Within the context of human resources and workforce planning, 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.
Sure, there are costs associated with losing employees, but the tangible costs for workforce planning exist in every area of HR. What you may be more concerned about are the intangible costs of attrition, and even those are manageable. When you approach workforce planning with creativity and attention to workers' intrinsic needs, you can sustain high morale, job satisfaction and engagement among your employees. If you treat attrition as a negative, it will be.
On the other hand, planning for attrition and successfully managing the cost of attrition happens through open communication, succession planning, employee development and making it clear how much you value employees who have contributed to the company but who are now moving on.
Calculate the monthly attrition rate. To calculate the attrition rate for any given month, you need to know the total number of employees at the beginning of the month. Then, you need to know the number of new employees added that month. Finally, determine the number of employees who left. The number of employees who left is the number of attritions.
Calculate the annual attrition rate. For this calculation, you need to know the total number of attritions for the year. Then, you need to calculate the weighted average of employees. Using the weighted average is more mathematically accurate since it smooths the effect of seasonal changes in the number of employees a company has throughout the year.[1]
Sure, there are costs associated with losing employees, but the tangible costs for workforce planning exist in every area of HR. What you may be more concerned about are the intangible costs of attrition, and even those are manageable. When you approach workforce planning with creativity and attention to workers' intrinsic needs, you can sustain high morale, job satisfaction and engagement among your employees. If you treat attrition as a negative, it will be.
On the other hand, planning for attrition and successfully managing the cost of attrition happens through open communication, succession planning, employee development and making it clear how much you value employees who have contributed to the company but who are now moving on.
Keep Reading more Glossary Terms & FAQs on our glossary page: peopleHum Glossary
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