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How to factor attrition vs. turnover into your headcount planning process

While attrition and turnover can be hard to predict, we'll show you how to consider both in your workforce planning to mitigate risk and create a more strategic, optimized hiring plan
Kirk Kappelhoff
Planning
11 min
Table of contents
Employee turnover vs. attrition
Voluntary termination vs. involuntary termination
Attrition rate vs. turnover rate
How to calculate attrition and turnover rates
How to incorporate attrition and turnover into your headcount planning 
Leverage technology to optimize your workforce
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Summary

Employee attrition turnover and attrition directly affect the operational efficiency in businesses. While these terms are often used interchangeably, understanding the differences between them and factoring both into your headcount planning process will help you  to prevent skill gaps, improve hiring decisions, and maintain workforce stability.

Losing employees is an inevitable, and often costly, part of any organization’s lifecycle.

While it seems to make sense to plan for the loss of employees, it’s challenging to do because turnover and attrition are often hard to predict. Most (if not all) companies do headcount planning in one form or another, but with regard to employee leaving, it’s usually turnover because that gets the most attention.   

Attrition poses risks, too, but is often considered unavoidable for the most part. The problem is, failing to factor attrition into your headcount plan leaves you vulnerable to all the same risks as turnover. 

Regardless of the reasons, when employees leave, it can impact your business in some pretty negative ways. 

This article will show you how to factor turnover and attrition into your headcount planning process for a more informed and comprehensive hiring plan—one that will make your business more resilient to workforce changes, regardless of what’s driving them.

But first, we need to tease out the nuanced differences between employee attrition and turnover.   

Employee turnover vs. attrition

While the terms turnover and attrition are often used interchangeably, they’re actually two different but related concepts. Turnover and attrition are two sides of the same coin. They both refer to the departure of employees from an organization, and can include employees leaving voluntarily or involuntarily. 

So what’s the difference? 

The difference between attrition and turnover lies in how organizations respond to employee departures. What distinguishes turnover from attrition is that when employees leave, their positions are typically backfilled whereas with attrition. With attrition, positions are not immediately backfilled and may never be.    

Let’s take a closer look at how these two ways of looking at employee departures are related to headcount planning.

Turnover and the turnover rate metric

Turnover is always a concern for companies because it represents a reduction in headcount that may or may not have been expected or planned but which always presents challenges. 

Turnover can occur as a result of voluntary or involuntary departures. For example, when employees in key positions leave for new opportunities, employers often need to backfill their positions as quickly as possible to avoid disruptions in the business. 

Turnover can also include layoffs, which are considered an involuntary departure. Whether temporary or permanent, layoffs are considered turnover because, despite being initiated by the company, strain its remaining workforce and would otherwise be refilled. 

Whether voluntary or involuntary, turnover causes some level of disruption in the business, which makes tracking the turnover rate an important metric to factor into headcount planning. 

Attrition and the attrition rate metric

Attrition is often viewed as inevitable and is not necessarily a bad thing for companies that need to reduce their workforce. This is because it’s a more passive way to reduce headcount as opposed to having to lay people off. When an employee leaves, the employer may eliminate the position altogether or merge it with another. 

Compared to turnover, there is far less pressure to backfill a position that has been vacated as a result of attrition. Indeed, this is the defining characteristic of attrition. 

However, attrition can negatively impact a business if the number of positions lost to attrition increases faster than the business can adjust or if the cumulative effects of positions left unfilled begin to hamper operations.  

Tracking attrition rate and factoring it into headcount planning is important because it offers a way to strategically look at ways to optimize your headcount over time as opposed to taking drastic steps to reduce it.  

You may also hear the term “internal attrition” which is often used at a department level to track when an employee moves from one team or department to another within the organization. 

Internal attrition isn’t really “attrition” because the employee is still working for the organization. Tracking internal attrition can be challenging but it’s still important because while it doesn’t impact your headcount at the organizational level, it can help inform your planning process.  

Voluntary termination vs. involuntary termination

At a high level, employee departures are typically classified as either voluntary or  involuntary terminations. 

While attrition and turnover reflect how organizations think about and respond to employee departures, their classification as voluntary or involuntary terminations help employers better understand why employees leave. 

Tracking whether an employee leaves voluntarily or involuntarily also provides insight into the different drivers of workforce changes and the degree to which a company can control them—both of which are critical to effective headcount planning. 

What is voluntary termination?

Voluntary termination occurs when an employee submits a written or verbal resignation to the employer. This can happen for a variety of reasons. The most common include employees that leave the company for new opportunities or retirement, or for personal reasons. 

Voluntary termination can also happen as a result of “job abandonment” where an employee fails to show up for work for three consecutive days without contacting the employer. 

Whether an employee’s death should be classified as voluntary or involuntary termination is the subject of debate. However, getting into the weeds on this point isn’t really useful for the purposes of headcount planning because the employee’s death is still a departure in either case.   

