Understanding Your Organisation’s Attrition Rate (2023)

What Is An Attrition Rate?

Commonly referred to as a ‘churn rate,’ a company’s attrition rate is the rate at which people leave.

How Do You Calculate Attrition Rate?

If you break it down, it is the number of people who have left the company, divided by the average number of employees over a period of time. Typically, it is expressed as a percentage (%).

The Four Key Different Types of Attrition

There are different kinds of attrition, though. They are as follows:

Type of AttritionWhat it Means
Voluntary AttritionWhen an employee chooses to leave
Involuntary AttritionWhen an employee is dismissed
Internal AttritionWhen employees move internally
Demographic-specific AttritionWhen a specific group (age, gender, ethnicity) leaves

Which Types of Employee Attrition Are Worst?

Most notably, concerning types of attrition are voluntary and demographic-specific attrition. That’s because both of these may be pointing to structural issues within your organisation.

The first, voluntary attrition, could point to flaws in the way you nurture employees. They may be leaving because they are not getting what they need, what they want, or are not satisfied in their roles. Having an idea of the ‘why’ behind an employee leaving, typically through an employee exit interview, is typically a good place to start.

In addition, demographic-specific attrition can also be a cause for concern. That’s because it could speak to a toxic type of corporate culture that could be harming your company from the inside out. Diversity management is crucial here, and a company lacking in it may have significant internal issues worth interrogating.

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(Video) What is attrition | How to control attrition | causes of attrition

Why Does Your Attrition Rate Matter?

Staff turnover can have a negative impact on your company’s performance. That is why it’s important to know the status of your attrition rate. The first impact can be felt in hiringcost. After all, replacing a highly-trained employee can vary between 120% of their annual salary to more than 200%, according to some sources.

Unless there is an extremely rigorous handover process, institutional knowledge will leave the organisation. That’s because it is almost impossible to transfer all the knowledge an employee has gained over the years. This is true, of course, unless you have a next-level succession planning process in place.

Their departure will also impact those people working around them. Often, that results in adding more work to already over-burdened team members. Their departure can also reduce morale, increase stress, burn out employees, and perhaps even impact the company’s overall business performance.

Whenever someone leaves it definitely changes the dynamics of a team and can even hurt the company’s employer brand and even employer value proposition (EVP). For example, recruiters often say that they struggle to recruit new people when the company has a history of high turnover.

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Understanding Your Organisation’s Attrition Rate (2)

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What’s the Difference Between Attrition and Turnover?

Although these terms are often used interchangeably, some suggest that attrition is more of a long-term concept. Most often, staff turnover is addressed by hiring people to fill gaps as quickly as possible. In that case, turnover means to bandage the ‘wound’ to your organisation, whereas attrition is a signal to treat the potential root cause.

HR Toolbox, for example, defines them separately saying that "vacancies left by attrition aren’t immediately filled up. Turnover, in contrast, is a more short-term metric.”

Looking to calculate your staff turnover rate? Download our template for some help.

Try It: Employee Attrition Rate Calculator & Formula

Understanding Your Organisation’s Attrition Rate (3)

Regardless of whether you call it employee attrition or churn (or, perhaps, less accurately, refer to it as turnover), it’s important to know how to calculate employee attrition.

So, here’s an example: Let’s say you ended the year with 200 employees in your organisation. But, in that same time, 40 employees left. The result would be the following:

Annual Attrition Rate= (# Of Leavers/# Of Employees) x 100Annual Attrition Rate = (40/200) x 100Annual Attrition Rate = (0.2) x 100Annual Attrition Rate = 20%

(Video) Employee Retention strategies with examples | How to reduce attrition

You can also get more specific, though, and look at turnover within a precise timeframe. This could result in gaining a handle on early attrition, attrition that occurs within the first 90 days of employment (within the probation period).

An example of this could look like the following. Let’s say that you had 60 employees join your organisation within a 90-day period, and 15 of them quit during that same time. Here’s how it might look:

Early Attrition Rate= (# Of Leavers/# Of Employees) x 100Early Attrition Rate = (15/60) x 100Early Attrition Rate = (0.25) x 100Early Attrition Rate = 25%

The point is to try and get your attrition rate formula to create the most accurate picture of attrition within your organisation. But, having an HR software that can grab these reports in an instant is a big help.

