Key takeaways
- Employee attrition rate measures how many employees leave a company (and their positions remain unfilled) within a set period.
- Attrition rate = (the number of employees who left a company and weren’t replaced / the number of employees at the beginning of a specific time period) x 100.
- If your company has a high attrition rate, your HR team may need to reevaluate its people strategy to prevent the company from stagnating.
Attrition occurs when a company’s workforce shrinks over time because employees leave and aren’t replaced. While attrition is normal, an abnormally high number of employees leaving could indicate something more serious, such as stagnating company growth. Considering 96% of workers are looking for a new job, according to a 2022 Monster.com survey, it is critical for employers to examine their workforce data to understand why — starting with attrition rate.
Calculating attrition rate over time provides companies with a macro-view of the factors driving employee departure. By doing so, companies can implement effective measures to retain their employees, create a stable and motivated workforce, and set themselves up for continued growth.
Check out our HR Software Guide for solutions to begin tracking your company’s attrition rate.
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How do you calculate attrition rate?
Attrition rate is calculated by dividing the number of employees who left a company and their positions remain unfilled in a given period by the average number of employees in the same period and then multiplying by 100.
Attrition rate =
Number of employees who left and weren’t replaced
Number of employees at the beginning of a time period
x 100
For example, let’s say that a company wants to calculate its attrition rate for the past 12 months. The number of employees who departed in the past 12 months and whose positions remain unfilled is 5. The average number of employees in the past 12 months is 75.
So, to calculate the company’s attrition rate:
Attrition rate = (5/75) x 100 or 6.67%
Attrition rate calculator
Workforce analytics software automates attrition monitoring
Instead of resorting to manual methods of calculating attrition rates, companies can use software to automatically calculate and track the rates over time. For example, many all-in-one human resources (HR) software platforms can combine hiring and termination data to provide meaningful insights on areas of the organization that need improvement.
Moreover, software can provide more granular insights into employee departures. For example, organizations can track attrition rate and layer it against other metrics, such as employee engagement and performance metrics, to look for causes of attrition. Solutions like BambooHR can show companies their most prevalent reasons for termination, the departments that experienced the most employee departures, and even the direct manager with the most employee separations.
Software can also calculate and track other workforce analytics, like cost per hire, time to fill, and retention rates. With such data, companies can pinpoint areas suffering from inefficiencies and implement corrective actions.
What is attrition rate?
Attrition rate measures the pace at which employees leave a company for voluntary reasons — such as resignation, retirement, or relocation — or involuntary reasons — such as discharges, layoffs, or eliminated positions. Along with other workforce and recruitment metrics, attrition rate is among the most critical metrics for HR teams to track.
Companies use attrition rates to track the overall health of their organization. For example, a relatively low or consistently stable rate could indicate that an employer is poised for growth as they retain a set of key employees contributing to their overall success. Alternatively, a high rate could mean the company is at risk of downsizing or losing institutional knowledge from employees leaving.
What are the causes of attrition?
There are several causes of attrition, many of which are natural and not necessarily negative. For example, employee retirement or relocation are examples of attrition beyond the company’s control. However, attrition due to layoffs or company restructuring may also be a natural occurrence as companies learn to be more productive with less—such as leveraging machine automation to handle rote, repetitive tasks.
Instead, companies should examine the voluntary reasons employees depart their organizations, as they could provide a more precise understanding of why they left and why those positions may be hard to fill. Typical causes of employee attrition include:
- Inadequate pay or benefits.
- Limited growth and development opportunities.
- Lack of recognition or rewards.
- Poor work-life balance.
- Unsupportive workplace culture.
- Personal reasons (such as domestic or health issues).
No matter the cause of attrition, employers will continue to face increasing employee attrition unless they take measures to stop it. One way is for employers to look for signs of unhappy employees and address their concerns early to prevent their departure.
What is a high attrition rate?
A high attrition rate indicates employees are leaving faster than employers are hiring. But what is considered high attrition varies by industry and region, as evidenced by the U.S. Bureau of Labor Statistics 2022 quit rates.
Industry averages indicate anything over 20% as a high attrition rate. However, because this is an overall average among various industries, a high attrition rate for a company could be higher or lower than this threshold. If the attrition rate for your company is over 20%, first research what is considered a high attrition rate for your industry before spending time and energy on ways to lower your attrition rate.
How do you reduce a high attrition rate?
To reduce employee attrition, employers should first collect data from multiple channels and let that knowledge determine priorities. For example, employers can use performance management and engagement software, such as Lattice, to survey employees on a continual basis and gather insight into the areas causing dissatisfaction. Other platforms, like 15Five, provide employees access to career development features—such as expert coaching sessions—so that employees can feel a greater sense of purpose and fulfillment in their roles.
Companies can also reduce attrition by optimizing the employee life cycle — through manager training and smooth offboarding procedures, for example — or by offering the right compensation, benefits, support, and employee resources. By making targeted improvements to such areas, employers can increase employee happiness and satisfaction and the likelihood that they will remain with the company for longer.
Why is attrition rate important?
Organizations that track their rate of attrition over time can see when they need to reevaluate their people strategies. For instance, rising attrition rates could indicate a drop in company efficiency and productivity as employers distribute work among fewer employees, and institutional knowledge is lost. Rising attrition rates could also indicate poor recruitment and retention strategies or low employee satisfaction with their role and the company at large.
Employers can use attrition rates as a way to measure workforce stability. The earlier employers start tracking their attrition rates, the earlier they can begin diagnosing why their company objectives are difficult to achieve—and the earlier they can address the discontent among their talent that causes departures.
Attrition rate vs. turnover rate
Attrition and turnover rates measure aspects of employee departure from an organization; however, they are not the same. The main difference is that attrition is the number of people who leave an organization and do not get replaced. In contrast, turnover is the number of people who leave an organization and do get replaced.
One way to think of turnover rate is as “churn rate” instead — it measures how many people leave an organization in a set timeframe. As a result, it is possible to have a high turnover rate but a low attrition rate. For example, certain industries, such as retail and fast food, can have high turnover rates but stable attrition rates because positions are immediately filled after the employee leaves.
Although high turnover rates can be a problem — such as indicating low satisfaction among employees or few growth opportunities — these rates are more of a glimpse of the company’s health in the short term. On the other hand, attrition rates provide a broader, longer-term picture of a company’s age and whether expansion or downsizing is on the horizon.
Proactive measures can slow company attrition
Attrition rate is a lagging indicator, meaning what caused attrition occurred in the past. However, that does not mean companies can’t leverage attrition rate data to affect positive change.
If employee attrition is a problem, companies can take measures to get ahead of it. For example, employee engagement surveys, stay interviews, regular performance reviews, and opportunities for career development can help employees stay motivated in their positions for longer. And even if attrition occurs, companies can collect the data from employee exit interviews to identify where they can continue to improve their processes.
Attrition is normal. But companies who take proactive steps to curb it not only increase employee retention but ensure they enjoy sustained growth for years to come.
Take a look at our Performance Management, Employee Engagement, and HR Software guides for the solutions to best address attrition for your company.