Employee attrition is a term used to describe the natural process of employees leaving the workforce.
Attrition can happen for a number of reasons, from employees resigning to redundancies, and even things like retirement can see a workforce reduction.
As attrition is a natural byproduct of the working life of an employee, it might not seem too important - but if attrition rates are too high then that could indicate problems within the organization that are causing high-value employees to move elsewhere.
That is not to say that attrition is completely bad. In fact, some attrition should be welcomed by businesses that want to grow and develop.
In this article, we will look at employee attrition, how it relates to retention and turnover, and why it is an important metric for HR to track. We will look at the different types of attrition and what constitutes a high attrition rate, and then discuss different strategies to reduce attrition.
What is employee attrition rate?
As a metric, employee attrition rate is the measurement of how many employees have left the workforce over a given period of time, and it is usually expressed as a percentage.
If the employee attrition rate is high, there can be many reasons why this is happening - but as it is a longer-term metric it is not as obvious for the business unless it is being specifically measured. For HR, knowing whether attrition is normal or becoming too high is important, especially when it comes to losing talent and risking the strength of the business.
Why is employee attrition rate important?
When too many employees are leaving a business at the same time, there can be pretty severe repercussions - to the effectiveness of the company, the strength of the workforce, and the experience and knowledge of the remaining employees.
Not only does a high attrition rate mean more costs in terms of hiring, especially when employees are leaving voluntarily, but losing a large amount of the longer-term, more experienced and more talented employees can cause a knowledge drain in the department and in the wider business, affecting the bottom line in more ways than one.
It’s not all bad news though, as some attrition can be healthy - removing stagnation and allowing growth through diversity and new ideas.
The four types of employee attrition
Understanding attrition rate is easier when you can see why employees are leaving, and there are four different types of attrition rate that can be measured. Some of these are down to the employee, some are down to the employer, and while some types can be avoidable others cannot - and it is important to be aware of the difference.
Internal attrition is potentially the best type, as it demonstrates that there is internal mobility within your organization, and employees are moving into roles that might be better fitting for them, or they might be developing into leadership positions, for example. Although this is a positive, it is important that their roles are being recruited for, and this can be mitigated with good succession planning.
If a number of people are moving within the company from a specific department, that could indicate that there is something particular happening.
This is the type of attrition that describes when an employee leaves of their own volition. This might be to go to a different organization or for any number of other reasons, and is the most common - and it can point to problems within the organization, especially if a high volume are leaving including top performers.
Employers are the cause of involuntary attrition. This can describe employees that are let go due to misconduct or poor performance, but it also includes company restructuring that can lead to redundancies and location moves, for example.
This is a description of where attrition comes from a specific group of employees that are leading. If there is a large number of women leaving, or older workers, or those from different ethnic backgrounds, it can mean that there are problems within the culture that are not allowing for diversity.
As an addition to demographic-specific attrition, retirement is often an unavoidable part of attrition, and while a couple of people retiring in a year might not be an issue you could have problems if the workforce is older and approaching retirement age at the same time.
Employee attrition vs employee retention
Retention rates are essentially the opposite of attrition rates, but they need to be tracked separately for the best results. High retention usually means low attrition, and retention rates measure how many people stay at a company over a particular period of time.
The reason that they both need to be measured is that they include different numbers in their calculations typically.
Attrition rates will take into account all employees, including new hires, and will also include all types of leavers.
Retention rates tend to exclude new hires (unless they are looking specifically at new hire retention), and they will also not include employees who have left the business involuntarily (ie through redundancy or through termination).
Employee attrition vs employee turnover
Attrition and turnover are sometimes used interchangeably, and while they are both measures of employees leaving a business, they are different in the way the numbers are used.
Turnover is a short-term metric, usually used when someone is quickly hired to replace an outgoing member of staff. Again, turnover is not usually used when discussing some forms of involuntary reasons for leaving, like restructuring and redundancies.
In comparison, attrition describes a longer-term view of staffing, taking into account all the different reasons that employees are leaving. Attrition does include turnover (and the subsequent replacement of staff), but can demonstrate that even after a busy period of hiring a company is still getting smaller according to the attrition rate.
How to calculate employee attrition rate
Calculating employee attrition is a simple equation.
You need to know the average number of employees over the period that you are considering, whether that is a quarter, a year, or any other period of time.
You also need to know how many employees left for any reason over the same period.
Then, you simply need to divide the number of departures by the average number of employees and multiply the answer by 100.
A company started the financial year with 1000 employees, and made 200 hires over that time. In the same period, 400 employees left.
