Employee Attrition Rate: Everything You Need to Know & Why It Matters

Do you ever feel your company's employee retention resembles a leaky bucket? You're continuously filling it up with new talent, but valuable employees keep slipping through the cracks despite your best efforts.

That drip, drip, drip is the echo of attrition. This force subtly but relentlessly chips away at the heart of your organization.

This article will answer all your questions about employee attrition rates:

• What is the employee attrition rate? 
• How do I calculate the employee attrition rate accurately?
• What does it actually mean for my business? 
• Should I be concerned about this? (Spoiler alert: yes.)

🔢 What is the employee attrition rate?

The employee attrition rate (churn rate) is a measurement that calculates the number of employees leaving the company in a given period.

It's usually measured in percentage and is one of the key metrics for human resources to assess how the company is doing. 

Types of employee attrition

The attrition rate measures several ways an employee leaves the company:

• Voluntary - When an employee freely chooses to leave the company. They may resign due to personal reasons, to change careers, or to work for a higher-paying company.
• Involuntary - When an employee is let go or dismissed. This can be due to cutting staffing costs or the company deciding that the position no longer contributes.
• Internal - When an employee is offered to work for another department or gets promoted within the same company.
• Retirement - when an employee reaches a certain age in their post-work years. 

🚨 Knowing the factors contributing to attrition is crucial for managing your company's rate. 

➡️ Check out our in-depth look at employee attrition and what affects its increase or decrease. 

Employee turnover rate vs. Attrition rate

While both attrition and turnover rates measure employees leaving the company, attrition rates assess voluntary and involuntary departures, whereas turnover rates measure only voluntary ones. 

With employee turnover, the company finds a replacement for the employees who resigned, while attrition rates record cases of employees who left their roles and the vacancy remains unfilled. 

A high attrition rate means your employees leave the company more frequently. In contrast, a low attrition rate means your employees stay with your company for an extended time.

The goal is to maintain a low attrition rate to lessen the time and effort in training and hiring new people. 

🧮 How to calculate employee attrition rate

Employee attrition rates can be calculated by the month, quarter, or year. 

While some companies use special software to calculate the attrition rate, you can follow a standard attrition rate formula. 

Here's how you can calculate the attrition rate for employees:

1. Identify the total number of employees at the beginning of the year or a given period.

2. Next, find out the total number of employees who left during a given period. 

3. Then, determine the total hired employees during the period. 

Here's how to get these variables:

Total no. of employees - total no. of departed employees = Total no. of remaining employees 

Total no. of remaining employees + Total no. of new hires = New total number of employees 

• Add the previous and new total employees to get the employee average and divide them by two. 
• Then, divide the employee average by the number of employees who left to find the decimal rate of attrition. 
• Finally, multiply the decimal by 100 to get the attrition rate as a percentage.

Here's an example: 

For this year, company X has over 100 employees. A few months later, 10 employees left, and 5 were hired. Find the annual attrition rate.

Here's how you can get the attrition rate: 

100 total employees – 10 departed employees = 90 remaining employees

90 remaining employees + 5 new hires = 95 new total employees

100 total employees + 95 new total employees = 195 total employees

195 total employees/2 = 97.5

10 departed employees/ 97.5 = 0.1026

0.1026 x 100 = 10.26% employee attrition rate

How to calculate voluntary attrition rate

You can calculate the voluntary attrition rate using this simple formula: 

Voluntary Attrition Rate (%) = Number of employees that left voluntarily during a specific period ÷ Average number of employees for the period x 100.

To analyze the trends and issues that may have caused employees to leave the company of their own volition, compare the voluntary attrition rate with the total or involuntary attrition rate. 

How to calculate involuntary attrition rate

You can calculate the involuntary attrition rate using this formula: 

Involuntary Attrition Rate (%) = Number of employees terminated during a given period ÷ Average number of employees for period x 100.

Involuntary attrition is not typically included in attrition calculations. Still, a separate calculation using the formula above can help you track the impact of staff reductions in a given period.

You can also use these formulas to track retirement and internal attrition rates. Update the dividend depending on the appropriate values. For example:

Retirement attrition rate = no. of employees who retired during a given period ÷ Average number of employees for period x 100.

Regularly calculating your attrition rates can help you identify trends in employee retention. If you do this monthly or quarterly, you can easily recognize rising and falling numbers. This allows you to establish a baseline and determine whether the attrition rate is alarming or stable.

👍 What is a good employee attrition rate?

While a good employee attrition rate varies by industry, companies should aim for an attrition rate of no more than 10%. However, a higher attrition rate does not always mean your company is doing poorly in employee retention.

For instance, the hospitality industry typically has higher attrition rates than the finance industry, as they usually hire temporary employees during peak seasons. This means a good attrition rate in the hospitality industry cannot be compared with a good attrition rate in the finance industry. 

"The benchmark for "good" attrition rates varies from industry to industry. For the most part, if possible, you want to stay below 20%, though my industry, information, and technology can have rates averaging 37%." Stanislav Khilobochenko, VP of Customer Services at Clario.

