Attrition Rate: Definition and Calculation
Employee attrition is the reduction of staff without giving importance to replacing them. Which indefinitely increases the turnover rate and costs organizations fortunes. A topic that has been discussed previously, covering all the major topics.
However, in this blog, we will be discussing the attrition rate and its calculation to find out the total percentage of employee attrition within an organization.
What is the Attrition Rate?
The attrition rate, also known as churn rate, can be defined as the rate at which employees leave an organization from a specific group over a particular period of time.
It is one of the effective ways that organizations can decrease high payroll without substantial turnover costs. Gaining better insight about the attrition rate, will increase your chances of retaining well-performing employees and gaining their loyalty towards the organization. An in-depth knowledge about the topic will provide you with the opportunity to assess the areas that have made your employees voluntarily leave the organization.
However, it can negatively impact the organization’s remaining employees in increased workload and reduced morale, leading towards an unhappy workforce with diminished satisfaction levels.
Attrition rate link with customer attrition
When your employees are satisfied with their work, their commitment to providing excellent customer service increases, however, when employees feel that the organization is not the right fit for them, they tend to leave their job leaving behind the incomplete tasks.
Thus, leading to a drop in customer satisfaction levels because you do not have the workforce to heed to their problems. When an organization faces such scenarios, it gives rise to customer attrition where your loyal customers stop purchasing your products and services.
However, the customer attrition rate can be hard to calculate because you do not have the accurate means to keep track of your customers. Lower customer attrition is always ideal for organizations because it will eventually mean that they are satisfied with the products and services, signifying that your employees are doing their best to retain them in the long run.
Calculating Attrition Rate
To calculate the attrition rate, use the following formula where you will need to put the number of attrition divided by the average number of employees, which is then multiplied by 100. Simply put,
To make things easier, we have added an attrition rate calculator so that you can keep check of your organization's attrition percentage
Attrition Rate Calculator
The attrition rate calculation will solely depend on the management and how they want to work on the organizational flaws to improve the bottom line. You can calculate the attrition rate-
To calculate the attrition rate of any given month, you will first need to know the total number of employees of that particular month. After that, you will need to have the total number of employees recruited that month, and finally, you need to have the number of employees left on that particular month.
The percentage which you will get will be the attrition rate of that particular month.
An organization has 100 employees for August 2020. During that month, 10 employees left voluntarily, and the company hired 20 new employees.
Now, calculate the average number of employees of the company where they started with 100 employees. If 10 left and 20 were hired, then the new number will be 110.
Then the average number of employees for that particular month will be (100+110/2)=105.
In this step, apply the attrition rate formula since we have the number of employees that left the organization and the average number of employees. Upon placing the numbers in the formula, we will get the attrition rate.
10/105 * 100=9.52
Hence, the organization has an attrition rate of 9.52% for August.
For the quarterly calculation of the attrition rate, you will use the same formula. However, instead of one-month data, organizations will be using the quarterly data to find out the attrition.
Let us take the third quarter of the calendar year, which consists of July, August, September.
At the start of July, the number of employees was 150. Over this period, 20 employees left, and you hired 30. Therefore, the number of employees at the ending of the quarter will be 150-20+30= 160.
The average number of employees for the third quarter will be (150+160)/2=155.
Therefore, the attrition rate for the third quarter will be,
20/155 * 100=12.90
Hence, the organization has an attrition rate of 12.90% for the third quarter of the calendar year.
Yearly calculation of the attrition rate requires the same formula as you did for the monthly and quarterly attrition calculation. However, instead of using the monthly or quarterly data, you will be using the organization’s annual data.
Suppose an organization started the year with 200 employees. Over the whole course of the year, 40 employees left the organization and 50 new hires.
The number of employees at the end of the year will be 200-40+50=210.
Average number of employees for the year will be (200+210)/2=205.
Therefore, the attrition rate for the whole year will be,
40/205 * 100=19.51
Hence, the organization has an attrition rate of 19.51% for the whole year.
Key Takeaways from the three scenarios discussed above-
The attrition rate of all the examples discussed above is relatively high. The first scenario has the lowest attrition rate, the second scenario with a moderate attrition rate, and the third scenario having the highest attrition rate.
Attrition rates are subjective, depending upon the performance levels of employees. If the leaving employees were below par performers, we could say that the attrition rate was positive. However, if the leaving employees were good performers, we can term it a negative attrition rate.
With the percentage of attrition, the management can quickly figure out things that need to change internally to reduce the attrition rate.
A higher attrition rate can significantly damage an organization’s branding, leading to revenue loss and key employees.
Although each calculation’s time frame is different, however, the concept of attrition is the same and can be applied to improve the organization for a better future.
Summing it Up
The calculation of the rate of attrition will solely depend on the employees that have left the organization. And it is upon the management to look after the root cause because of which the employees are leaving.
The main aim should be to minimize the attrition of the organization so that turnover costs can be reduced and employees can be retained for a longer period. Which will further help the organization’s bottom line in the long run.