Employee retention relies heavily on attrition rate and turnover rate. But what is the attrition rate? In summary, attrition measures the rate at which employees leave a business.
It has never been more critical to monitor attrition and turnover rates. Resignation rates remained high in 2022, but new job opportunities remained even higher. We’re seeing that the “Great Reshuffling” isn’t merely a product of pandemic-induced volatility but the beginning of a long-term trend.
HR professionals are increasingly measuring critical HR indicators like attrition rate to acquire insight into their business in the tightest labour market in recent memory. Organizations can identify chances for development and develop a solid retention strategy by comparing internal numbers to industry standards.
What is the definition of the attrition rate?
The attrition rate, often known as the “churn rate,” is the number of employees who leave an organisation in a specific period.
What is the difference between attrition and turnover? The truth is that the phrases attrition and turnover rate are frequently used interchangeably. They are calculated using the same formula.
However, some HR specialists believe that the difference between attrition and turnover is due to context. They contend that the attrition rate accurately depicts the number of employees who leave without being replaced. Turnover, on the other hand, tracks employees who depart and are replaced by new ones.
High attrition and turnover rates can also be indicators of internal difficulties. Replacing employees can cost one-half to two times the employee’s annual compensation due to hiring costs, lost opportunities, and decreased productivity. It is in the best interests of an organisation to retain and develop talent.
The four types of attrition
It is not enough to look at the estimated numbers to determine whether staff attrition constitutes a risk to your firm.
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It is critical to recognise the type of attrition and comprehend its causes. High attrition rates can affect a company directly related to employee happiness. Here are the four types of employee attrition and the underlying causes.
Voluntary attrition
Voluntary attrition occurs when employees choose to quit the organisation. This is the most common sort of attrition and the most critical for HR to consider. The most typical reasons for voluntary attrition are resignation and retirement. Personal issues, inadequate remuneration and benefits, and a lack of inclusive procedures can contribute to an employee’s resignation.
Involuntary attrition
This occurs when employees are forced to leave the office. Downsizing or changes in market growth and demand may result in involuntary attrition.
Internal attrition
Employees leave their current position to take a new one inside the organisation. Employees may have been promoted or transferred to another department.
Demographic-specific attrition
This particularly concerning type of attrition occurs when a specific group leaves your business in large numbers. To guarantee that marginalised groups such as women, persons of colour, and LGBTQ+ are not alienated at work, HR teams must measure the attrition of these groups.
How to calculate the attrition rate
It is simple to calculate your employee attrition rate.
First, divide the number of employees who have left (during a specific period) by the average number of employees (for that same period). The split value is then multiplied by 100.
The attrition rate formula is as follows:
Attrition rate (%) = (number of leavers / number of employees) x 100
For example, suppose you want to calculate your company’s annual attrition rate. Your business began the year with 100 employees. During the year, 20 people (voluntary and involuntary) departed the company, while 4 new employees were hired.
The first stage is to figure out how many employees there will be at the end of the year:
100 – 20 + 4 = 84
Then calculate the average number of employees for that year:
(100+84) / 2 = 92
You can now calculate the attrition rate for the whole year as follows:
Attrition rate (%) = (20 / 92) x 100 = 21.7%
A high rate indicates that your employees are regularly leaving, while a low rate suggests that you keep your personnel for extended periods.
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