An employee attrition rate is simply the percentage of workers who leave a company during a fixed period. Industry experts say companies should strive for an attrition rate of ten percent or lower. The higher your attrition rate is, the more you will be spending on hiring and training new people to accommodate churn.
Your attrition rate can also tell you a lot about company culture and ways that you can improve. Here’s a closer look at the employee attrition rate and how it impacts overall business operations.
What is Employee Attrition Rate?
The employee attrition rate can be calculated on a monthly, quarterly, or yearly basis. To calculate your attrition rate, use this formula:
(number of employees who left/total number of employees) x 100 = attrition rate (%)
It’s important to understand the distinction between employee turnover vs attrition. The employee attrition rate includes all employees who leave during a fixed period. This includes voluntary separations due to retirement or relocation, in addition to terminations, layoffs, and resignations. Employee turnover only counts involuntary separations.
Why is Attrition Rate Important?
If a company’s attrition rate is too high, it can lead to a great deal of dissatisfaction among its employees. Most workers want to build professional relationships and friendships in the workplace. When people leave too often, it can negatively impact company culture and become a drag on worker productivity.
Over the long term, a high attrition rate will start to have an impact on company growth. If an organization develops a reputation for its high attrition rate, it can damage future recruitment efforts and its ability to attract the best employees.
Types of Employee Attrition
There are three types of employee attrition:
- Natural attrition
- Involuntary attrition
- Voluntary attrition
Natural attrition happens when employees leave due to retirement, family relocation, or some other reason. Involuntary attrition happens when employees are lost due to layoffs or dismissals. Voluntary attrition happens when employees willingly leave due to resigning or job dissatisfaction.
Factors Leading to High Employee Attrition
The goal of any company should be to reduce employee attrition, but this can’t be achieved without understanding the factors that contribute to employees leaving. Poor company culture is cited as one of the main reasons why employees choose to leave. This can be due to poor management or ineffective leadership, a toxic work environment with poor communication, improper work-life balance, or other factors.
Career development opportunities are increasingly important to today’s workforce. If employees don’t have the opportunity to learn new skills or climb the ranks within an organization, they’re more likely to leave. A competitive job market can also contribute to a high employee attrition rate. If employees are receiving inadequate compensation and benefits compared to what your competition is offering, they’ll find out, and many will choose to leave.
How to Monitor and Improve Employee Attrition Rate
Managing workforce attrition requires a proactive approach. Your HR team should be regularly tracking and reporting on attrition metrics on a monthly, quarterly, or annual basis (or all three). This can give you insights as to why employees leave and whether there are any annual or seasonal trends related to attrition.
Implementing employee engagement and satisfaction surveys is a way to start improving your employee attrition rates. Anonymous surveys will help to gather honest answers and insights from your employees.
If you notice trends that indicate dissatisfaction with career growth opportunities, lack of communication with managers, or lack of competitive benefits, this can let you know the company culture areas that you need to work on. Your payroll and HR systems can be used to effectively gain insights into workforce trends, which in turn will help you lower the employee attrition rate.
Conclusion
A high employee attrition rate can quickly lead to a dissatisfied workforce and reduce productivity. Organizations should strive to improve company culture while providing career growth opportunities and competitive benefits. Reducing employee attrition will pay many dividends, including the retention of your best workers and reduced expenses for hiring and training.
Contact Us at ASAP Payroll to learn how our payroll and HR solutions can help you improve employee retention.
