Attrition Rate: What it Means and How To Calculate It

Attrition is a critical metric for any organization, as it measures the rate at which employees are leaving the company. High attrition rates can indicate dissatisfaction among employees, while low attrition rates can suggest a strong and stable workforce. Calculating attrition properly will help managers understand the reasons behind employee turnover and make informed decisions to improve retention strategies. This article will guide you on how to calculate attrition effectively.

The calculation formula used in this HR calculator is quite simple. You add the number of employees at the beginning of the period to the number at the end, and divide it by 2 to get the arithmetic mean. Then we divide the number of employees that left by the arithmetic mean, and multiply the result by 100 to see the outcome in percentage. Use our attrition rate calculator if you’re curious how your company’s annual attrition compares to others. Now, you can quickly check out this metric and find more insights about the company.

Importance of employee attrition rate

With accurate, reliable employee surveys in BambooHR®, you’ll gain the insight you need to prevent burnout, improve morale, and stop premature turnover in its tracks. According to experts, healthy organizations have an attrition rate of 10% or less. At this attrition rate, your workforce is stable, and you’re unlikely to risk shortages or other disruptions. Employee attrition refers to the strategic decision not to replace employees who leave an organization voluntarily. A company that has a large percentage of employees set to retire in a few years should be taking drastic steps to avoid high attrition in the coming years. Employers can either choose to redistribute the responsibilities to other younger team members.

Addition to that, higher rate leads to discourage or reduce the motivation of remaining employees. When this rate gets high, the remaining employees start thinking about the safety of their jobs. Due to those reasons, this rate has become a vital insight into a company. Now that you have calculated how many employees left during this period, divide this figure by the initial employee count and multiply by 100 to express it as a percentage.

  • It indicates that a substantial number of employees are leaving the organization, which can have negative effects on productivity, morale, and overall stability.
  • Yet, in terms of real value, high attrition represents huge costs to organizations.
  • So, if you had 100 employees and 20 of them left in January, your employee turnover rate equation would show a 22.22% attrition rate.
  • Like anything else, it’s all a matter of continual positive momentum.
  • More important than the period analysed are the key touchpoints in the lifecycle of an employee.

For instance, rising attrition rates could indicate a drop in company efficiency and productivity as employers distribute work among fewer employees, and institutional knowledge is lost. Rising attrition rates could also indicate poor recruitment and retention strategies or low employee satisfaction with their role and the company at large. Instead of resorting to manual methods of calculating attrition rates, companies can use software to automatically calculate and track the rates over time.

Hire for a long time

If you have a higher attrition rate than your retention level, then you have a problem on your hands, and you’ll need to sort that out as soon as possible. For example, according to DailyPay, the US staffing industry had an employee turnover rate of 352% in 2017, whereas finance and insurance jobs only had an employee turnover rate of 1.7%. Similarly, according to XpertHR, HR staff in the UK in 2017 experienced a 12% average turnover rate, whereas the engineering occupational group was only 4.9%. It’s important to analyse your attrition rates through different lenses. First, you will want to compare your employee turnover to that of other companies within your industry or occupational group.

You should define the period that you want to have a look at, whether that’s three months or six months, and then examine the trend. More important than the period analysed are the key touchpoints in the lifecycle of an employee. In addition, advisors seem to leave the industry after a very short period. In fact, some studies indicate that half of the advisors who leave the profession do so within their first 90 days of employment. This really helps when putting forward a business case for support in building a better contact centre culture, one of the keys to reducing attrition.

How to Reduce Attrition of Employees

One way to think of turnover rate is as “churn rate” instead — it measures how many people leave an organization in a set timeframe. As a result, it is possible to have a high turnover rate but a low attrition rate. For example, certain industries, such as retail and fast food, can have high turnover rates but stable attrition rates because positions are immediately filled after the employee leaves. Employee turnover refers to the rate at which new hires replace employees who leave their companies. High turnover rates can negatively affect businesses as hiring and training new staff can be expensive. In addition, it can lead to a loss of institutional knowledge and experience, which also impacts creativity and innovation.

Voluntary vs. involuntary attrition

To do this, you need to know the same metrics mentioned in the previous section of the article. But companies who take proactive steps to curb it not only increase employee retention but ensure they enjoy sustained growth for years to come. No matter the cause of attrition, employers will continue to face increasing employee attrition unless they take measures to stop it. One way is for employers to look for signs of unhappy employees and address their concerns early to prevent their departure.

A robust enterprise learning strategy will not only make your teams more valuable to you, but it will also make your company more valuable to your teams. The second biggest reason companies are hemorrhaging top talent is lack of growth. Team members are no longer willing to stay for the long haul if they don’t see what’s in it for them. Turnover is expensive, kills productivity, and can hurt your profit, not to mention your reputation. With customers and employees in the driver’s seat, you may be scrambling to keep them happy and engaged.

After all, when organizations invest in the employee experience and focus on what their employees need, those employees are much more likely to stay. For example, fast-moving sectors such as tech and consulting may have a higher acceptable attrition rate than more stable sectors, such as government or healthcare. In the tech sector, employees often leave due to high-demand for their talent elsewhere — along with better compensation according to this article. These include improving the work environment and creating a more positive work experience for employees. The sheet is free to download and doesn’t require any sign-up or leaving your personal information. Just make a copy and input your own data to find out your company’s monthly or annualized turnover rate.

Check out our HR Software Guide for solutions to begin tracking your company’s attrition rate. One of the most important ways to fix a high attrition rate or reduce turnover is to be proactive. You don’t want to be hearing about issues for the first time in an exit conversation. Take the time to listen to the challenges and struggles your teams and customers are having.

Employees that are highly stressed are more likely to quit their jobs. A recent study showed that job stress has a negative impact on performance and a positive correlation with leaving the company. By some estimates, it could cost a company six to nine months of an employee’s salary to replace them.

Step 1: Calculate the Average Number of Employees

However, the first six weeks is the period within which advisors are most likely to leave the contact centre. For example, a report by ContactBabel found that one in five UK contact centres have an attrition rate of over 30%. This can amount to significant financial losses over the course of the year.

Why is understanding attrition important?

A high attrition rate can have positive and negative impacts, depending on the circumstances. Addressing it requires business and HR strategies and interventions. Attrition can adversely affect the company, so it’s essential to know your company’s attrition rate. Tracking attrition rate is helpful to monitor if the number of people leaving is growing or declining so HR teams can improve workforce planning and people management. The changes in attrition rate can signal the management to the root cause(s) of employee exodus. Calculating attrition is an essential step for any organization looking to optimize its workforce management.

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