Attrition Rate – A Rising Concern in India?

Many people would have heard of ‘attrition rate’, it is a well-known and much feared term among HR professionals. But what exactly is attrition rate? The attrition rate, also known as churn rate, is used to calculate the rate at which employees leave organizations.

The attrition rate is a concept that has consistently enabled organizations to align futureplans with workforce economic trends and business situations. Keeping track of the attrition rate helps senior-level management to see trends and dive into the root cause of any rises and take the correct measures to decrease it.

It is not enough to simply look at the calculated numbers to determine whether employee attrition poses a risk to your company. It is critical to recognize the type of attrition and comprehend its causes. High attrition rates can have a variety of consequences for a company, some of which are directly linked to employee satisfaction.

The employment market in India has taken a turn since the pandemic hit, employees have understood the importance of work-life balance and flexibility. The percentage of Indian jobseekers putting work-life balance among their top goals has risen from 36% to 47% in the last two years, which has led to quiet-quitting, a term that has been popularly used in recent months. The largest group of people this is affecting is Generation Z and Millennials, who supposedly began the quiet quitting phenomenon, it should not be a surprise however, that Baby Boomers or Generation X are among those that are fed up with this trend. Nevertheless, most Gen Z and Millennials oppose the notion that it is "anti-work” and is believed that this trend has led to a surge in employee attrition in India from 6% in 2020 to 20.3% in 2022.

The rising churn rate has led to tremendous impact on various industries in India. The IT sector is dealing with an all-time high attrition rate averaging at 25%, Ecommerce at 28.7% and Hi-Tech at 21.5%. Furthermore, professional services (25.7%) and financial services (24.8%) have also experienced high attrition rates. However, strangely the attrition rates in the engineering industry has been much lower, at 14%, 12.9% in chemicals, 12.4% in automobiles, and 8.6% in metals and mining. Evidently, this shows that high attrition rates are much more widespread in new age economy sectors than in traditional old economy sectors.

This being said, the market is highly volatile, and candidate driven in India at the moment, although we are starting to see a switch here. People are open and looking for new opportunities within a short span of time for competitive salaries and leading roles. In my conversations with candidates, I have observed that this triggers a chain reaction in which “she resigns, he resigns, and the next person also resigns”. For this situation to improve both the organization’s as well as candidates mindset has to change.

During my research I found that there are a few initiatives that organizations can introduce to maintain a positive attrition rate. Implementing inclusive workplace strategies, providing training materials or growth opportunities, conducting surveys, offering competitive compensation & benefits. Remember that although tracking down the attrition rate is helpful for organization it is, however an inevitable and healthy part of running any business.

Although the rising attrition rate is a possible cause for concern for businesses and HR leaders due to the loss of valuable talent in their workforce, it can be beneficial. To look on the positive side of attrition, it can force an organization to start investigating the issues that are causing it. It enables businesses to reduce employment costs because employees leave of their own will and are not replaced. Another positive, it may eventually result in the hiring of new employees which can bring new thoughts and energy to an organization.

If you have enjoyed this blog and would like to speak more on Attrition in India, please feel free to reach out.

Furthermore, if you are an HR professional looking to hire or for your next move within the HR space, contact Rinkal Choudhary via LinkedIn or at rc@elliottscotthr.com.