Attrition with regard to business is the gradual, purposeful reduction of staff members as employees leave through resignation or retirement and they are not replaced. Attrition decreases the size of the workforce and is measured by the attrition rate. Companies tend to aim for the lowest possible attrition rate because it means that their staff members are happy in their employment and there is not a high turnover of staff leading to a potentially expensive hiring and training process.
In human resources, two terms describe when staff leave a company: attrition and turnover. Turnover is calculated by the number of staff leaving a company through discharge, termination, resignation or abandonment who are then replaced. Companies must understand the reasons for their staff leaving so that they can take measures to improve their turnover and attrition rate if necessary.
Attrition rate calculations project a company’s future performance. Compare the attrition rate of similar businesses in the same industry to help business managers implement strategies to reduce employee turnover before issues occur.
Low attrition causes a considerable decrease in costs to businesses. It increases productivity and the investment made in the staff members who stay. Low attrition raises the reputation of the company because clients can rely on a solid working relationship with the employees.
The equation for calculating attrition
Once a business determines why a staff member has left, they can calculate the attrition rate. Human resources departments divide the number of employees who leave by the total number of a company’s employees to determine what the attrition rate is. Use this equation to calculate the attrition rate:
The annual attrition rate in % = (Number of employees who leave ÷ number of employees) x 100
Attrition is typically shown as a percentage of the total workforce. It is straightforward to track attrition rates for annual comparisons, which can indicate problems that must be addressed.
Steps for reducing your attrition rate
Businesses can lower their rate of attrition by following these steps:
1. Audit the current attrition rate
Calculate what your current attrition rate is. You may need to ask for assistance from the human resources department to determine the figures. Compare this to other companies in your location and industry and determine how it relates.
2. Find out the attrition rate history
If possible, calculate the attrition rate from previous years. Note down a figure for each year, and try to include at least five years if possible. You may find it helpful to plot a graph, which gives an easy-to-read visual aid to work out if the rate is improving, worsening or staying the same.
3. Project your attrition rate
Using the data you collect from the first two steps, calculate what the future attrition rate will be. With this information, you can make positive changes to benefit your employees and lower the attrition rate if necessary.
If the attrition rate is high due to a number of planned retirements, you will be able to plan for the hiring process and ensure that suitable members of staff are employed with enough time to undertake an appropriate training program for their positions.
Related: How to Grow Your Business
4. Start out with the best people for a job
The hiring process is expensive, time-consuming and challenging. However, it is still better to wait for the right person for the role and for someone who will fit in with the company culture than to hurriedly employ anyone because you need the position filled. Ensure that your company uses good hiring practices with a thorough evaluation of potential staff members. Find people who are looking for a long-term commitment and the potential for growth.
Related: How to Find Good Employees
5. Keep your employees satisfied
If employees are not happy in their position, they may leave. It is important that managers and supervisors understand how people feel about their jobs and take action to increase employee satisfaction. Regular meetings and appraisals with staff will allow management to discuss job satisfaction with employees and gauge how happy they are. There could be a simple step that the company can take to support its employees further, such as flexible working hours or offering education and training so that they can grow in their employment.
Recognizing when your employees have done well in their jobs and rewarding them for their work is likely to increase their loyalty and job satisfaction.
6. Offer competitive pay
If there is another business that pays its employees more, your staff could be attracted to work there. Ensure you can pay them at least as much as your competitors. Regularly review your workforce’s salaries to make sure that yours remain competitive over time.
Here are answers to common questions about employee attrition:
What attrition rate should the company aim for?
The average rate of attrition can vary considerably depending on the industry and geographical region of the company. Research typical rates in your industry and area to determine an average.
Is there a difference between attrition and retention?
These two terms have opposite meanings. Retention rate is the percentage of employees a company has retained or kept over a specified time period, while attrition refers to the number of employees who leave a company.