Calculating and improving your attrition rate: Metrics that matter

When employee retention is low, there is a problem: Happiness is down, engagement is off, or perhaps the economy is booming and employees are leaving for better opportunities. However, if the staff Attrition rate is excessive, you may not necessarily have an issue, but you do need to handle it.

Everything you need to know about calculating and enhancing attrition rates at your company will be covered in this article, including:

What is the attrition rate?

The rate at which employees depart an organization is known as the attrition rate. The attrition rate essentially counts the number of people who depart, either voluntarily or involuntarily. It is frequently reported as a percentage and is one of the key data points that HR monitors to learn more about the state of a firm.

Why are attrition rates important?

Let’s explore the significance of tracking attrition rates now that we have a better understanding of what they are. In other words, attrition rates indicate something that HR management must know: how many individuals are departing your company.

People leaving is, in a sense, anticipated and typical. However, if your attrition rates are extremely high, it can be a sign that your people strategy needs improvement. And if you lose good employees, especially if it’s difficult to find replacements, you won’t be able to work as efficiently to meet your business goals.

Not to mention that replacing an employee can cost up to nine months’ worth of that person’s income, according to some estimates.

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How can you calculate your employee attrition rate?

To determine attrition, divide the average number of departures in a particular time by the average number of employees in that period, multiply by 100, and then divide that result by the total number of employees in that period.

This shows how many people are still present following departures, or how much manpower you’re losing. Keep in mind that your attrition calculation does not account for turnover or employee retention; rather, it assesses how quickly and effectively, if at all, your company can find replacements for those who leave.

Attrition vs. retention

What precisely separates attrition from retention, then? The percentage of workers who continue to work for a company over a given time period is measured by the retention rate. Attrition measures, which count the number of workers that leave the organization, are basically the inverse of this.

The fact is that retention is a complicated indicator that, by itself, doesn’t really reveal anything about the state of a company. We must go deeper into retention data, including turnover and attrition, in order to comprehend the subtleties.

Because attrition explains what those departures actually imply for the organization, whereas retention only tells us how many people are leaving. Because attrition is a measure of strength rather than headcount.

Attrition vs. turnover

The distinction between turnover and attrition is a little more complex. In actuality, the two phrases are frequently used synonymously. The two terms do differ a little bit, though.

People sometimes see employee turnover as a transient problem that can be solved by swiftly employing new employees to fill the void created by departing ones.

Attrition, on the other hand, is a long-term idea that focuses more on the number of people departing over longer periods of time and aims to apply big-picture, strategic thinking to solve the more significant organizational challenges.

What is a high attrition rate?

The attrition rate cannot, of course, be studied in a vacuum. The attrition rate needs to be considered in the context of the sector, region, and global events. What what is a high attrition rate, then?

Anything over 20% can be regarded as high attrition, according to averages. However, because this differs by industry, it is important to conduct further in-depth research to determine how your organization’s attrition rate stacks up against that of other businesses in that sector. A rate of over 20% in any given year, as a general rule, indicates that you should investigate what might be wrong and what improvements you might make.

What causes high attrition rates?

Several factors can contribute to high attrition rates, including:

Pay

Pay should be just one of many things keeping people with a company. But, the truth is that people simply won’t stick with a role that doesn’t pay a fair wage, especially if another company offers them more.

Growth and development

People today place high importance on development, so someone who feels that they are stuck in the same position with little possibility for advancement will probably start looking elsewhere. In fact, 94 percent of workers say they would stay in their jobs longer if their employers supported their professional development.

Company culture

Leaders in HR already understand the significance of culture. But learning that a toxic business culture is the leading predictor of attrition—ten times more significant than compensation—certainly puts things into perspective.

Stress

Stress is a significant issue that impacts both individuals and companies. According to studies, workplace stress greatly increases the likelihood of turnover.

What do employee attrition rates say about your business?

Not all attrition is detrimental. Because of retirement, layoffs, and resignations, it is frequently unavoidable. A strong corporation can weather minor workforce cutbacks and is unlikely to look for worker replacements right once.

It is often impossible to ignore your company’s contribution to high attrition rates, which can indicate a variety of possible management, employee relations, and organisational culture problems. Although it’s a bitter pill to swallow, this presents HR professionals with a chance to advance the company as a whole.

‍How can you reduce high attrition rates?

By implementing the following strategies, HR directors can assist their organisations in gaining from attrition:

1. Make plans for a variety of jobs. The finest plans take into account the needs of the people and the firm. HR managers can plan for various employment types within the organisation by conducting research and gathering data to adapt to the nature of the labour market. Some members of the core team who are absolutely necessary may be hired on a full-time basis, while others may work as temporary employees or independent contractors.
2. People retention is essential to business success. HR leaders may concentrate on attracting and keeping the most important individuals for the development and growth of their organisations once they have identified who they are. By offering competitive salary packages, opportunities for personal and professional advancement, and cultivating a workplace culture based on respect, admiration, and trust, HR executives may boost the likelihood of maintaining great employees.
3. Include a programme for a smooth exit. HR managers can implement an offboarding programme that enables employees to part ways amicably. It’s crucial to express gratitude and best wishes for their upcoming professional endeavours to leave individuals. In this manner, employers demonstrate integrity, and former employees can act as goodwill ambassadors for their current employer.
4. Keep the door open in case someone comes back. Managers and executives can collaborate with HR leaders to create policies and a culture that encourages boomerang workers. The potential for valuable information, expertise, and excitement to be contributed by high-calibre individuals who leave an organisation and then elect to come back exists.

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