Click here to learn more about HR analytics with Personio.

What Is Considered A ‘High’ Employee Attrition Rate?

Generally, high attrition rates or churn rates indicate that employees are turning over pretty quickly while low attrition rates mean that people are staying with your company for a longer period of time.

Employee attrition rates will also vary based on the size of your company. That said, if you have an attrition rate that is over 20% throughout the course of a year, then your team may want to dig into the numbers.

Additionally, if your early attrition rate, the rate of new joiners leaving within their first six months of employment, is north of 15%, you may want to look into your onboarding processes (simply to make sure everyone is getting up to speed quickly).

Personio offers a seamless employee onboarding solution that can help.

What Does a 10% Attrition Rate Mean?

This figure means for example that for every 100 employees you have, 10 will leave over the course of a year. Similarly, if you have 50 employees in total, then five will leave. It is the fraction of people who will leave in relation to the full number of employees currently employed in your organisation.

Keep In Mind: Attrition Rates Vary Wildly

According to a source quoting the US Bureau of Labor Statistics: “About 3 million Americans quit their job each month.”

This is not the norm worldwide, though. It is very important to remember that attrition rates vary widely across sectors, countries, and job types. So, while Monster says that the UK average employee turnover rate is approximately 15% a year, in 2018 LinkedIn reported from their own data that the global average was 10.9%.

They also reported very wide ranges of turnover, even within specific industries. For example, in this LinkedIn survey, software/technology businesses had an average turnover rate of 13.2% at the time, but user experience designers specifically turned over at 23.3%, while the e-learning sector showed a turnover trend of only 11.6%.

As a further illustration of the diversity of attrition rates, a survey by XpertHR published in 2019 indicated that the average turnover for sales and marketing staff was as high as 31%, while only 17.2% of HR staff turned over and engineers specifically only turned over at a rate of 8.8%.

(Video) Attrition Rate Formula / How to calculate attrition rate

This image below, adapted from the Science of Work, helps put attrition rates into perspective…

HR Best Practices: Other KPIs To Keep In Mind

Is your HR looking to dive deeper into analytics and reports for your organisation? Here’s a quick run-through of some other articles we think you might find helpful:

  • Bradford Factor Scores

  • Employee Engagement Metrics

  • Recruiting KPIs

We hope you enjoy!

Where Is Your Employee Attrition Coming From?

Understanding Your Organisation’s Attrition Rate (4)

Source: Science of Work, based on Rubenstein, A. L., Eberly, M. B., Lee, T. W., & Mitchell, T. R. (2017). Surveying the forest: A meta‐analysis, moderator investigation, and future‐oriented discussion of the antecedents of voluntary employee turnover. Personnel Psychology, 1-43. doi:10.1111/peps.12226

Best Practice: Find Out Why People Are Leaving

While your company’s attrition rate is important – especially if the number has changed significantly over a period of time – what’s more important is to know why employees are leaving in the first place.

If employees leave because they have to – they’re moving to a new city, they’re changing careers, their family circumstances are forcing them to change – then there’s nothing that you, as a company, can do about it.

That said, employees don’t just leave because they have to. They may be pushed, whether intentionally or because there’s something in your business that isn’t quite right. If that happens, it is worth paying attention to what made them decide to leave so you can fix it.

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Understanding Your Organisation’s Attrition Rate (5)

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(Video) TALENT RETENTION: How to reduce Attrition

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What Is Influencing Your Attrition Rate?

Figuring out why employees are leaving is critical to improving your attrition rate.

That’s partly why many companies do exit interviews: employees are more likely to be honest about what they didn’t like about the company. Or, about what went wrong once they have a secure position somewhere else.

When they leave it’s helpful to ask questions about:

Potential FactorAsk Yourself
ManagersAre managers properly motivating employees?
Team AtmosphereIs culture a major factor for leaving?
Recognition ProgramsDoes an employee feel recognized for their work?
Pay & BenefitsIs your company adequately compensating employees?
Mental HealthAre stress and workload major issues?
Workforce DemographicsDoes your company have a diversity problem?