Typically, the attrition rate can be calculated based on the size and nature of the company. Generally, you can use your previous numbers as a standard for a good attrition rate specific to your company.

The review intervals for the attrition rate may also vary. Some businesses prefer quarterly to annual attrition rates and vice versa. Aim for a lower attrition rate over time to get your company moving in the right direction.

👀 Why should you pay attention to your company's attrition rates?

 A consistently high attrition rate could mean employees are dissatisfied, which will require changes in the system. It can also impact the recruitment process when considering new hires, as it reflects your company's relationship with employees. 

"High attrition could be a sign of deep-rooted issues in the company culture, work environment, or compensation system. Understanding why employees leave and taking prompt action can help improve workforce stability, employee morale, and ultimately, the company's profitability." Sarah Watson, Chief Operating Officer at BPTLAB.

Disregarding high attrition rates can inflict long-term harm on your business. Here are some of the adverse effects to watch out for.

Damaged company reputation

A high attrition rate may be perceived as a red flag to candidates, as employee retention is often associated with the company's reputation. Research reveals that 50% of candidates are unwilling to work for a company with a bad reputation even if they get paid higher. Plus, a high attrition rate can lead to negative reviews from previous employees, which can further put your company in a bad light. 

Increased recruitment costs and training

According to Gallup, replacing an individual employee can cost the company around one-half to two times the employee's annual salary. This includes expenses on the recruitment process until training the new hires.

If you have a high attrition rate, you'll spend most of your funds looking for a replacement. You will also be training new hires all over again, which can be counterproductive as the funds can be utilized on the company's growth, such as upskilling your current valuable employees, allocating promotional efforts, or taking your business to the next level.

Loss of company knowledge

With high attrition rates, even if your company has a well-established and thorough handover process, collecting everything an employee has learned during their time with the company is impossible.

Lower employee morale  

The more frequently the current employees see their colleagues leaving the organization, the more it can affect their morale. Constant resignations raise concerns about the company's performance and lead employees to seek other opportunities outside the company. When the cycle continues, it can significantly impact your company in the long run.

Disrupted business workflow and continuity  

When an employee leaves the company, it disrupts the system built by the team, slowing down the company's progress. This is because constant rehiring due to employee attrition can take a toll on workflow management. Once you get new hires onboard, they will need more time and effort to learn the processes and develop competencies and knowledge to adapt to the current workplace system. 

Limited potential for human resources managers 

When your organization suffers from a high attrition rate, human resources managers spend so much time recruiting replacements. As a result, they wouldn't have enough time to create more employee-focused initiatives for professional growth and career development, contributing to even higher attrition rates. 

Monitoring your company's attrition rates is vital to prepare your strategy in case of an uptick in employee resignations. This way, you can better manage the possible effects of a high attrition rate and determine solutions from the get-go. 

💡 Keeping a steady attrition rate for your company is vital to your company's success. Check out these helpful tips on how to reduce employee attrition. 

➡️ Reduce your organization's attrition rate with Zavvy

Monitoring your company's attrition rate is a must to unlock the secrets to a happy and engaged workforce! 

If your attrition rate is soaring, it's high time you implemented strategies to ensure employee satisfaction and retention. 

While employee attrition can be beyond your control, that doesn't mean you're powerless! 

With Zavvy, you can proactively address the root causes of attrition by nurturing and developing your employees' potential.

Our comprehensive platform empowers you to streamline onboarding, personalize development plans, and create engaging learning experiences. 

By investing in your employees' growth and well-being, you can build a workforce that is committed, engaged, and ready to take your organization to new heights.

Don't let attrition take the driver's seat in your organization. Reduce the risk of high attrition rates and keep your top talent engaged and motivated with Zavvy. 

📅 Request a demo now and start unlocking the full potential of your workforce.

❓ FAQs

What does a 20% attrition rate mean?

A 20% attrition rate is different for each industry. Let's say you manage a company with over 200 employees annually. In the same year, 40 employees left. The result would be the following:

Annual Attrition Rate = (No. of departed employees/ No. of total employees) x 100 Annual Attrition Rate = (40/200) x 100 Annual Attrition Rate = (0.2) x 100 Annual Attrition Rate = 20%.

So, for a company size of 200 employees, around 40 resigned employees will result in a 20% attrition rate. 

Is 10% attrition high?

While a good attrition rate varies per industry, maintaining a 10% or lower attrition rate is ideal for managing the effects of employee attrition.

Which Big 4 has the highest attrition rate?

Data from the Workplace Gender Equality Agency revealed that consulting giant EY experienced a significant wave of departures, with more than one in three staff members, totaling 2700 workers, resigning from 2021 to 2022. This attrition rate surpassed those of its big four rivals, Deloitte, KPMG, and PwC, and the overall business average, where one in four employees left the company during the same period.

Is a high attrition rate always a bad thing?

Not necessarily. While a high attrition rate means there is frequency among your employees deciding to leave or getting dismissed, an ideal rate may vary per industry. A general rule is maintaining a 10% attrition rate at most.