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What is an Attrition Rate and How Do I Calculate It?

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Recruitment metrics

One of your company’s most valuable assets isn’t a fancy pantry stocked with food, a newly-renovated conference room, or a fleet of trucks. It isn’t technology either, although some of the devices in your workplace might be very expensive and top of the line.

While all of the things mentioned above contribute to a productive and engaging work environment, your company’s most important assets are your employees. Your employees are the backbone of your company so they need to be treated like the valuable assets they are.

Ask yourself right now – do you let your employees feel valued? Do they feel engaged and motivated in the workplace? If they’re not, you might just find yourself dealing with a high attrition rate.

 

What is an attrition rate?

Employee attrition typically differs among organizations based on the kinds of employees leaving but the meaning of attrition rate remains the same. Attrition rate definition is the rate of gradual yet deliberate reduction in the number of an organization’s employees. At some point in time, employees will look for opportunities outside of the company for various reasons. It might be due to either personal or professional reasons and that’s okay. People are allowed to seek chances for career growth outside your company.

 

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How to calculate attrition rate?

As mentioned above, the meaning of attrition rate in simple terms is when there is a reduction in the workforce due to various factors that may or may not be avoidable. If you need to carry out company attrition analysis, you’ll need to learn how to calculate attrition rate.

Here’s an explanation to provide you with a better understanding of how to calculate attrition rate:

  • Conduct a headcount of the total number of employees in your company from the start of the year. Let’s say you have 500.
  • Record the total number of employees that leave your company during the year. For instance, 50 people left your organization in both voluntary and involuntary attrition.
  • You should also record the total number of employees that your company hires during the entire year. Then, you can start adding up the numbers. For instance, if you hire 100 people in one year, then your total headcount would be (500 + 100 = 600).
  • The next step is to calculate the average for the number of employees that you have in your company during that year. In this case, the number is (500 + 600)/2 = 550.
  • Then, calculate the employees left in your organization from the number of average employees in percentage. For this example, we have: (50/550) x 100 = 9.09%.
How to calculate attrition rate in formula form:

Rate of attrition = (number of employees that left the company / the average number of current employees) x 100%

 

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Major factors that influence employee attrition rate

Now that you know what is an attrition rate and how to calculate it, here are the major factors that affect employee attrition:

  1. Personal motivation

Your employee may be undergoing major changes in their personal life that compels them to have a career shift or to switch jobs. The reasons are endless: a mid-career professional wants to take up a post-graduate degree, new parents want to move to another city with better schools, etc.

As long as you conduct comprehensive exit interviews, you can keep in touch with these employees and assure them that if they want to work for your company again in the future, they’re welcome to do so.

  1. Professional motivation

This is where your HR team can play a crucial role in controlling attrition. An employee might leave simply because they aren’t enough opportunities in your company for career progression. This especially rings true for technology companies, where talents have to fight for seniority or managerial positions as they move up the career ladder.

To avoid professionally-motivated attrition, what you can do is create a long-term technical track for each position in your company. Coordinate with the executives so that you can plan out a linear yet fulfilling career route for each rank and file employee.

  1. Challenges with the workplace

Challenges in the workplace can range from lack of requisite tools to carry out tasks efficient to uncollaborative leadership and teamwork.

This type of attrition is relatively easy simple to fix. Just ask for regular feedback, listen to employee concerns, and address any gaps they may have in their experience as your employee. Typically, someone who is happy and fulfilled with their job won’t leave the company if most of their needs are met.

  1. Poor employee-to-role fitment

We have all witnessed employees who were enthusiastic during the recruitment process and onboarding program, only to leave a month or two later. This is often a clear indicator that the job or the opening was not fit for that candidate to begin with.

You improve your attrition rate regarding this factor by ensuring an effective recruitment process.  That means finetuning your job descriptions and conducting detailed interviews with candidates. Candidates should know exactly what they’re signing up for so that you’re also less likely to witness new-hire attrition.

 

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How to reduce employee attrition rate

As mentioned above, some of the reasons for employee attrition are a work environment that’s not conducive, a lack of confidence in the market value or leadership of the company, absence of professional growth, and many others.

However, you have reasons to be concerned when the attrition rate starts to inch past a certain figure or threshold. A high attrition rate can lead to leadership gaps in your organization, especially if employees in senior positions are the ones leaving. If minority groups are the ones leaving, it can also negatively affect the diversity in your workplace.

Here are a few ways to effectively reduce employee attrition rate in your company:

Transparent Communication

There’s nothing worse than working for a company that doesn’t know how to communicate effectively. Those types of companies will see their best employees walk out the door. To avoid this, always connect with your employees and provide them with constructive feedback. It’s also important to relay important company updates as soon as they happen.

Be sure that you’re communicating honestly and openly with them so that whenever a problem arises, they can trust you to fix it. Don’t leave your employees in the dark.

On The Job Training

Offer employees with on the job training, perhaps with an industry expert or a motivational speaker. If there is a seminar, a workshop, or a conference outside the company, offer to send them. Employees are more likely to stay if they see that their company is willing to invest money in them.

Show Appreciation

One of the best ways to motivate and engage your employees is to let them know that they are appreciated. Appreciation can come in both big and small ways.

For instance, you can tell your employees how or proud or amazed you are of them and the work that they do. You can either send this out as an email blast to everyone in the company or announce it during a weekly or monthly townhall. Be specific with your praise, so that they’ll know you genuinely appreciate the work they put in.

Goal Setting and Engagement

When employees know the company’s expectations of them, and they know the goals they’re working towards, they will be motivated to reach those goals – even better if there are incentives involved. If it’s possible, you can also ask your employees to participate in a process of setting their own goals. When employees set their own personal goals, they’ll receive more satisfaction once they reach those and will be less likely to leave the company.

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Final Thoughts

There are a number of reasons why employers ask the question “what is an attrition rate?” From this article, we hope you already have a strong understanding of the definition of attrition rate, how to calculate it, what influences it, and the various ways that you can do to improve it. If you want to know how well your company is doing to retain or keep employees, you can carry out an attrition vs. retention survey. If you have a higher attrition rate compared to your level of retention, then you have a problem in your hands and you’ll need to sort that out as soon as possible.

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