How to calculate and improve the employee attrition rate? Attrition vs. turnover explained

Higher salaries, flexible working conditions, interesting benefits, and a positive corporate culture – these are just a few reasons why people decide to quit their jobs and move to another company. While such departures are a natural process for any organization, when there are too many of them as compared to the number of employees, the company should be concerned. The so-called employee attrition rate can help identify potential retention problems. In today’s post, we explain what this metric is, how it can be calculated, and give examples of actions that can be taken to reduce it. Read on to find out more.

What is the employee attrition rate?

The employee attrition rate is a metric that helps companies and organizations understand how many people leave the company over a given period of time in relation to the total number of employees. It is an important human resources management tool that helps assess the stability of a company’s workforce and monitor an organization’s ability to retain its employees. If it is high, it may indicate problems related to the company’s atmosphere, working conditions, management, or other factors that affect employee satisfaction. Such a situation is also usually costly to the organization, as it requires constant recruitment and training of new people.

Employee attrition vs employee turnover

Sometimes the employee attrition rate is confused with the turnover rate. While there are certainly some similarities between the two, they should not be used interchangeably. Why not? Attrition involves voluntary and involuntary departures (e.g., retirement, expiration of a contract, disciplinary dismissal, downsizing). In all of these cases, the employee won’t be replaced. When turnover occurs, the company looks for someone to replace the employee. To calculate it, the number of people who left their jobs should be divided by the average number of people employed over a given period of time and then multiplied by 100%.

How to calculate the employee attrition rate?

To calculate the attrition rate, you must divide the number of people who left the company and weren’t replaced by the number of employees at the beginning of a specific time period x100. Although it depends on the industry, the attrition rate of 20% should usually be alarming for the organization. In retail or service companies with high turnover, this metric may be higher than in organizations with typically low turnover (e.g. financial services).

Is it possible to improve the attrition rate?

A high attrition rate is a wake-up call that should motivate the HR department to take appropriate corrective action. But what can be done to retain employees? The first step is to investigate the reasons for their departures by conducting interviews or surveys, and then:

• Improve working conditions – fair salaries and attractive benefits can be a powerful motivator for employees. Companies should constantly monitor their job offers to ensure they’re competitive in the market,
• Provide opportunities for professional development – employees who have opportunities to develop their skills are more committed to their jobs and less likely to leave the company. Organizations can, for example, create talent management programs to identify and develop potential internal leaders, which can help meet employees’ development needs and retain them.
• Foster a strong corporate culture – promoting openness, trust, mutual respect and diversity can also attract and retain employees,
• Ensure feedback and open communication – employees want to know that they are valued and that their opinions are considered. For this reason, it is a good idea to introduce regular appraisal interviews and encourage them to share their thoughts. It can also be helpful to conduct regular satisfaction surveys so that the organization can monitor satisfaction levels and respond to any problems.

Summary

Improving employee attrition is a long-term process that requires ongoing commitment from executives, managers, and human resources. The key to success is listening to employees, adapting strategies to changing needs, and constantly striving to create an attractive and satisfying work environment. However, this will not be possible if the metric in question is not constantly tracked, which is where Firmbee can help.

This project management software allows you to create an employee database that contains all the information about a given person (from contact information and position to salary and skills). In the database, each person can be given the appropriate status – for example, a coworker, an employee, a trainee, or an ex-employee – which makes it much easier to calculate attrition rates.

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