A high attrition rate causes problems in the tech industry.
The employee turnover rate in the tech sector stands at 13.2% and is higher than in any other business sector.
What is attrition rate?
Attrition rate refers to the percentage of employees who leave a company over the course of a year. It is also sometimes called the rotation ratio.
Attrition is the number of employees who leave an organization in a given year for any reason. It can be voluntary (for example, the resignation of an employee) or involuntary (for example, the termination of an employee).
Before we dive deeper into the subject of employee turnover in tech, it’s worth explaining how to calculate the attrition rate, so we’re all on the same page.
Calculating your attrition rate
Attrition is a reduction in the size of your workforce resulting from employees leaving the organization or retiring. You can calculate it by dividing the number of full-time employees who have left per month by the average number of employees and multiplying it by 100.
And it doesn’t spare anyone… not even “the big guys”
No tech business is immune to turnover, irrespective of its size or reputation.
- Uber – on average, their employees stay with the company for just 1.8 years, despite the generous benefits package and fancy office space that Uber offers
- Dropbox – tech workers leave after 2.1 years
- Tesla – the average tenure equals 2.1 years
Lack of strategy for reducing your attrition rate will have serious business consequences
If you don’t address high employee turnover, it will have a negative impact on your business. Think about:
losing an employee can cost you dearly – literally. Especially if your top performer leaves. Experts on turnover and retention estimate that it costs 150% of the employee’s base salary to replace them.
on average it takes 43 days to hire a software developer, that’s nearly a month and a half of productivity loss and it doesn’t even account for onboarding. This can cost you as much as $33,251.
when an employee leaves, they take all their knowledge with them, and you can’t put a price tag on that. This knowledge gap must be filled – on average it takes one to two months to bring knowledge workers up to speed. Unavoidably, this will create some bottlenecks unless you ask your best employees to take over some of the tasks and work at excess capacity. Unfortunately, this might lead to…
Lower employee morale – nobody likes to be overworked, and this might have a bad impact on employee motivation. Also, if the departing employee was close to people who stayed with the company, they might become emotional or even resentful and consider quitting.
Low employee morale cannot be ignored as it can escalate the problem: one employee resignation can lead to another, and another…
Ever heard of the snowball effect?
Like-minded people tend to follow one another – they reinforce each other’s viewpoints. According to Robert Cialdini, we frequently base our decisions on other people’s actions., We treat it as social proof which constitutes a shortcut to decide how to act. The more employees leave your company, the more will follow.
What are the reasons for the high attrition rate in tech?
- Seeking higher compensation (71%),
- Looking for better working conditions (47%)
- Searching more responsibility (32%)
- Seeking more opportunities to express creativity (26%).
The above-mentioned reasons for the high attrition rate in tech can be split into two main categories: having the right skill set to perform the job and having the right culture-fit.
The high attrition rate in tech is a problem that all businesses battle with. The high employee turnover rate can and should be tackled prior to getting new hires.
Implementing the right mechanisms for tech skills screening such as automated in-stack coding tests, tech interviews, as well as verifying the culture fit is the best strategy for managing attrition.