Voluntary terminations are harder to plan for because the company doesn’t have any direct control over when they happen. While the company may be a contributing factor, they can be difficult to predict. 

What is involuntary termination?

Involuntary termination happens when the employer initiates the termination, and the employee has no choice but to leave. 

This might include termination on the basis of performance or layoffs driven by a company’s need to reduce its workforce. It can also happen when a company eliminates positions or merges positions.  

The key thing to remember here, relative to headcount planning, is that the company controls these departures. So, they’re usually easier to plan for. 

Attrition rate vs. turnover rate

While attrition and turnover are concepts—ways of thinking about employee departures—calculating the rate at which employees are leaving is how you'll actually factor them into your headcount planning.

Fortunately, that's pretty straightforward.

Turnover rate formula

Calculating turnover rate, which is expressed as a percentage, is pretty straightforward:

Turnover rate (a percentage) equals the number of positions vacated due to turnover divided by average number of employees multiplied by 100 .
Turnover rate formula.

Attrition rate formula

Attrition rate, which is also expressed as a percentage, can be calculated with the formula below: 

Attrition rate (a percentage) equals the number of positions vacated due to attrition divided by average number of employees multiplied by 100 .
Attrition rate formula.

You’ll undoubtedly notice that the formulas for attrition rate and turnover rate are essentially the same (the variables just have different names). This is because they’re both measuring the rate of employee departure from the organization. 

While this may seem like splitting hairs, tracking them separately provides a deeper understanding of your workforce, which in turn, allows you to be more strategic in your headcount planning process.    

It’s important to note that because they both represent employee departures, in order to track attrition and turnover rates effectively, you’ll need a system that allows you to distinguish between them. This can be accomplished by tracking the reason for each employee’s departure, ideally, as granularly as possible. 

Information to track for more effective headcount planning

Let’s look at the specific types of data you’ll need to distinguish between turnover and attrition in your organization. 

If you’re like most companies, you’re already tracking the basics, such as start and end dates, roles/positions, salaries, etc. But there are a few additional high-value data types you’ll want to start tracking in your HRIS (if you’re not already): 

  • Nature of employee departure (voluntary or involuntary): A minimum requirement for a high-level understanding of turnover and attrition.  
  • Reason for the employee departure: Provides yet deeper insights here and a much more comprehensive view of turnover and attrition in your workforce.
  • Employee tenure at time of departure: Provides insight into how often you might have to backfill different positions and the level of expertise lost when employees leave. 
  • Employee designations: Helps you better understand the roles you might expect to become vacant.

Tracking all of this by department will yield much deeper insights for your headcount planning process than doing it at the organizational level.   

Below, we’ll walk you through the attrition rate calculation. Just remember that because both attrition and turnover are calculated essentially the same way, if you track them separately, you can use the same process described to calculate your employee turnover rate. You just need to swap out the attrition rate formula with the turnover rate formula.

How to calculate attrition and turnover rates

Even though you generally have less control over attrition than you do turnover, factoring it into your headcount planning process will allow you to be more strategic, proactive, and better prepared in your response to workforce changes. 

Step 1. Calculate the average number of employees

Headcount planning is typically conducted annually, starting in the third quarter of the year so it can (ideally) be finalized before the end of the year. 

To calculate the average number of employees, you would look at the number of employees you have had over the previous 12 months, both at the beginning of the 12-month period and at the end of it, and plug those numbers into the following formula: 

Average number of employees for calculating attrition and turnover rates equals the sum of the employees at the beginning of the period and the employees at the end of the period divided by2
Formula for calculating the average number of employees, which is needed to calculate attrition and turnover rates.

Step 2. Count how many employees left due to attrition

Add up all the employees that left the organization during that same 12-month period for reasons you would consider attrition. In most cases, these will be voluntary terminations. 

Note that not all voluntary terminations are attrition. For example, if a department head unexpectedly leaves to take a position with another company, that would likely be considered turnover due to its impact on the business and the pressure to hire a replacement. 

However, if that department head had instead announced retirement six months down the road, it would be more accurate to categorize that departure as attrition. In this case, the company would probably have the time needed to find a suitable replacement—or to perhaps restructure the organization in a way that would eliminate the need to backfill that role.  

The example above illustrates the value of being able to clearly distinguish between attrition and turnover for the purposes of headcount planning. 

Pro Tip: If you haven’t previously considered the differences between attrition and turnover and/or your HRIS isn’t set up for capturing the level of granularity needed to do that, working through those limitations first will benefit your headcount planning now and make it easier for you to track for future planning. 

Step 3: Calculate the attrition rate

Now, just plug the numbers from Steps 1 and 2 into the attrition rate formula:

Attrition rate (a percentage) equals the number of positions vacated due to attrition divided by average number of employees multiplied by 100 .
Attrition rate formula.

How to incorporate attrition and turnover into your headcount planning 

Once you know your attrition and turnover rates, you can use them to inform your headcount planning process. Here again, we’ll walk through how to factor in attrition specifically, with the understanding that the same process can be used to factor in turnover.   