Check out these metrics for measuring and tracking employee wellbeing today.

People often leave in order to get a promotion, salary increases, or to a company with a better career progression framework. Therefore, money is often a contributing factor. But, there’s also a saying that goes: ‘People don’t leave jobs, they leave bosses.’

Having a good manager is very important to employee satisfaction. That said, employees don’t just leave because of their managers, they leave because of the role and the value they find in their work.

Employees are more likely to leave a job if the responsibilities of the role are ambiguous. Or, if the job is made up of seemingly unimportant tasks, and if they don’t feel that what they do is meaningful.

Is A High Attrition Rate Good?

A low attrition rate isn’t always a good thing. Some companies with low attrition rates become stale over time without new people bringing in new ideas. Similarly, it can be difficult to get a challenging employee to leave a business.

If they’re a poor cultural fit for the business or their job it can reduce productivity and morale across the business. It may be a good thing if they leave. In most cases, though, a high attrition rate is usually bad.

When Should You Focus On Employee Attrition?

Awareness of your attrition rate is most certainly a good thing.

That’s because it allows you to identify how many employees are leaving and why they are leaving. If you have a high employee turnover rate, pay attention to it.

Fixing underlying issues can help improve business:

Potential IssuesPotential Solutions
PerformanceCan you implement a framework to help employees develop?
ProductivityAre there tools that can help employees focus on their work and not admin?
MoraleDo you need to put your culture in focus and create values?

Download our definitive guide to corporate culture for organisations here.

However, a change of employees can also be an opportunity for the business. It allows you to restructure a team or a department and possibly even save costs. This can be done either by hiring more junior people, splitting the role up among other team members, or promoting someone internally.

The important thing to remember is that a high attrition rate shouldn’t cause concern for no good reason. Make sure to first compare the rates within your industry and country averages. In fact, what may seem alarming might be quite commonplace.

The thing to be aware of is what happens when attrition rates start to increase. That’s when it’s time to interrogate your employee data thoroughly and to make changes, without haste.

Staff Attrition: Best Practices For When Employees Leave

While it does hurt to lose talented employees, and it’s expensive to replace them, it’s also wise to let them go graciously and painlessly. It’s easier if employees’ records are up-to-date, easy to locate, and you have the right termination processes documented. And, when they are ready to follow.

That’s what makes Personio’s HR analytics and reportingso helpful. It’s a streamlined way to keep your finger on the pulse of your employee satisfaction, with an eye peeled for any dissent, dissatisfaction, or frustrations. This way, you can fix issues before they ever become problems for your top performers.

(Video) Employee Retention Strategies for HR Teams to Use

It’s not only good practice, though. Over time it may help reduce your employee attrition rate and improve employee retention. After all, the idea is to get people on board, keep them happy, and help your business thrive. Our mission is to help HR professionals do that every single day.

FAQs

What is your attrition rate for the organization? ›

For calculating attrition, you divide the average number of departures in a given period over the average number of employees in that period and then multiply by 100 to get the percentage. This represents the number of people left after departures: in other words, how much manpower you're losing.

What is your understanding of attrition? ›

Attrition is the departure of employees from the organization for any reason (voluntary or involuntary), including resignation, termination, death or retirement.

How do you evaluate attrition rate? ›

A simple formula for figuring out your employee attrition rate is dividing the number of full-time employees who have left per month (called “separations”) by the average number of employees, and then multiplying that figure by 100. To summarize, the formula is: attrition rate = (# of separations / Avg.

How do you explain employee attrition? ›

Employee attrition occurs when the size of your workforce diminishes over time due to unavoidable factors such as employee resignation for personal or professional reasons. Employees are leaving the workforce faster than they are hired, and it is often outside the employer's control.

What is an example of attrition? ›

Voluntary employee attrition examples include employees leaving to pursue other job opportunities or retiring. On the other hand, involuntary employee attrition includes job position elimination due to business downsizing.

What does 70% attrition mean? ›

Attrition rate refers to the percentage of rooms that must be filled in order to avoid paying a penalty. For example, let's say you make a block of 20 rooms for your wedding. However, only 13 rooms are booked by your guests, and your contract states that your attrition rate is 75%.

