Attrition

Learn the ins and outs of employee attrition, its causes, calculation, and strategies for managing it effectively within your organisation.Attrition – the gradual loss of employees from an organisation – is a natural part of the business cycle. While often viewed as a challenge, attrition can be leveraged as a strategic tool for growth and renewal.

What is Attrition in Business?

In the context of HR, attrition refers to the gradual and often natural reduction in the size of a company's workforce. This happens when employees leave the organisation due to various reasons (retirement, resignation, relocation, etc.) and are not immediately or intentionally replaced. Unlike layoffs, which are typically sudden and deliberate workforce reductions, attrition is generally a slower process.

Attrition is a natural part of any business, but high attrition rates can be problematic, leading to increased costs, decreased productivity, and the loss of valuable institutional knowledge.

Employee attrition is different from employee turnover in the sense that turnover accounts for employees leaving the organisation voluntarily and involuntarily. Learn more about Employee Turnover here. 

A Note on Customer Attrition: In some cases, HR professionals might also use the term "attrition" to describe the loss of customers or clients over time. While this article primarily focuses on employee attrition, the principles of understanding and managing attrition can apply in both contexts.

Common Reasons for Employee Attrition

Understanding why employees leave is crucial for addressing attrition. As employee attrition is a natural occurrence, in most cases, it’s because of resignation, retirement, or relocation. In the context of resignation, common reasons include:

• Poor compensation and benefits: Employees may feel undervalued if their pay and benefits aren't competitive.
• Lack of career development: Limited opportunities for growth can lead to stagnation and dissatisfaction.
• Work-life imbalance: Excessive workloads or inflexible schedules can cause burnout.
• Negative workplace culture: A toxic environment, poor management, or lack of recognition can drive employees away.
• Personal reasons: Employees might leave due to family issues, health concerns, or a desire for a change.

What is an Employee Attrition Rate?

The employee attrition rate is a metric used to measure the rate at which employees leave a company over a specific period. It helps organisations gauge the health of their workforce and identify potential areas of improvement.

How Do You Calculate Employee Attrition Rate?

To calculate the employee attrition rate, follow these steps:

1. Determine the Time Frame: Choose the period for which you want to calculate the rate (e.g., monthly, quarterly, annually). Usually, it’s annually. 
2. Count the Number of Employees Who Left: Include all employees who left during the specified timeframe voluntarily.
3. Calculate the Average Number of Employees: Find the average number of employees you had during the timeframe. You can do this by adding the number of employees at the beginning and end of the period and dividing by two.
4. Apply the Formula:

Attrition Rate = (Number of Employees Who Left / Average Number of Employees) x 100

For example:

In a year, the number of employees who left voluntarily is 8. At the start of the year, you had 110 employees; at the end, you had 102. This means that the average employee in that year is 106 (110+102=212/2). 

Using our formula, the attrition rate is: 

• 8/106=0.075x100
• 0.075x100
• 7.5%

Most companies want their attrition rate to be 10% or less, however, please remember that the average attrition rate depends on several factors, like the location and industry. 

Tips to Ensure Your Organisation Benefits from Attrition

In most cases, employees leaving voluntarily especially at low rates means your organisation is in a good place. However, if your HR team identifies a particularly high or sudden attrition, there might be some problems that need addressing. 

Here are some tips to ensure that attrition benefits your organisation:

See Opportunities for Restructuring: Attrition can provide a chance to re-evaluate roles and responsibilities within teams. This can lead to streamlining processes, eliminating redundant positions, and redistributing tasks more efficiently.

Have a Solid Offboarding Policy in Place: Part of an effective offboarding is identifying why the employee is leaving. From their responses or feedback (as well as your observation), you may pinpoint areas to improve (eg. better compensation, career path planning, etc)

Check Your Screening Procedures: Are the low-performing employees leaving? Perhaps you need to have a more effective background check process to hire the suitable candidates. 

Proactively Plan the Workforce: By anticipating and tracking attrition trends, HR professionals can plan for potential vacancies and align recruitment strategies accordingly.

Check Opportunities for Internal Mobility: Encourage internal transfers and promotions to fill vacancies. This can boost morale, retain institutional knowledge, and provide growth opportunities for current employees.

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