Step 1: Analyze historical data

Start by reviewing past attrition trends. Break down employee departures by department, seniority level, business function, and location to identify patterns. 

Some teams may have consistently higher attrition rates, indicating underlying issues such as workload imbalance or lack of career growth. Also, assess the average tenure of employees in different departments, locations, and business verticals.

For early-stage companies with limited historical data, leaders can benchmark against industry averages. In addition, they can also analyze early warning signs, like declining employee engagement scores or exit interview trends.

Step 2: Forecast future attrition

Use historical trends to predict future attrition rates. If a particular team has seen a 15% annual attrition rate, there is a high probability for similar patterns to continue unless addressed. It is also incredibly important to factor in external influences like market conditions, funding cycles, and competitor hiring trends.

Step 3: Integrate attrition into headcount planning

Once attrition forecasts are clear, factor them into your headcount planning. Align recruitment efforts with anticipated departures to avoid workforce gaps. You can also build attrition buffers into hiring and budget plans to prevent last-minute hiring troubles that increase costs. 

Strategies for managing turnover and attrition

By taking a structured, data-driven approach to understanding turnover and attrition in your business, you can minimize their impact to create a more stable workforce and retain top talent. 

  1. Be ready for scenarios

While you can’t predict every resignation, you can prepare for different levels of attrition and turnover. Scenario planning helps you anticipate risks, adjust hiring strategies, and maintain business continuity.

Pro Tip: A headcount reporting dashboard can provide real-time visibility into workforce trends in your business, helping leadership make informed staffing decisions.

  1. Align recruitment with projections

Integrate attrition and turnover forecasts into the headcount planning process to make sure the hiring budgets and timelines reflect expected vacancies.

  1. Get HR and finance on the same page

Both teams need to work together to balance talent retention with cost efficiency. Tracking and analyzing attrition and turnover by role and department helps HR create targeted retention plans while allowing finance teams to forecast hiring costs. 

  1. Automate headcount reconciliation

By automating headcount reconciliation, HR and finance teams can ensure real-time accuracy in workforce data, preventing discrepancies that can lead to over- or under-hiring.

Additional benefits of tracking attrition and turnover

We’ve discussed how tracking turnover vs. attrition at a granular level can help you in your headcount planning, but doing so offers other benefits as well:

  • Provides the ability to better manage workforce costs: While attrition isn’t necessarily disruptive in the short term, over time, it can lead to increased hiring, training, and onboarding expenses, all of which can affect a company’s profitability.
  • Helps identify problems that can lead to high turnover and attrition: Attrition can be an early indicator of a problem in the making. When people keep leaving, there’s usually an underlying reason. It could be poor management, a lack of opportunity for career growth, or a toxic work environment. Tracking voluntary attrition and turnover can help leaders spot issues that if left unresolved can become a problem. 
  • Supports long-term growth: Developing a deeper understanding of the causes of attrition and turnover can help you manage it more effectively with smarter hiring, better financial planning, and a stronger company culture that combined creates a more stable workforce.  

Leverage technology to optimize your workforce

By looking at past trends, anticipating future attrition and turnover, and factoring both into your headcount planning process, you can be more prepared for employee departures in different areas of your business and more strategic in your hiring plans. 

Achieving these benefits requires a deep understanding of your company’s workforce that’s only possible with granular tracking of all employee departures, including whether they were voluntary or involuntary, and for the voluntary departures, the reasons employees are leaving. You also need to know what areas of your business are losing employees and the kinds of employees they’re losing in order to evaluate the potential impacts of both turnover and attrition and to plan for those. 

This level of tracking requires more than just a spreadsheet. For one thing, spreadsheets are hard to maintain and even harder to incorporate into broader planning processes. With modern headcount planning software, you can easily track and forecast turnover and attrition rates in real time. Another key advantage of using software with these capabilities is that they offer integrations with other key business systems, such as your HRIS, for more connected planning.   

Drivetrain is a great example of this. With more than 800 integrations, it can connect to your HRIS to pull in all your employee-related data (start and end dates, positions, compensation, etc.) and with your ERP or accounting system to bring in employee-related expenses, all of which need to be factored into headcount planning. 

Drivetrain is a comprehensive financial planning and analysis (FP&A) platform that  provides all the features you need for workforce planning. In addition to automatically consolidating all the data you need for that process, with Drivetrain, you can track all the details of employee movements in and out of and within your organization at the department level for a full understanding of attrition and turnover. 

Combined with its powerful scenario planning and financial forecasting features, Drivetrain enables you to more accurately forecast turnover and attrition and model the potential impacts on your business. You can also use what-if analysis to inform your decisions regarding internal movements between departments. 

These are insights you can use to mitigate risk and strategically optimize your workforce and associated costs. 

If you’re tracking your headcount on spreadsheets or if your HRIS isn’t giving you this kind of insight, it’s time to take a look at Drivetrain

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