Attrition
What is employee attrition?
Attrition is when an organization doesn’t replace employees who leave. Employee attrition can be linked to retirement, layoffs, or general resignations.
What causes employee attrition?
The attrition rate can increase due to problems with management, working conditions or lack of development and growth until they compel some employees to quit—a worst-case scenario that needs a remedy for the wellbeing of both employees and employer. But even without such issues, some employee turnover is normal. Workers may voluntarily leave their jobs for a variety of other reasons, including:
- Finding a better job elsewhere
- Retirement
- Moving to another city
- Illness
- Death
Successful businesses generally fill vacancies as they occur, maintaining the size of the staff. But there are times when companies freeze hiring, leaving vacancies unfilled. For example, sometimes positions become obsolete due to structural or operational changes in the business.
If an organization faces financial difficulties, it may have little choice but to cut labor costs by reducing headcount. In either case, employee attrition is a more humane and less disruptive way to reduce the size of the workforce than firing people.
How long does employee attrition take?
When companies seek to downsize via employee attrition, it may take months or even years to reach the desired staff size because attrition is voluntary and somewhat unpredictable. Some companies that need to downsize right away offer financial incentives for their employees to leave, speeding up this process.
What does attrition rate mean?
An employee attrition rate is a measurement of employee turnover over a specific time period, typically one year. It helps employers understand whether they are doing a good job retaining their talent in times when downsizing isn’t necessary or desirable.
How to calculate your business’s attrition rate
- Determine your average number of employees during the year. To do this, add the number of employees at the beginning of the year to the number of employees at the end of the year, then divide by two.
- Divide the number of employees who left voluntarily during the year by the average number of employees you calculated in the first step.
- The result is the attrition rate, which is generally expressed as a percentage.
For example, if you have 110 employees at the beginning of the year and an additional 90 at the end of the year, 110 + 90 = 200. Dividing that result by two shows you had an average of 100 employees during the year. If 20 employees left during the year, dividing 20 by 100 shows the attrition rate is .2, which is 20%.
The average employee attrition rate varies significantly between companies and industries. If your rate is higher than your peers’ rates, these steps can help improve retention:
- When hiring, ensure new employees not only have the necessary skills to do the job but are also a good fit for your culture.
- Make sure your compensation package is competitive.
- Survey employees regularly and then use their feedback to make changes that'll increase their job satisfaction.