest factor in attrition rates, coming up with the following breakdown. Like any other SaaS metric, customer attrition rate is only as valuable as the context you have around it.

About Paychex

Employee turnover refers to the rate at which new hires replace employees who leave their companies. This concept tends to reflect more short-term changes within the company. High turnover rates can negatively affect businesses as hiring and training new staff can be expensive. In addition, it can lead to a loss of institutional knowledge and experience, which also impacts creativity and innovation. To minimize employee attrition rates, prioritize open communication, collaboration, and employee well-being.

If the turnover at a company is high, it often indicates that a large number of employees are leaving, whether voluntarily or involuntarily. High turnover rates could be a sign of a disengaged workforce, limited growth opportunities, or even poor hiring decisions. Companies will ultimately need to address the root causes in order to control turnover over the long-term. The employee attrition rate measures the number of employees who’ve left your organization within a set period of time. In the same way you measure engagement, intent to stay, well-being, inclusion — it gives you an idea of how you’re performing.

Best practice: find out why people are leaving

1. Understanding attrition vs. retention may help address the root causes of employee departures, such as low pay or lack of advancement.
2. High attrition leads to recruitment costs, training expenses, and delays in getting new hires up to speed.
3. Although high attrition might sometimes indicate positive changes like restructuring or the removal of underperforming team members, it usually reflects more significant problems within the company.
4. Bureau of Labor Statistics, the average annual turnover rate in the U.S. stands at a humbling 47.2%.
5. It’s important to assess who is leaving your company, as the departure of star employees can affect your productivity in the long run.
6. Demographic-specific attrition occurs when employees from a particular age group, gender, ethnicity, or other demographic segment leave a company at a higher rate than other groups.

By investing in the employee experience and initiatives such as career development programs, mentorship opportunities and regular feedback channels, you’ll foster a sense of loyalty and commitment. The attrition rate is a measure of the rate at which employees leave an organization without being immediately replaced over a specific period of time. It often signals underlying issues such as poor management or low team member satisfaction.

Explore new research on employee productivity, well-being and technology from The Productivity Lab’s State of the Workplace report. Get actionable insights in minutes with research-backed, anonymous employee surveys in BambooHR®. It’s important to recognize these employees’ contributions and reward them with incentives that will help them feel valued and appreciated.

Customer attrition and churn are synonymous as they both account for lost accounts (either through active or passive attrition). This is just one example of a finance/CS partnership that improves customer communications. But broadly speaking, the more proactive you are about collaborating with customer success, the more proactive they can be about communicating with current customers. These are all typically things that build up over time, but the trigger to leave can occur at any stage in an employee’s lifecycle. And often, simply working out what employees want (or what their challenges are) and resolving them is enough to help them stay. In 2023, we’re experiencing one of the most significant talent shortages ever.

Your company’s reputation can make or break its ability to attract high-quality candidates, particularly from the Gen Z pool of applicants who prioritize how to calculate attrition company culture and work-life balance. Once managers are talking to employees and people are hearing accurate information from executives, the only remaining need is to connect the dots. One-on-one meetings allow employees to ask their managers for clarification on any recent team changes, and for managers to ask about employees’ career plans and life events. While managers should be giving their employees regular, in-the-moment feedback, taking time for formal one-on-one meetings allows you to sync up and build that all-important trust with employees. So, your attrition rate would be 9.41%, which falls within the healthy range experts recommend.

Most notably, concerning types of attrition are voluntary and demographic-specific attrition. That’s because both of these may be pointing to structural issues within your organisation. Attrition due to layoffs or company restructuring could also be natural as companies learn to be more productive with fewer staff. One example is using machine automation to handle repetitive tasks previously managed by a human being. HR software simplifies this process by combining employee demographic information with your separation data for more granular insights.

1. Attrition rate measures how many employees leave a company over a period of time.
2. Internal attrition occurs when you don’t backfill a position following promotions, demotions, and role or departmental changes.
3. Regular feedback sessions and team-building activities can also promote a sense of community and purpose among employees.
4. Churn and customer retention analysis data can help product, marketing, and customer success teams identify gaps and opportunities to improve throughout the customer experience and lifecycle.
5. Download our definitive guide to corporate culture for organisations here.

If that happens, it is worth paying attention to what made them decide to leave so you can fix it. Let’s say you want to measure early attrition to understand the effectiveness of your new hire onboarding over the past 90 days. You hired 20 employees over the past 90 days; four left and have not been replaced.

Attrition monitors the number of employees who leave, while retention looks at the number who stay over a set period. For the more nuanced version of attrition, only consider the number of employees who left and were not replaced before dividing that by your average headcount. The plan should be specific, with clear objectives, timelines, and assigned responsibilities to ensure effective implementation. This step is critical because it moves the process from analysis to action, enabling the organization to tackle attrition proactively and improve its overall workforce management. Aside from compensation, job satisfaction also influences whether employees remain or choose to search for another job. People spend a significant amount of their lives at work, so it’s critical to feel fulfilled from performing their jobs.