The employee Attrition rate inside a corporation, or the number of people who quit their jobs over a predetermined period of time, is measured by the attrition rate.
All businesses that want to make sure that their current organizational structure is operating properly with no (or very few) internal issues must track the staff attrition rate, which is sometimes used interchangeably with the term “employee turnover rate.”
How to Calculate the Attrition Rate
The attrition rate calculates the frequency of employees leaving an organization within a given time frame, either freely or involuntarily. The ability to retain current personnel is crucial to a company’s long-term performance, and the attrition rate sheds light on this process.
- Establish the Exact Time Parameters for Measurement
- Count the number of dismissed workers.
- Calculate the average number of employees
- Subtract the Churned Employees from the Average Employee Number
Attrition Rate Formula
The formula for calculating the employee attrition rate is as follows. Attrition Rate = Number of Churned Employees ÷ Average Number of Employees
The number of employees that left in June was 10, which we will divide by the average of the employee headcounts at the beginning and end of the period, or 100 and 90.
- Employee Attrition Rate = 10 ÷ 95 = 10.5%
How to Interpret the Attrition Rate
A high employee turnover rate indicates that employees are leaving a company frequently, whereas a low rate indicates that employees are staying with the organization for a longer period of time.
- High Employee Attrition A high attrition rate suggests that the business may be experiencing issues that need to be quickly discovered and resolved.
- Low Employee Attrition On the other side, a low attrition rate is what most businesses aim for and is typically viewed favourably because it shows that present employees have an incentive to stick with the business rather than looking for new opportunities elsewhere.
In general, businesses with low employee turnover tend to have better organisational systems and practises in place for keeping workers on board over the long term. These businesses frequently outperform rivals in terms of revenue and profitability as well as the ability to draw in more qualified, higher-level talent from their pool of available candidates.
Contrarily, a high staff turnover can be time-consuming because it takes time to examine resumes and cover letters, screen new applicants (such as through background checks), and conduct interviews before onboarding and new employee training can even begin.
Causes of High Attrition Rates
- toxic working conditions
- Communication Gap (and Leadership in Hierarchy)
- Lack of Organizational Hierarchy, or “Bottlenecks,” in the Task Allocation Process
- Employee burnout due to physical exhaustion and the resulting damage to their mental health
- Low overall company morale, or a bad culture and no incentives for workers to perform better
- Compensation That Is Below Market Relative to Competitors
- Sub-Par Onboarding and Training of New Employees
- No “Open Door Policy” or Discussion Meetings Behind Closed Doors (i.e. Feedback for Improvements)
Why does Attrition Rate matter?
Knowing the state of your attrition rate is crucial for this reason. Institutional knowledge will depart the organization unless there is a very strict handover mechanism. This is because it is essentially difficult to convey all of an employee’s acquired knowledge over the course of their employment. Naturally, unless you have a procedure in place for next-level succession planning, this is true.
Frequently, this entails giving already overworked team members more work. Additionally, their departure may have an impact on employee burnout, stress levels, and the company’s overall business performance.
The dynamics of a team change when someone quits, and it may even be detrimental to the employer brand and employer value proposition of the organisation (EVP). For instance, recruiters frequently claim that it is challenging to locate new employees when the business has a history of having a high turnover rate. Additionally, their departure could negatively impact the company’s overall financial success as well as employee burnout, stress levels, and staff morale.
What is the difference between Attrition Rate and Turnover?
Attrition happens as a result of a deliberate departure, such as retirement, or for private reasons. Attrition opportunities are typically anticipated or announced beforehand, but they have not filled right away.
Contrarily, employee turnover happens as a result of bad employee-company and employee-job fit, poor corporate culture, inadequate leadership, etc. Because the issues are with the company, employee turnover vacancies are unplanned. The company’s problems must be resolved right away, and open positions must be filled.