How do you handle attrition at work? ›

How to manage attrition
  1. Foster a pleasant work environment. The work environment is the space where employees fulfill their job responsibilities. ...
  2. Appoint the right leadership. ...
  3. Give employees creative freedom. ...
  4. Prioritize professional growth. ...
  5. Offer competitive compensation and benefits.
29 Sept 2021

What are the 5 modes of attrition? ›

Types of employee attrition
  • Involuntary attrition. Involuntary attrition happens when the company decides to part ways with the employee. ...
  • Voluntary attrition. ...
  • Retirement attrition. ...
  • Poor job satisfaction and pay. ...
  • Not enough career opportunities. ...
  • Poor workplace culture. ...
  • Lack of employee motivation. ...
  • Poor work-life balance.
24 Jan 2022

What is the meaning of attrition rate in HR? ›

Employee attrition is the naturally occurring, voluntary departure of employees from a company. Employee attrition involves leaving a job for: Personal reasons. Professional motivation.

What is the importance of attrition rate? ›

Attrition rates help you understand how well you're retaining your talent. For instance, a high attrition rate indicates that your employees are leaving frequently, while a low rate shows that you're keeping your employees for longer periods of time.

What does 80% attrition mean? ›

The attrition penalty is usually the difference between the rooms you booked and the attrition limit. For example, if you sign a hotel contract for 100 room nights and your contracted attrition is 80%, you are required to book 80 room nights (or 80% of the total), or you will have to pay a penalty.

What are the five top reasons for attrition? ›

The most important factors that affect employee attrition are pay, workload, flexibility, development, and hiring. Knowing and understanding these factors plays a huge role in the decreasing of employee attrition within a company, and can help firms greatly in the long run.

What are the main causes of employee attrition in I met? ›

Causes of employee attrition
  • Retirement. Retirement is one of the main causes of employee attrition. ...
  • Financial. Many times, employers decide not to hire new staff for financial reasons. ...
  • Life Events. ...
  • Career progression. ...
  • Evolution of the organization. ...
  • Industry shift. ...
  • Skill gaps.
27 Sept 2022

What is positive attrition? ›

Positive attrition refers to staff turnover that actually benefits the organization. Think of an employee who is a poor performer, makes many errors, has difficulty working with others, delivers low quality customer service and/or uses sick leave and vacation time as the hours are earned.

Is attrition same as turnover? ›

While turnover refers to layoffs due to negative reasons such as differences in corporate culture and toxic management, employee attrition occurs due to natural causes such as retirement. Turnover and attrition occur when employees leave the company for different reasons, such as layoffs and terminations.

How many types of attrition are there? ›

There are two main types of employee attrition: Voluntary attrition: When an employee chooses to leave the company, that is voluntary attrition. This can include any reason an employee leaves on their own accord, whether it's truly voluntary or not.

What is a 20% attrition? ›

As a refresher, attrition is a term used describe when your actual room block pickup is less than what you contracted – if you don't “make” your room block, then you're “in attrition.” The term is also used to describe the amount of leeway a hotel offers you if you don't pick up your block – as in, “You have 20% ...

What is normal attrition rate? ›

General Employee Turnover Statistics

What is a good employee turnover rate? On average, every year, a company will experience 18% turnover in its workforce. A business can expect on average to lose 6% of its staff because of reduction in force or terminating them due to poor performance.

What is a 10% attrition? ›

It's often calculated as an annual figure or as a number of employees over another time frame. It is usually given as a percentage figure. So, for example, if your company has 100 employees and ten employees leave in the course of a year, then you have an attrition rate of 10%.

How do you solve attrition problems? ›

7 Tips to Control Employee Attrition
  1. Pay Competitive Benefits And Perks. The primary reason for an employee to work is to earn. ...
  2. Find The Reason. ...
  3. Recruit The Right Candidate. ...
  4. Offer Flexibility. ...
  5. Provide A Positive Workplace Environment. ...
  6. Improve Employee Engagement. ...
  7. Appreciate.

How do managers deal with attrition? ›

Give the employees best equipment and supplies. Upgrade the systems, machinery, and software so they could work efficiently. Taking care of the needs of the employee is an indication that the company values them. Coping with the attrition should not be an issue if good training is a priority.

