Attrition Rate & Effects

High Attrition rate!

In certain businesses /companies/firms talented and efficient employees are the basic necessity of employer.

In such industries to find the good employees is a big problem and their retention is even bigger problem

Talented employees change their job very often.

When talented employee leaves the company, it becomes difficult for employer to run the company till he get a suitable replacement.

Employer want to retain the talented employees to ensure the growth of business without interruption and more important for their peace of mind

 Why employee leave?

Despite better pay scales and faster career advancement opportunities, the attrition rate among Startups and Boutiques firms in India is the highest.

The key reasons for such a high attrition rate include high uncertainty, overburdening employees with work, reluctance in power decentralization, and culture.

As a result, the attrition rate in these firms stands at 43.7% and 42.1%, respectively.

What is its impact on Company?

According to a study by the Society for Human Resource Management, employers will need to spend the equivalent of 6 to 9 months of an employee’s salary in order to find and train their replacement. Other research show that the average costs could be even higher. Costs, the company bears to hire new employee includes costs for interview the cost of training and on boarding, advertising costs .

Ex. If salary is 80000 per month

Then replacement expenses will 9 x 80000= 720000

Side Effects:

•       Decrease production

•       Customer may shift to other company

•       Tension to employer

What is the solution to make employee to stick with the company?

So one of the solutions to reduce attrition is to increase the salary. But it may not be the permanent solution. After gaining experience employee may get better job option from the same industry. So fear always remains in the mind of employer about employees leaving job and joining competitors or starting their own business.

In such type of businesses employer wish that employees should remain with them for minimum 10 to 15 year.

For this employer may offer good lump sum amount apart from regular employment benefits payable, then chances of employees agreeing to work for longer duration.

In such case employer make an agreement with employer through agreement contract.

In this agreement conditions may be

•       Longer tenure of service from employees

•       To pay good lump sum amount at the end of tenure.

•       Protection for the family in the event of death during the contract period

•       If employee fails to complete the tenure then employer will not pay additional payment.

The payment at the end of the tenure is always conditional, which will tempt employee to complete the tenure of service as per contract.

Solution:-

LIC policy on the life of employee under Employer-Employee scheme will provide the necessary solution to above expectations of both employer and employee. Conditional assignment of policy will provide the necessary solution. If employee serves for the term, he will get the maturity amount (which will be as per agreement amount) and in case of his early death his family will get the death claim amount. In case employee resigns in between policy will revert to employer.

Employer purchases LIC policy on the life of employee as desired by the employee.