Average Number of Employees: The calculation would be 1000 (number at the start) + 800 (number at the end) /2 = 900.
400 / 900 x 100 = 44.4%
The attrition rate at this company is 44.4%.
If the company lost 200 employees and hired 400, their attrition rate would be
1000 + 1200 / 2 = 1100
200 / 1100 x 100 = 18.2%
The attrition rate at the company would be 18.2%
What is a high employee attrition rate?
Attrition rate does not have a ‘one-size-fits-all’ answer to what constitutes a high employee attrition rate. It is down to a number of different criteria as to what is too high, and that can be different across companies and across industries.
However, this isn't useful when you are considering the attrition rate at your company; so it is worth bearing in mind that the benchmark for a high attrition rate would be somewhere above 20%.
In the example above, the first company would have a very high attrition rate, while the second would have a more acceptable level of attrition.
The causes of high employee attrition rates
There are many factors that can contribute to high employee attrition rates. Some of them are unavoidable (such as redundancies, restructuring, and retirement), but others can be mitigated if not avoided completely.
These can include things like a change in personal circumstances, moving house, or having children, and they can also include being offered a better opportunity elsewhere.
Employees might feel that they have no opportunities for growth or development, or they might not be experiencing a good fit with the role they are doing.
These causes might work in combination with each other and with the more personal causes that might tempt an employee to quit the company.
These can be company-wide issues like low pay and lack of benefits, or they can be to do with poor leadership, a lack of recognition or feedback and a stressful or toxic culture.
What is a good employee attrition rate?
Similarly, a ‘good’ attrition rate is also hard to define, but the averages suggest that it is about 10% or so.
It is described as a good rate because not only is some attrition natural, it is also desirable - it can have benefits to the business.
Firstly, some of the employees that might be leaving, whether voluntarily or involuntarily, are likely to be poor performers. This not only removes the ‘dead wright’ but offers the opportunity to get high-performing talent in the role instead. It also helps reduce the risk of poor job fit - whether the employee in question moves internally to a position that is more suitable or leaves entirely.
Another benefit to attrition is that it can enable better diversity, encouraging new ideas from different backgrounds as the old guard moves on, making the workplace and the culture more dynamic and likely to be more innovative too.
It is also worth mentioning that when it comes to mergers, structural changes, or a focus pivot for the business, attrition will have to happen in positions that no longer align with the aims of the business. Some staff might be willing to relocate or train for a new position, but it is inevitable that some will have to be let go.
How to reduce high employee attrition rates
There are some strategies that your business can employ to help reduce high attrition and ensure that it is only the ‘good’ kind that affects the business. The process needs to start with effective planning from the start - even before hiring a new starter.
Review pay and benefits
Pay and benefit structure is something that is important to get right. Employees want to feel like they are paid well and fairly treated, so you need to make sure that you are offering a comparatively good salary and/or offering excellent benefits.
Checking average salaries for similar roles is a good way to make sure what you are offering is in line.
Make better hires
Choosing the right applicants from a large pool of candidates is not easy, but by using a combination of aptitude, skill, and personality tests the recruitment team can help reduce the risk of a bad hire, especially when it comes to job fit and ability.
The onboarding process should be carefully constructed to give a new hire the best opportunity for success, including all the training and knowledge that they need to hit the ground running and become a high-performing member of the team sooner rather than later.
Communication and feedback
Leadership issues are a big factor when it comes to people leaving an organization, and part of that is a lack of communication and feedback in both directions. Both leaders and employees should be able to make and receive feedback in a constructive way.
Training and development
Good succession planning in a business relies on a structured and thorough training and development plan, and this will also help employees to remain within the business as they can move internally to get a promotion instead of going elsewhere.
A toxic culture causes stress, reduced productivity, and can lead to high attrition rates. While you will be hiring with organizational culture in mind, you will need to assess what the current culture is like and make the necessary changes to improve it.
When an employee leaves, an effective and gentle offboarding system will help the HR team to check whether there are any underlying issues that need to be resolved. Every employee that leaves the business should be offered an exit interview, where they can freely discuss their feelings about the business and why they are leaving.
Opportunity for return
This is especially important for high performers - having the opportunity to come back at a later date. You might not be holding a position open for them, but you can't be sure that they might not come back in another capacity later - perhaps as a consultant, for example.
For the HR team, knowing about the attrition rate of your company will help you make better decisions to improve retention - and that means that the business can grow and develop in a healthy way.
While some attrition is healthy for growth, a high rate can point to problems within the organization that need to be solved for future success.