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How to Calculate Employee Attrition Rates

Some employee turnover is inevitable, even at a medium-sized company, and slow attrition may be acceptable in some circumstances. However, if turnover is high or employees are leaving frequently and not being replaced, this is something that should be monitored, as it could be a warning sign of poor morale or potential staffing issues on the horizon. Understanding employee attrition, how to calculate the attrition rate, and how to manage attrition can help you keep your business healthy and productive.

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What is employee attrition?

Employee attrition refers to the gradual reduction in the number of staff members as they leave through resignation or retirement and are not replaced. Attrition is used to decrease the size of the workforce and is measured by the rate of staff departure.

In most cases, workforce attrition is not desirable, and companies try to keep their attrition rate as low as possible to ensure all departments are fully staffed. The exception is if a company is trying to downsize but would prefer not to actively pursue layoffs.

What is the difference between turnover and attrition?

Turnover refers to the rate at which employees leave the company, no matter the reason they leave. A high turnover rate is undesirable for several reasons:

  • It suggests staff are unhappy in their positions.
  • The organization is forced to spend time and money interviewing replacements.
  • There may be additional spending on training/onboarding new hires.

Both turnover and attrition can be costly for an organization. That’s why it’s so important to try to understand the reasons for staff departures and take measures to improve your turnover and attrition rates if necessary.

To calculate your turnover rate, use the following equation:

(Number of Departing Employees / Total Number of Employees) * 100 = Turnover percentage

A high turnover may be normal if you’re in a seasonal industry. In most other cases, however, it’s a bad sign and could indicate a poor working environment and employee dissatisfaction.

The key difference between the meaning of attrition of employees and the meaning of turnover is that while turnover covers employees leaving for a variety of reasons, including dissatisfaction, attrition focuses on departures due to extenuating reasons, such as retirement. To determine whether an employee should be counted in your attrition rate, you’ll need to work out why they left the organization.

How to calculate attrition rate

Calculating staff attrition is similar to calculating turnover:

(Number of Employees Leaving for Unforeseen Reasons/Total Number of Employees) * 100 = Attrition Percentage

Some attrition is normal. If you’re unsure whether the rate of attrition in your business is excessive, compare it with rates at other similar organizations in your industry. By monitoring attrition annually, you can get an idea of whether there may be trouble ahead when it comes to your staffing numbers.

Why low attrition rates are desirable

Low attrition is preferable because it helps keep recruiting costs low while also maintaining high productivity.

Low attrition can also be good for your brand’s reputation, because it’s a sign of stability and allows clients to build long-term working relationships with senior employees. It’s also easier to recruit high-quality talent when interviewees can see there are many longstanding employees at the business.

How to interpret your attrition rate

To reduce your attrition rate, you’ll first need to be aware of it. It’s also important to have an understanding of how it’s changed and why it might have changed. Perform an audit of your current attrition rate based on figures from your human resources department. 

Next, look at how the rate of attrition of employees has changed over the last 5 years (or the lifetime of the company if it’s a younger company). Is the rate improving or worsening? Have there been any major events that may have impacted the attrition rate for that year? A merger or acquisition may have caused some people to review their position within the company, for example.

Once you’ve worked out past attrition rates, you can use that information to project future activity. Try to take into account any known planned retirements or staff on contracts who have already announced plans to move on for amicable reasons. Armed with this information and your projections, you can start to consider incentives, training programs or bonuses for long-term employees. You can also begin the hiring and training process to replace any retirees as early as possible.

Strategies to reduce turnover and attrition

Focus on retention over talent acquisition

Look for ways to retain your current employees, perhaps through benefits, training, bonus packages or flexible working. Focus on ways to constantly improve your workforce morale and retention, including keeping turnover rates low and retention rates high. This can keep operations running smoothly.  

When you do hire, be selective

If you have advance warning of a person’s departure, start the hiring process early so you have plenty of time to find a suitable replacement. Perform in-depth interviews and don’t rush into bringing someone on board to fill a position unless it’s urgent to do so. It’s better to be selective and find the right replacement the first time around.

Invest in your onboarding process

Make your onboarding process as smooth as possible. Give new hires ample time to settle in to their roles and support them as they do so. Create a culture where they feel comfortable asking questions and receive the help they need to learn your company’s processes and tools.

Communicate with existing employees

Hold regular meetings with employees both one-on-one and on a team basis to gauge their job satisfaction and learn of any concerns they may have. Work with employees if they express a desire for training, ask about progression options or express an interest in working from home or a hybrid arrangement.

By giving employees the flexibility or opportunities they’re looking for, you’re more likely to retain them in the long term. This is mutually beneficial since it gives the employee the working environment they want and saves the organization the time and money associated with finding a replacement employee.

Promote wellness

Invest in your wellness program, or start one if it doesn’t already exist. Encouraging employees to take care of their physical and mental health helps reduce sick days, improve morale, enhance productivity and improve retention.

Reward loyal and high-performing employees

Be sure to recognize employees who are performing particularly well or who contributed to accomplishing a business goal. A combination of recognition and practical or monetary rewards will help boost employee morale and keep people loyal.

Salary compression is a major concern for many employees, and it’s widely believed that changing jobs is the most efficient way for people to increase their earnings. Taking the time to review employee salaries twice a year can ensure your team is receiving pay that is in line with what competitors are offering.

Perform exit interviews

Exit interviews can be an effective way of learning about the issues employees are faced with. Staff members may feel unwilling to speak up about things they’re unhappy with while they’re still working for a company but are willing to give feedback once they have an offer elsewhere. If similar issues show up in numerous exit interviews, it may be worth taking action.

Frequently asked questions about attrition

What is considered an acceptable attrition rate?

Employee attrition varies significantly across industries, and there can be regional differences too. If you’re concerned about the attrition level in your organization, try to compare it to other companies of a similar size in your industry and region.

What are some common causes of attrition?

Attrition can be split into two categories: involuntary attrition and voluntary attrition. Involuntary attrition occurs when someone leaves due to retirement or layoffs. Voluntary attrition occurs when a person leaves the company for a reason other than job dissatisfaction—for example, if they’re relocating to be closer to loved ones or changing careers.

Can employee attrition be beneficial to a company?

If your organization is hoping to downsize, attrition can be helpful for slowly reducing staffing numbers. If you’re planning to replace the departing employee, there may be some benefit to bringing in people with a fresh perspective. The key is to keep attrition to a manageable level and make sure departures are amicable rather than due to job dissatisfaction.

Is high attrition always a bad thing?

High attrition is normal in some organizations, such as those that do seasonal trade. In addition, outside factors such as extreme weather or supply chain issues may have an impact on your business and lead to unusually high short-term attrition. Once those issues are resolved and trading conditions normalize, it’s likely attrition will return to more typical levels.

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