How do you manage high attrition? ›

5 Ways To Prevent High Employee Attrition Rates
  1. Set realistic expectations. ...
  2. Offer support and show appreciation. ...
  3. Train employees with effective tools. ...
  4. Communicate well and often. ...
  5. Compensate fairly and recognize high performers.

What is attrition strategy? ›

Attrition warfare is a military strategy consisting of belligerent attempts to win a war by wearing down the enemy to the point of collapse through continuous losses in personnel and materiel.

What is the first step in attrition? ›

The first step is to determine why your employees are most likely to attrit. If your candidates are leaving as soon as they experience the job for the first time, you're likely suffering from mismanaged expectations.

What is the main challenge of attrition? ›

No career growth or development opportunities: Global Talent Monitor's report on workforce activity shows that the lack of future career development remains a key driver of employee attrition — 40% of departing employees say it led them to be dissatisfied with their jobs, Gallup reports.

What are the three types of attrition? ›

3 Types of Attrition
  • Voluntary Attrition. When an employee leaves the company for a better job opportunity or career growth or more pay, and leaves on his own. ...
  • Involuntary Attrition. If an employee is terminated from a job due to some issue like lack of performance. ...
  • Retirement Attrition.
13 Aug 2021

Can you have an attrition rate over 100%? ›

To get the percentage of turnover, you take the number of people who left your company during a period divided by the average headcount for that same period and multiply it by 100. It is possible for your turnover rate to be more than 100%. This means that you replaced your entire workforce during that time period.

Can attrition be more than 100%? ›

There you have it: you can absolutely get turnover rates of more than 100%. But remember that turnover numbers can vary substantially month to month. This is particularly important in the case of annualized turnover.

What attrition rate is high? ›

What is a high attrition rate? A high attrition rate can be anything over 20% according to industry averages, however, these numbers vary by industry. Meaning if your company is experiencing staff turnover of over 20% for the year, they should be looking into ways of retaining employees.

Who is responsible for attrition? ›

To that point, Management is the leading contributor to attrition with 82% of surveyed employees listing it as a motivating factor in leaving an organization. This is often due management not communicating well or effectively to their team.

What does it mean to attrition? ›

/əˈtrɪʃ·ən/ a gradual reduction in the number of people who work for an organization that is achieved by not replacing those who leave: Most of the job losses will come through attrition.

What is attrition and why is it important? ›

Employee attrition is defined as the unpredictable and uncontrollable, but normal, reduction of the workforce due to resignations, retirement, sickness, or death. The employee attrition rate measures the number of people who move out of a company and are not replaced.

What is the purpose of attrition? ›

Attrition occurs when the workforce dwindles at a company as people leave and are not replaced. Attrition is often called a hiring freeze and is seen as a less disruptive way to trim the workforce and reduce payroll than layoffs.

What do you mean by attrition in BPO? ›

Attrition is the rate at which members of staff leave the workforce over a given period of time. It is also known as “employee turnover”, or “employee churn”, although in the contact centre industry, “churn” tends to refer to the flow of customers rather than staff.

What can help with attrition? ›

5 Ways To Prevent High Employee Attrition Rates
  • Set realistic expectations. ...
  • Offer support and show appreciation. ...
  • Train employees with effective tools. ...
  • Communicate well and often. ...
  • Compensate fairly and recognize high performers.

How do you increase attrition rate? ›

7 Tips to Control Employee Attrition
  1. Pay Competitive Benefits And Perks. The primary reason for an employee to work is to earn. ...
  2. Find The Reason. ...
  3. Recruit The Right Candidate. ...
  4. Offer Flexibility. ...
  5. Provide A Positive Workplace Environment. ...
  6. Improve Employee Engagement. ...
  7. Appreciate.

What is the main challenge with attrition? ›

No career growth or development opportunities: Global Talent Monitor's report on workforce activity shows that the lack of future career development remains a key driver of employee attrition — 40% of departing employees say it led them to be dissatisfied with their jobs, Gallup reports.

What causes employee attrition? ›

The four main causes of turnover are lack of growth and progression, inefficient management, inadequate compensation, and poor workplace culture. These reasons for staff leaving are present at many organizations around the world.

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