Today, we’re talking about employee attrition rates, an important metric that reveals how well (or poorly) an organization retains its talent.
The employee attrition rate reflects workforce stability and speaks volumes about the organization’s culture and efficiency. It’s a must-track metric for organizations aiming to maintain a stable workforce and promote a longer employee lifecycle.
In this article, we’ll break down how to calculate employee attrition rate and share a free employee attrition rate analysis template!
Without further ado, let’s get started!
Table of Contents
What is employee attrition?
Employee attrition happens when an organization’s workforce gradually decreases in a specified time, whether due to voluntary departures, retirements, or involuntary exits.
Unlike employee turnover, which often involves bringing in new hires to fill the gaps, the attrition rate meaning represents those positions that remain unfilled.
Understanding the difference between employee turnover vs. attrition is key, while turnover focuses on replacement, attrition often reflects a more permanent loss of workforce.
Types of employee attrition
An employee may leave their organization due to various reasons and understanding the types of employee attrition is equally important before calculating the attrition rate.
Voluntary Attrition
As the name suggests, voluntary attrition happens when employees choose to leave their organization on their terms. Whether it’s for better job opportunities, personal reasons, or dissatisfaction.
Understanding the reasons behind voluntary attrition offers insights into what might be driving employees away. Keeping an eye on this type of attrition can help organizations identify issues related to low employee engagement and implement necessary changes before these problems escalate.
Involuntary Attrition
Involuntary attrition happens when employees are asked to leave the organization, often due to layoffs, performance issues, or shifts in organizational strategy.
While these decisions can be necessary, they must be approached thoughtfully. High levels of involuntary attrition can weigh heavily on team morale and disrupt productivity.
That’s why it’s so important for organizations to take a closer look at these rates. By doing so, they can find ways to improve, like working on succession planning and investing in employee career development plans. Such precautions prevent involuntary attrition and foster a more supportive and positive workplace where employees feel safe.
Internal Attrition
When an employee moves to a different role or department within their organization that’s regarded as internal attrition.
Internal attrition doesn’t necessarily be a negative term; instead, it can be a good sign, showing that employees see growth opportunities and are eager to advance.
If internal attrition makes up the largest percentage of your general employee attrition rate, it’s a clear sign that your organization should promote individual career development plans, and support career progression to keep top talent in-house.
Retirement-based Attrition
Retirement-based attrition or natural attrition kicks in when employees step away from the workforce to enjoy their golden years.
While this is a natural part of the employment cycle, a sudden wave of retirements can create staffing gaps, once again making proactive succession planning essential.
Demographic-based Attrition
Demographic-specific attrition reveals a harsh truth: organizations may struggle to retain certain groups of employees.
For instance, if employees with disabilities are leaving at high attrition rates, it may signal that the workplace isn’t accommodating their needs, impacting their ability to work safely and productively.
Addressing the challenges faced by different demographics leads to meaningful improvements in employee retention strategies and reduces workforce churn.
How to Calculate Employee Attrition Rate
The employee attrition rate formula is straightforward for understanding workforce stability. The formula is as follows:
Employee Attrition Rate = (Number of Employees Who Left / Average Number of Employees) x 100
How to measure employee attrition rate meaningfully
Although the attrition rate formula is straightforward, measuring it is not just about crunching numbers. It’s about understanding the underlying factors that contribute to workforce changes.
Here’s how to approach this measurement in a meaningful way:
- Use comprehensive data
Break down the data into categories such as voluntary vs. involuntary attrition, departments, or demographics.
- Conduct exit interviews/surveys
Do not miss out on the chance to understand the reason behind departure, especially in voluntary and demographic-based attritions.
Exit interviews and/or surveys help organizations reveal the trends causing departures.
- Analyze trends over time
Keep track of employee attrition rates regularly, this can be monthly, quarterly, or annually, and analyze which trends reoccur or fluctuate within that period.
- Utilize other HR metrics
Employee attrition rate alone is not enough to improve employee experience strategy and lifecycle. Always incorporate HR metrics for retention with performance metrics to have a holistic approach to workforce dynamics.
- Set a competitive benchmark
Compare your attrition rates with industry averages to see where you stand. This contextualizes your data and helps you understand if your rates are high or low compared to similar organizations.
What is a good attrition rate?
According to multiple resources, including SHRM, a good employee attrition rate is generally below 10% and organizations should aim for this target.
This is a short answer to what is an acceptable attrition rate and definitely can serve as a useful starting point. Yet, setting a universal standard for attrition rate is not possible since factors such as global economic conditions and industry-specific dynamics can significantly influence these rates and are subject to change.
What is considered a high attrition rate?
If your rate of attrition is above 10%, it can be regarded as a high attrition rate, indicating that a significant portion of employees is leaving.
What does a high attrition rate mean?
Simply put, a high attrition rate means that an organization is having a tough time keeping its employees around, and this challenge impacts everyone involved.
Let’s get into details and see what causes high attrition and how it affects organizations.
