Biggest Factors that Lead to Employee Attrition

Lack of Compensation, Employee Benefits and Career Mobility among the biggest factors that are causing a rise in talent attrition in the IT industry in 2022.

Every HR team is fighting the same problem in their respective organizations – “Employee Attrition.” Employee attrition is a very common phenomenon in fast-growing industries where employees leave an organization and join elsewhere. Today, it is at an all-time high in some industries such as IT and software development, banking and finance, healthcare and education. Every organization witnesses attrition, but it only becomes a big HR problem when the recruiters are unable to hire replacements faster. There are many reasons that lead to employee attrition, and most of them are attributed to workplace management and employee benefits. In this article, we will discuss some of the biggest factors that lead to a high rate of employee attrition in an organization and the industry, in general.

What is Employee Attrition?

Employee attrition or employee churn is calculated as the number of employees leaving an organization in a year, expressed in percentage. Employee churn is a very natural event in the employee lifecycle, where they could be dissociating from the company operations due to voluntary or involuntary reasons. Common forms of attrition are retirement, migration, disability and / or mergers and acquisitions.

The standard formula to calculate rate of employee attrition is expressed as:

[Number of employees leaving the company/ total number of employees in the company during the same period] * 100

Most companies aim at a churn rate of 10% or lower to ensure business continuity and reduce brain drain to competitors. If an organization has a churn rate higher than 10%, it needs to seriously retrospect factors that are causing this effect. TeamLease’s recent report titled, ‘Brain Drain: Tackling the Great Talent Exodus’ highlights the increasing retention rates in the IT sector. It also clearly cites the top reasons for talent exodus, consequences of dysfunctional turnover, and possible ways and strategies to reduce quitting.

Top Factors that Lead to a High Employee Attrition Rate

Lack of competitive compensation package

Employees want to future-proof their lives against the rise in inflation and the fear of a global economic recession. With a limited scope to enhance employment opportunities, employees look for better compensations to improve their financial health. This directly affects satisfaction at job and self-esteem. Lack of a better compensation package at the backdrop of talent war in the technology innovation industry, force employees to leave the organization. A competitive salary, regular rewards and recognition, and having a great employee benefits program could increase the employee lifecycle in the organization and prevent further rise in the employee attrition rate.

Dysfunctional work-life balance

Lack of flexibility at workplace is causing high rates of attrition among employees, particularly those who have a spouse, kids, parents, and pet. Employees demand more from their employees, and when employers fail to acknowledge these demands, people quit irrespective of a high compensation or a great working relationship with the management.

Top employees who are at peak of their performance often suffer from mental and emotional imbalance due to poor work-life coordination. This problem has further aggravated during the pandemic years where most of the employees were locked out with their family members in one place and were still expected to deliver performance. The poorly planned back to work, and hybrid working policies have caused further damage to work-life balance, resulting in forced resignations to organizations that support better working conditions. Despite offering flex-hours, 40 hours weeks and rewarding long vacations, employees still feel disgruntled as performance appraisals still account only for targets met versus number of days actively worked in the organization through the cycle.

Organizational failure and poor commitments

Employees are increasingly feeling left out of the managerial commitments even as they bear the brunt of some very poor quality leadership and organizational misalignment. This is particularly true of IT companies and startups that have very high rate of employee churn.

According to TeamLease’s latest report, 33% of the employees chose exodus over retention despite good compensation due to the lack of commitments from the organization. These employee felt the organization doesn’t value them as a pat of their overall vision roadmap. This has influenced a sort of cultural dissonance among the employees who stay back, causing further dissatisfaction, eventually leading to quitting.

Career mobility and training programs

Employees want to keep moving places and this mobility gives them a sense of dynamic growth in their careers. Longer an employee stays back in a role with the same job title, greater are the chances of them leaving the company in the near future. Employees see the initiatives taken by employers in training their workforce as a major retention factor. 45% of the employees who were surveyed by TeamLease feel that their employers must look into TLD initiatives to reduce workforce attrition. Also, better career mobility and mentoring could help top-performing employees to seek internal promotions whenever an opportunity arises in cross-functional teams and departments.

Organizations that have a strong career mobility strategy for their employees are likely to reduce their attrition. These efforts also influence their corporate image in the job market leading to recruitment and selection of candidates who seek similar opportunities within the industry as your existing employees.

Trust

An organization that doesn’t trust its employees is likely to lose it employees like a forest fire. Many IT companies have strictly warned their employees to report to work on-site at least thrice a week due to recent outsourcing incidents. For managers, this is a tricky situation. Breach of trust also happens when employer are taking the “quiet laying off” routes to maintain balance in their HR budgets and operational efficiencies. Employees who sniff this in their employer prefer to bow out of the company before the axe falls on them. Hence, the real churn rate is higher than what the organization had previously predicted.

Sharing his views, Mr Sunil Chemmankotil, Chief Executive Officer, TeamLease Digital, said, “The Indian IT sector has witnessed tremendous growth in the last decade. It has recorded 15.5% growth, which is the fastest in more than a decade and touched $227 billion, creating additional 5.5 lac jobs in FY22 alone. However, with the global pandemic disrupting the IT hiring chain, there is evidence of a reverse trend which indicates that retaining a business-critical talent has undergone a great change in the last two years. The survey indicates that 57% of IT professionals would not consider returning to the IT services sector in the future. With the usual demand for salary hikes and other benefits, the main attraction for employees in their new jobs is ‘Great Reflection’ on the internal policies and external factors that should be relooked at by employers as we are viewing great changes in the employees’ feelings about work and life.”

 Organizations’ strategic hiring plans must contain goals towards their employees and their betterment. This ultimately translates into soul searching over whether an employee feels valued in his/her work or merely creates outcomes and value to benefit others. A fundamental change in the employment value proposition leads to deeper employee-employer relationships, a strong sense of owning and purpose-driven work,” he adds.

Conclusion

Working culture and the expectations around use of technologies have completely changed the employee-employer relationship. Employees need something more than just flexible working hours, a good compensation package, training and development opportunities and mental peace. They want a holistic organizational commitment that would positively inspire them to stay at work and deliver what is expected from them. A true meaningful organizational behavior and communication management is needed to prevent employees from leaving your organization faster than what you can hire.

What’s your employee attrition management strategy?

[To share your insights with us, please write to sghosh@martechseries.com]