What is the attrition rate?

Let’s begin by answering the question: What does attrition rate mean?

Your mind might instantly go to your customer attrition rate. This is the figure that expresses how many of your customers are no longer buying from you.

However, calculating the rate of attrition is also essential in another sphere of your business — your employees. In this context, the expression “attrition rate” simply defines a calculation that measures, usually as a percentage, how many people leave a company.

Attrition is not the same as turnover. Let’s explain why.

What is an employee attrition rate?

Attrition in the workplace happens when employees leave a company, whether voluntarily or not, and the company chooses not to replace them, leaving a range of job roles vacant for a potentially long time or eliminating those positions.

Attrition vs. retention

Before outlining the main differences between attrition and turnover, let’s look at attrition vs. another crucial employee-related metric: retention.

Attrition and retention are almost two sides of a coin. Attrition focuses on how many employees have left the company within a specific timeframe. Retention shows how many have stayed with the company within that same timeframe.

Calculating both rates can help when analyzing employee loyalty, satisfaction, and performance, as well as pinpoint any potentially problematic aspects like discontent related to unsatisfactory pay, working arrangements, or even company culture.

Usually, a healthy work environment will have low attrition rates and high retention rates.

Attrition vs. turnover

Attrition and turnover can be easily confused, as they both measure how many people have left a company over a particular time. Nonetheless, there are some subtle but important differences to account for.

With turnover, the focus is not just on employees leaving. It’s also about new employees replacing them and filling those vacant positions quickly.

On the other hand, attrition tends to be related to more strategic decisions not to replace lost employees and potentially remove those job roles from the company.

Attrition, therefore, results in a company’s workforce decreasing, whereas turnover usually doesn’t.

Types of attrition

Before calculating your rates of attrition, it’s essential to understand the different types you might be dealing with. Let’s take a closer look.

• Voluntary attrition: This happens when an employee leaves their job voluntarily as opposed to being laid off or made redundant.

• Involuntary attrition: This occurs when the decision to remove a person from their job comes from the company, not the employee. The reasons can be several, including restructuring, economic issues, or the employee’s performance.

• Internal attrition: When an employee leaves their position or department to take on a different one within the same company, internal attrition occurs.

• Demographic-specific attrition: This type of attrition is when many people belonging to a specific demographic (e.g., gender, age group, or ethnicity) leave the company. This pattern should be investigated, as it can sometimes reveal deeper problems with the company.

• Retirement attrition: This is when a person leaves the company due to retirement.

Which types of employee attrition are worst?

While all types of attrition can become problematic if the rates go above a particular threshold (as we will soon discuss), two of them tend to be more worrying than others — namely, voluntary and demographic attrition.

When due to things like unsatisfactory pay, lack of growth and progress opportunities, or other similar factors, voluntary attrition can point to deeply rooted issues that should be looked at carefully.

Similarly, the reasons behind demographic-related attrition should be meticulously determined and analyzed. For example, if they uncover a company culture or patterns of behavior that point to sexual, racial, or age-related harassment, they should be immediately discussed to find a resolution.

Why are employee attrition rates important?

Calculating employee attrition rates is important as it can unlock precious insights into your workforce and the overall health of your company.

Generally speaking, a low percentage of attrition is normal and unproblematic for most companies. But when numbers rise or specific patterns emerge, then it’s time for your company to take action.

When left unattended or neglected, high attrition rates can generate a range of problems, including:

• Increased hiring costs: Even though a company might not immediately replace the lost employee, its HR team might still need to go through processes and procedures and spend more time, money, and other resources on things like staff retention, training, and engagement.

• Lost expertise: With every employee that leaves, there’s a chance a specific skill set or know-how may be gone, too, and might be difficult to replace.

• Company culture erosion: Company culture plays a fundamental part in the overall employee experience, and a constant churn of employees can seriously chip away at its solidity and cohesiveness.

• Trickle-down burnout: If a company chooses not to replace a person who’s left, then who will take on the extra work? Usually, the employees who remain. This additional workload can cause stress, poor performance, and even burnout when not managed correctly.

What do employee attrition rates say about your business?

You might be running the best tech tools around, have all the CRM integrations you need, and serve a large customer base, but what if your employee attrition rates are higher than average? That’s a red flag that you should be paying close attention to.

If your attrition rates are high, or if they have seen a recent spike, it might mean that:

• Your employees are unhappy (with their pay, working arrangements, the company culture, or anything else)

• Your company’s performance suffers

• Your employee loyalty and engagement plummet

Of course, low or decreased attrition rates point to the opposite: a solid company culture, happy and loyal employees, and a healthy, well-performing business.

Why track attrition metrics?

As with every employee-related metric, tracking employee attrition rates can help you discover a range of important aspects of your company. Are your employees happy? Do they feel supported by you? Is the company culture one that promotes diversity, open-mindedness, and respect?

