Find out the meaning of attrition rate and an example formula used to calculate the rate.
Employee attrition rate is the percentage of employees who has left an organization over a certain period. It includes those employees who left voluntarily and involuntarily. Another employee attrition rate definition is that it is staff’s turnover. It is an indication of the capability of an employer to retain employees. Therefore, organizations need to calculate the attrition rate. Below it is one of the formulas used to calculate the rate.
Calculating the employee attrition rate
Deducing the employee attrition rate is easy. Let’s calculate the rate together by following the steps below.
- Calculate the average number of employees who worked in the organization throughout the year. Add the number of the employees who were present at the beginning of the year and those who were still working in the company at the end of the year. Divide the sum by two. For instance, if a company had 960 employees at the starting of the year and 940 at the end of the year, the average number of employees per year would be 960+940/2= 950
- Next, assess the number of employees who left the company in the year. Do so, by evaluating the previous year’s records. If your organization does not keep records on employees’ attrition, you can calculate the number of staff that left over the year. Assume 100 employees left the company.
- Then, divide the number of staff who left the organization during the year by the average number of employees in that year, to deduce the employee attrition rate. Continuing the example above, the employee attrition rate, in this case, would be 100/950*100=10.5%
Which is healthy attrition rate?
Attracting and retaining outstanding talents can be a challenging venture. This is especially if you do not understand the employee turnover in your company. Whether the employees are leaving to work with your competitors, for career advancement or they are being replaced for poor performance, every business should deal with staff turnover. This brings us to the question of what is healthy vs. unhealthy employee attrition rate.
Average turnover rates differ based on a number of factors such as region, country, field and profession. Economic conditions, politics, and geography also influence the rate. Experts argue that an attrition rate of 10% is healthy and anything beyond that means trouble for the organization. However, whether the rate is healthy or unhealthy depends on the employees who are leaving. For instance, if you are losing most of your top performers, you need to work on your employee retention strategies.