The Attrition Rate is a way to measure how many employees leave a company within a specific time. It calculates the number of individuals who have left their positions.
Companies need to track the employee attrition rate, which is sometimes referred to as the employee turnover rate. Attrition Rate helps ensure that the organization is running smoothly without any significant internal issues.
What are the different types of Attrition Rate?
The different types of attrition rates:
|Type of Attrition Rate||What it Means|
|Voluntary Attrition||When an employee decides to resign or quit the job.|
|Involuntary Attrition||When an employee is terminated from their job.|
|Internal Attrition||When employees transfer to different positions within the company.|
|Demographic-specific Attrition||When a particular demographic (based on age, gender, or ethnicity) leaves.|
- Voluntary Attrition: The voluntary attrition refers to employees who leave the organization freely. It contains resignations, retirements, and employees who go to pursue personal reasons or better career opportunities.
- Involuntary Attrition: The involuntary attrition refers to employees terminated or laid off by the organization, as opposed to those who left voluntarily. This includes employees who were let go due to performance issues, organizational restructuring, or other reasons beyond their control.
- Internal Attrition: Internal attrition happens when employees switch to different departments within the same company. For instance, an employee might leave their job in the finance department and move to the HR department if there is an open position.
- Demographic-specific Attrition: The demographic-specific attrition occurs when employees quit their jobs due to factors that are unique to their particular demographic group. This can include reasons such as retirement or needing to care for a family member. While this type of attrition may be more predictable and easier to plan for, it can still be difficult to replace employees with specialized skills or experience.
Causes of High Employee Attrition
The following internal problems often contribute to a higher employee attrition rate:
- The lack of structure in the organizational hierarchy can lead to an inefficient task allocation process, resulting in “bottlenecks.”
- Employee burnout is caused by physical tiredness and the resulting impact on mental well-being.
- Toxic Workplace Environment
- The company’s overall morale is low due to poor culture and a lack of incentives for employees to perform at their best.
- Lack of Communication.
- Compensation is not competitive in the market.
- Insufficient Training and Onboarding Process for New Employees.
- Do not have an “Open Door Policy” or conduct closed-door meetings for feedback and suggestions on improvement.
How can we calculate the Attrition rate?
To calculate the attrition rate, divide the number of employees who left the organization within a specific time by the average number of employees during that same period. Then, display the result as a percentage, and multiply it by 100.
The formula for attrition rate is Attrition Rate = Number of employees who left / Total number of employees x 100.
For example, At the beginning of the year, your organization had 1000 employees. As time passed, the employee count increased by 100, bringing the total to 1100. However, a total of 50 employees left the company.
To compute the attrition rate, divide the number of employees who quit the company by the average number of employees for the given period.
Need for Calculating Attrition Rate
Organizations find it helpful to calculate their attrition rate for various reasons:
Firstly, it helps them keep track of their employee retention efforts by identifying trends and potential issues related to turnover.
Secondly, calculating attrition rates helps estimate the financial impact of turnover by quantifying recruitment, hiring, and training costs.
Lastly, it’s possible to identify problem areas within the organization by tracking attrition rates by department or location, which allows targeted interventions to address underlying issues.
What is the difference between employee attrition rate and turnover?
Employee attrition occurs as a result of planned exit due to retirement, personal reasons etc. These openings are always informed in advance.
Employee turnover on the other hand occurs as a result of poor employee performance or poor culture, leadership quality and so on. Employee turnover vacancies are unanticipated or uninformed. These issues are to be addressed immediately and the vacancies must be filled as soon as possible.
Attrition rate calculations provide a metric to assess the effectiveness of HR policies and employee engagement strategies, which supports efforts to improve retention and overall organizational success. The human resources management tool like Zimyo HR Software offers an user-friendly HR Dashboard to monitor the attrition rates in your organization. The HR professionals see various metrics such as; employee performance, leaves, active employees, retention rate, headcount, and attrition rate,etc. It helps them to understand and improve their organizational culture and keep their employees happy.
FAQ (Frequently Asked Questions)
To calculate the attrition rate this formula can be used:
Attrition Rate= No of Separations/ Average number of Employees*100
Suppose there were 200 employees in March. Over this period 30 employees left and you hired 20 more employees.
Average number of employees= 200+190/2= 195
Attrition Rate= 30/195*100= 15.38%
30% attrition rate means out of total 100 there were 30 employees who left the organization.
Attrition Rate= Number of Attritions/ Number of employees*100