What is Attrition Rate?
Attrition rate is a reduction in the workforce caused by retirement or resignation, without plans to fill or replace that vacant job position. Outside the HR context, the term attrition refers to a reduction in strength or a weakening – which is likely the reason why the term has a negative connotation, even when there can be positive outcomes resulting from a reduction in staff.
Unless your company is adequately prepared for employees who are planning to resign or retire, attrition can be costly. Your company may experience a loss in productivity, particularly when the departing employee is the only one, or one of very few employees, familiar with that position. In addition to diminished productivity, you stand to lose institutional knowledge.
Employees who have been with the company for years understand how the company operates, and are familiar with the mission and the company's ethics and principles. They are likely to be involved in training new employees, precisely because they are extremely knowledgeable about company practices, policies and objectives.
How do you calculate Attrition rate?
Attrition rate formula in HR
A simple formula for calculating 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 = (No. of separations / Avg. No. of employees) x 100.
Attrition rate calculator
What are the different types of Attrition Rate?
Voluntary attrition refers to the type of attrition when the employee chooses to leave the company on their own. It can be for reasons such as:
- Personal reasons - Returning to school, personal or structural changes within the company
- Professional reasons - Dissatisfaction with current employer
- Internal Attrition - Moving within the company's teams/departments in search of a better skill fit.
- Demographic specific attrition - When a specific demographic, such as the elderly, or a specific gender, race, or ethnicity, leaves in large numbers.
Involuntary attrition refers to the type of attrition when the employee leaves for retirement or is terminated:
- Employee dismissal or termination
- Death of the employee
Why does Attrition Rate matter?
Staff turnover can have a negative impact on the performance of your company. That is why it is critical to understand the status of your attrition rate. The first effect is felt in the cost of hiring.
Unless there is an extremely rigorous handover process, institutional knowledge will leave the organisation. This is due to the fact that it is nearly impossible to transfer all of an employee's knowledge gained over the years. Of course, this is true unless you have a process in place for next-level succession planning.
Their departure will have an effect on those who work with them. Frequently, this means adding more work to already overburdened team members. Their departure can also lower morale, increase stress, burn out employees, and possibly have an effect on the company's overall business performance.
When someone leaves, the dynamics of a team change, and it can even harm the company's employer brand and employer value proposition (EVP). Recruiters, for example, frequently state that it is difficult to find new employees when the company has a history of high turnover.
What is the difference between Attrition Rate and Turnover?
Attrition occurs as a result of a planned exit, such as retirement, or for personal reasons. Attrition openings are usually planned or informed in advance, but they are not filled immediately.
Employee turnover, on the other hand, occurs as a result of poor employee-company and employee-job fit, as well as poor company culture, leadership, and so on. Employee turnover vacancies are unanticipated because the problems are with the company. The company issues must be addressed immediately, and the vacancies must be filled.