Calculate and understand attrition rate with confidence
Employee attrition rates are a vital metric that helps employers better understand movement and fluctuation in their workforce. Understanding attrition rates is an important way to track and contextualise your employee departure and to develop strategies for improving employee satisfaction and retention.
This article gives employers a thorough introduction to understanding and calculating attrition rate, why it’s essential, and how to leverage your stats to improve employee retention.
What is attrition rate?
Let’s start by defining attrition. Attrition rate is a measure of the number of employees who leave a company over a specific period. It is usually expressed as a percentage of a company’s total number of employees. Employers typically use attrition rate as a way to track employee turnover and to understand the reasons why their employees are leaving. You can use this metric to identify areas of concern and make changes to improve employee retention.
What is a good attrition rate?
Your ideal attrition rate will vary depending on your industry and specific company. However, a low attrition rate is generally considered a positive indicator for your company.
Generally, most industries consider an attrition rate of around 5-10% low and healthy. Anything higher than that may indicate a problem or an opportunity for improvement in the company’s employment practices.
That being said, it’s important to note that some turnover is normal and even healthy for companies. In some industries or specific roles, a certain turnover level is expected as employees move on to new opportunities or retire.
In some cases, a very low turnover rate can actually indicate stagnation, limited growth opportunities, or lack of a competitive compensation package.
Employers need to track their specific turnover rate and compare it to industry averages and historical trends. It is also essential for employers to understand and monitor the reasons behind their particular turnovers, because this will help them to identify where the issues lie and take the necessary steps to improve their employee retention rates in the long term.
What does a high attrition rate mean?
High attrition rates can indicate various problems, such as poor working conditions, low morale, lack of opportunities for advancement, or inadequate compensation. If your attrition rate is higher than the industry average, you should investigate why to improve your retention rates.
Attrition vs Turnover
Employee attrition and employee turnover are related concepts, but they are different.
As we saw earlier, employee attrition refers to the gradual loss of employees over time, usually through retirements, resignations, or deaths. It measures how many employees are leaving a company over a certain period, typically expressed as a percentage of the total number of employees. It’s a long-term measure and can be used to track overall trends within your business.
On the other hand, employee turnover is the rate at which employees leave a company and are replaced by new hires. It is also expressed as a percentage of the total number of employees. Employee turnover is a shorter-term measure, usually looking at a specific period, such as a quarter or a year.
In short, attrition rate is a measure of the long-term employee losses and turnover rate is a measure of the short-term employee losses.
For example, if a company has 100 employees, and 5 of those employees leave the company over a year, the attrition rate would be 5%. If, during that same year, the company also hired 5 new employees to replace the ones that left, the turnover rate would also be 5%.
How to Calculate Attrition Rate
Let’s take a look at calculating attrition rate for your business.
Attrition Rate Formula
There are several ways to calculate attrition rate, but one standard method is to use this formula:
Attrition Rate = (Number of Employees who Left / Average Number of Employees) x 100
The “Number of Employees who Left” refers to the number of employees who left your company during a specific period, such as a quarter or a year.
The “Average Number of Employees” is the average number of employees working at your company during that same time period.
How to work out attrition rate
Here’s a worked example using the attrition rate formula from above:
Let’s say a company has 200 employees; during the last quarter of the year, 15 employees left the company.
In this case, the “Number of Employees who Left” is 15, and the “Average Number of Employees” is 200 (for the quarter).
So your calculation would be:
Attrition Rate = (15 / 200) x 100 = 7.5%
This means the company’s attrition rate for the last quarter of the year was 7.5%.
Tips for working out your attrition rate
Short & long-term attrition rates
Keep in mind that if you calculate your attrition rate for one quarter of the year, this is a relatively short-term rate. So it’s good practice to look at your attrition rate over more extended periods of time for more visibility over your real, bigger-picture trends.
Look at reasons for employee departures
It is also essential to consider the reasons for your employees’ departure. Employers should classify employees who left for reasons such as retirement, death or long-term disability differently than employees who left due to poor working conditions or lack of growth opportunities.
Sub-categorise your attrition rate
It can also be beneficial to break down the data by department, function, or employment status to identify specific areas where you might have a retention problem.
Consider length of service
Also, to better understand your overall employee turnover, it’s essential to consider your employees’ relative length of service, as in some cases, short-term employees might have a higher turnover rate.
How to Reduce Employee Attrition & Improve Staff Retention
Reducing employee attrition and improving staff retention are essential goals for any employer. High turnover rates can cause financial strain and significant disruption, while retaining good employees can help to improve productivity, morale, and the bottom line.
There are several strategies that employers can use to reduce employee attrition and improve staff retention, including:
Offering Competitive Compensation.
Providing fair and competitive salaries, benefits, and bonuses can help to attract and retain employees. Employers should conduct regular salary surveys to ensure that they are offering comparable compensation packages to those in their industry.
Improving Employee Experience.
Creating a positive and supportive working environment can improve employee satisfaction and reduce turnover. Employers should provide employees with comfortable and safe working conditions, cultivate a welcoming workplace culture, and offer people-oriented tools and resources to do their jobs effectively. Want to know more? Read about employee experience management and why you should care.
Providing Opportunities for Growth.
Employees who feel they are learning and growing in their careers are less likely to leave. Employers should provide opportunities for training, development, and career advancement to help employees see a clear path for advancement within the company.
Fostering a Positive Company Culture.
A positive company culture can foster employee engagement and retention. Employers should encourage open communication, collaboration, and a sense of belonging to improve employee satisfaction and reduce turnover.
Providing Recognition and Rewards.
Employees who feel valued and appreciated are likelier to stay with a company. Employers should recognize and reward employees for their contributions, such as through performance bonuses, promotions, and employee-of-the-month programs.
Encouraging Work-Life Balance.
Promoting a healthy work-life balance can help to reduce burnout and turnover. Consider accommodating flexible work arrangements, such as telecommuting or adjustable hours. Measures like this will help employees better balance their work and personal responsibilities.
Regular Employee Feedback.
Regularly seeking feedback, acting on it and communicating the changes can help improve employee satisfaction, and show that their opinions are valued. Try conducting employee surveys, exit interviews, or one-on-one meetings to discuss employee concerns and suggestions.
It’s also worth mentioning that reducing employee attrition is not just a one-time effort but a continuous process. You should be proactive about monitoring your attrition and turnover rates and adjusting your approach as necessary.
FAQs about Attrition Rate
What is a good attrition rate UK?
It is difficult to pinpoint a specific attrition rate that would be considered “good” for all employers in the UK, as it can vary depending on the industry and the organization’s particular circumstances. According to the UK Commission for Employment and Skills, the average attrition rate in the UK was 15% in 2020. However, this is not a benchmark number and can vary based on specific roles, industry type and company size.
Is a high attrition rate good?
A high attrition rate is generally considered a negative indicator, as it suggests that employees are unsatisfied with their jobs and more likely to leave. A high attrition rate can also indicate that the company needs to address employee dissatisfaction or up its retention efforts more effectively. High attrition can be costly for a company in terms of recruitment and training expenses. It can also disrupt critical workflows, negatively impact workplace culture and morale, and harm the company’s reputation.
For this reason, it is essential for organizations to regularly measure their employee turnover rate, endeavour to understand the reasons for it, and take appropriate action to improve employee retention. Also, it’s essential to compare the company’s attrition rate to industry standards or similar companies to get a more balanced perspective