the internal recruitment does not directly affect attrition rate. Internal recruitment coupled with employee friendly policies, better compensation package and conducive work environment help to solve the attrition problem to a great extent 

To what extent internal recruitment reduce attrition rate in the organization?

Thanks for the question.  Beside employees promotion & demotion, not sure internal recruitment includes getting existing employees to recommend their family members, friends, acquaintances that qualified for the job vacancies?  Some companies have such arrangement whereby if their acquaintances etc. are suitable for the jobs & they can last for e.g. 6 months, those employees that recommend them will entitle for certain amount of commissions debited into their salary e.g. U$400-500 per head.  If their acquaintances can't last for 6 months, then the employees who recommend them will not entitled for any commission.  Not sure this kind of arrangement can reduce attrition rate?  Perhaps some research can be conducted.  In case any RG member has gone through this perhaps can share your experience.  Thanks.

I assume that we are discussing the "avoidable" category of attrition - as defined in the paper Dr. Muniapan references?  In this case, retention relates to culture, and culture to the respect of the dignity of human effort.  Compensation is a baseline remuneration for effort.  People require acknowledgement of themselves, their work, and their goals.  All of the organization's contributors would ideally have an individualized learning plan that 1) enhances their level of functioning in their current roles; and 2) provides a learning path to qualify for their "next" job in the organization.

Employee attrition involves losing employees by a particular organization. When it is expressed as a percentage for a specified period of time, it can be called attrition rate. Employees resign from the current organization owing to various reasons.

Internal recruitment involves attracting personnel who are working for the organization to fill job vacancies occurred within that organization by promoting often and transferring sometimes. When current employees ascertain that job vacancies are filled internally, then they think that they will get a chance in future to get promoted. With that expectation they will tend to stay within the organization.  In this way, internal recruitment has an impact on reducing attrition rate. Also if the manager influences subordinates to be loyal to the organization by presenting opportunities of getting promotions due to the internal recruitment policy, we can expect an impact of internal recruitment on reducing the attrition rate. Also when employees observe some employees (who are senior peers or/and superiors) getting promoted, they tend to stay further within the organization resulting in reducing the attrition rate (their expectations get reinforced vicariously).  

In my view, if current employees desire to get promotions which offer significant pay increases, higher status, better titles, more privileges, more authority and freedom, and higher probability to climb the ladder of the professional hierarchy and managerial hierarchy, internal recruitment reduces attrition rate in the organization to a significant extent.

what about demotion of the employees what will happen with this case when you attrition rate? 

A demotion is usually given to an employee on disciplinary ground. It is not easily accepted by the relevant employee as it affects negatively the status, career, and position of the employee. Hence it is more likely that demotions increase the attrition rate. If the employee's job exclusivity (degree of difficulty in replacing him or her) and job essentiality (degree of impact of the job on others) are very low, it is more likely that he or she bears the demotion and stays within the organization.

I agree with Prof. Opatha.  The policy of filling vacancies through internal recruitment and promotions reduces the attrition rate, as it creates a positive environment in the organization. Thus, enhancing the commitment and confidence of the employee to stay on.