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What is the Attrition Rate, and how is it calculated?

The attrition rate is defined as a reduction in the workforce induced by retirement or resignation with no plans to replenish or replace the open employment position. Outside of the HR context, the phrase attrition alludes to a loss of strength or a weakening, which is likely why the term has a negative connotation, even when a reduction in employees can result in beneficial outcomes.

Attrition can be costly unless your organisation is appropriately prepared for employees who intend to resign or retire. Your organisation may suffer a loss of productivity, especially if the retiring employee is the only, or one of only a few, experienced employees. In addition to decreased productivity, you risk losing institutional knowledge.

Employees who have been with the firm for a long time understand how it functions and is familiar with its objectives, ethics, and beliefs. Because they are exceptionally informed about company methods, policies, and goals, they are likely to be involved in training new employees.

How is the attrition rate calculated?

Attrition rate formula in HR

A basic formula for measuring your staff attrition rate is dividing the number of full-time employees that leave each month (referred to as “separations”) by the average number of employees and then multiplying that by 100.

The formula is Attrition rate = (No. of separations / Avg. No. of employees) x 100.

What are the various Attrition Rates?

Voluntary attrition:

Voluntary attrition occurs when an employee chooses to leave the organisation on their own them own. It could be for a variety of reasons, including:

– Personal reasons – Returning to school, personal or structural changes within the company

– Professional reasons – Dissatisfaction with current employer

– Internal Attrition – Moving within the company’s teams/departments in search of a better skill fit.

– Demographic-specific attrition – When a specific demographic, such as the elderly, or a specific gender, race, or ethnicity, leaves in large numbers.

Also Read: What makes you unique

Involuntary attrition:

Involuntary attrition is the form of attrition that occurs when an employee retires or is terminated:

– Retirement.

– Employee dismissal or termination

– Death of the employee

Why is the Attrition Rate significant?

Staff turnover can have a detrimental impact on your company’s performance. That is why understanding the status of your attrition rate is crucial. The first influence is felt in the hiring cost.

Institutional knowledge will leave the organisation unless there is a rigorous transfer process. This is because it is incredibly impossible to convey all of an employee’s ability gathered over time. Of course, this is true unless a strategy for next-level succession planning is in place.

Those who work with them will be affected by their leaving. This frequently involves adding extra work to already overworked team members. Their departure may also weaken morale, cause stress, burn out personnel, and negatively impact the company’s overall business success.

When someone quits, the dynamics of a team alter, which can affect the company’s employer brand and value offer (EVP). Recruiters, for example, typically claim that finding new staff is tough when the organisation has a history of high turnover.

What is the distinction between Attrition Rate and Turnover?

Attrition occurs due to a planned exit, such as retirement or personal reasons. Attrition opportunities are typically designed or told in advance. However, they are not filled immediately.

On the other hand, employee turnover arises due to poor employee-company and employee-job fit, as well as inadequate business culture, leadership, and so on. Employee turnover openings are unanticipated since the difficulties are with the company. Company difficulties must address swiftly, and vacancies must fill.

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