Causes of high attrition
Understanding the causes of high attrition is the first step to prevent the workforce churn and increase staff retention rate.
- Work environment
Not establishing a work environment where employees feel supported and satisfied is among the reasons that cause high attrition. According to Mercer’s 2024 Global Talent Trends, employees seek workplaces that practice employee empowerment and allow them to be their authentic selves.
- Compensation and benefits
In the competitive landscape, a lack of financial stability leads to high attrition and makes up most of voluntary employee and new hire turnover.
Employees today are looking for more than just a monthly paycheck; they seek a long-term financial relationship with their organization in exchange for their labor.
One way to reduce voluntary attrition is to keep up with and even set new industry standards.
- Career development opportunities
Another cause of the high employee attrition rate is the lack of career development opportunities.
To foster a meaningful reciprocal relationship, organizations should offer career development plans and resources that help employees thrive and to help you with it, you can use start by using our employee development plan template!
On the contrary, if employees feel that their organization is not investing in their growth and long-term success, they can turn into disengaged employees, leading to attrition.
- Work-Life Balance
Organizations that push for a high-performance culture without considering work-life balance are setting themselves up for high attrition.
When the pressure is relentless and boundaries blur, employees can quickly show burnout signs and feel undervalued.
Consequences of high employee attrition rates
Attrition can have serious consequences for both organizations and employees, particularly concerning the impact of high employee attrition rates on company culture.
- Increased Costs
When employees leave, organizations face the financial burden of recruiting and training new talent. This covers everything from job postings to onboarding. Such expenses can quickly add up when there is a high employee attrition rate.
- Loss of organizational knowledge
Without proper succession planning and mentorship programs, a high employee attrition rate results in the loss of organizational knowledge. When experienced employees depart, they take with them a wealth of insights, skills, and organizational know-how that cannot easily be replaced.
- Decrease in employee morale
Frequent voluntary and/or involuntary attrition can cause low morale among remaining employees. For example, one employee may feel stressed about the increased workload, while another may feel insecure about their job security.
How to reduce high attrition rates
To reduce the causes of high attrition and avoid the consequences, organizations need to embrace a proactive approach to increase satisfaction and engagement in employees.
Keep in mind that strategies to manage employee attrition aren’t limited to what’s listed below. Every organization has its own unique culture, and taking the time to analyze it can lead to fresh, effective strategies that truly resonate with your team.
1. Listen to employees
Listening to your employees is crucial in developing strategies to prevent turnover. Organizations should aim to understand how their employees feel during their tenure.
Incorporating employee engagement surveys into the workflow is an effective way to gain insights and reduce high attrition rates.
One of the easiest ways to implement this is by utilizing employee engagement software.
Let us introduce you to Teamflect!
At Teamflect, we know how important employee engagement is, and we offer amazing features that help organizations reduce employee attrition rates. So, what are they?
With Teamflect, you can send out all kinds of surveys including exit surveys too! You can choose from our library or create your custom survey and send it within your organization, anonymously or not.
Since Teamflect seamlessly integrates with Microsoft Teams and Outlook, all employees receive an adaptive card that informs them about the survey, which immensely increases the participation rate!
After completion, you get a Power BI report that allows for thorough analysis, helping you spot what needs to be addressed before things escalate.
If you’d like to see all of this in action, schedule a demo with us!
2. Invest in career pathing
Think of career pathing as a roadmap for your team. It’s about aligning their aspirations with the opportunities your organization offers.
When employees understand how they can progress, whether through vertical moves, lateral shifts, or even cross-functional roles, they feel a sense of direction and purpose.
In short, if you invest in your employees’ futures, they’re much more likely to stay and invest in your organization’s success which is a powerful way to tackle high attrition rates.
If this sparks your curiosity about creating career pathing in Teams, dive into the article and enjoy!
3. Be positive and put people first
Having a positive, people centric culture is one of the most cost-effective way to reduce attrition rates. But what does that really mean?
A people-centric culture prioritizes healthy communication, empathy, and respect at every level of the organization. When employees feel valued and heard, they’re more likely to stay engaged and committed to their roles.
Big companies like Google, Microsoft, and Patagonia exemplify this approach, showcasing how a people-centric culture can lead to high employee loyalty and satisfaction!
4. Offer competitive compensation and benefits
To retain talent, make sure your compensation packages are not just good but truly competitive and this goes beyond just a paycheck, think about health insurance, retirement plans, and flexible work arrangements that cater to modern needs and expectations.
Regularly benchmarking your offerings against industry standards can keep you ahead of the curve and reduce employee attrition rates.
Free Employee Attrition Rate Analysis Template
At Teamflect, we’re passionate about sharing insights. Download our employee attrition analysis template to get a clearer view of how your organization is managing turnover!
Wrapping up, keeping track of your employee attrition rates is a must for the continuity of organizational health and success. Building lasting relationships with your team begins with creating a positive workplace where everyone feels supported and satisfied. Let’s make that a priority!