Once you’ve answered these and many more questions, your HR team can then work on implementing any strategic changes or suggest different ways to do things, including hiring, training, and nurturing people to ensure they stay with the company for as long as possible.

How to calculate attrition rate

Now that we have examined attrition rate in detail, let’s look at how to calculate it for your company. Here is the attrition rate formula:

Employee attrition rate = Number of employees who left during a specific timeframe / Average number of employees who were working during that same timeframe x 100

For example, imagine your company employs 100 employees, and 5 of them left in the past 12 months. Using the attrition rate formula above, you can calculate that your attrition rate was 5%, which is a low number and shouldn’t point to any particular issues within your business.

What is a high attrition rate?

In the example above, we said that a 5% attrition rate is low, which is good news for any company. What is, then, a high attrition rate?

While there is no average attrition rate, anything below 10% is usually desirable. Of course, as with anything else, this figure should be put into the context of the company’s size, industry, and location, as all these elements can play significant roles when it comes to employee attrition.

Top causes of high attrition rates

Now that you are more familiar with the attrition rate calculation, let’s discover the main factors causing attrition in the first place.

Pay

One of the main culprits for attrition is, unsurprisingly, compensation. If an employee feels that they are not paid adequately, or if their pay has not increased over several years, then this can cause frustration and dissatisfaction, which, in turn, can contribute to the employee’s decision to leave the company.

But there’s more to low wages than simply earning less money. Often, employees can perceive sub-par salaries as unfair, and they can feel undervalued or underappreciated for their work. Ultimately, these feelings can lead the person to look elsewhere for a better, higher salary with a company that truly sees their worth and is happy to compensate accordingly.

Stress

Burnout can be a consequence of high attrition rate. But, it can also be the very cause of attrition in the first place.

Work-related stress, anxiety, and other mental health issues can indeed cause an employee to consider leaving their job if they deem that’s what’s generating all those problems.

Whether it’s due to an excessive amount of work, mistreatment by peers and superiors, lack of work-life balance, or anything else, stress can be a slippery slope to burnout, which can result in employees leaving the company.

Company culture

A company culture that promotes diversity, inclusivity, engagement, empowerment, open-mindedness, and flexibility is a winning culture, regardless of the type of business, size, industry, and location.

Therefore, when the company culture doesn’t tick the boxes that most employees are looking for, it can cause people to leave in search of better opportunities that most closely align with their values and expectations.

A toxic, negative company culture, though, is not just one in which harassment and disrespect are rife. It can also start with simpler, day-to-day things, such as not providing training on a new real-time guidance tool or ignoring employees’ requests to consider flexible working arrangements.

Growth and development

Another factor that often contributes to high attrition rates is a lack of future prospects for employees. If someone joins a company as a junior member of staff and, after five years, they haven’t moved on from that role or acquired any new skills, this can become problematic.

Ensuring that your company offers plenty of growth and development opportunities to all its employees is a must to avoid people getting increasingly unhappy and frustrated, and ultimately leaving you for good.

Remember to always provide lots of support, training, guidance, and learning opportunities — whether it be by training your new team members on how to make the most of your intelligent routing solution, sponsoring mentorship programs or higher-education courses, or anything else along these lines.

How to reduce high attrition rates

If you’ve realized that your company’s attrition rates are high — or higher than you’d like them to be — there are many steps you can take to decrease them and build a more positive, welcoming, and empowering environment that people love to work in. Let’s look at a few of them. 

1. Plan for varied employment

No two employees’ needs and expectations are the same, because no two employees’ lives are the same. Consider, then, offering a varied range of working arrangements that take into consideration the differing requirements of your diverse workforce.

Some people, for example, might have caring responsibilities at home, while others with disabilities might struggle to travel to the office every single day. Offering options such as remote or hybrid work, alongside arrangements such as part-time and freelance contracts, can help.

2. Boost your retention rate

It’s easier said than done, but there are things you can do to improve retention in the workplace. For instance, why not offer more competitive benefits or compensation packages, as well as growth and development opportunities?

Many things can boost employee morale, satisfaction, and happiness, leading to higher retention. It’s just a case of figuring out what works for your particular situation and what matters for your employees.

3. Create a respectful and supportive exit experience

When an employee departs, it’s vital to give them the chance to discuss their decision in detail with either their line manager or the company owner, or both.

During this meeting, the so-called “exit interview,” you may become aware of particular issues with your company and can use these insights to nurture your employees and prevent other people from leaving.

A respectful and supportive exit experience can also leave such a positive impression on your departing staff member that they might recommend your company to other talented candidates, or they might choose to return to you and take their role back.

4. Maintain pathways for returning talent

When an employee leaves, particularly if they were a very talented one, and if their decision was unexpected and came as a bit of a shock, you might start to wonder whether they might, one day, come back.

When this happens, such employees are called “boomerang employees.” To make the transition back into their role easier and smoother, work with your HR team to build specific policies and pathways that make returning employees feel welcome and valued.

Is employee churn always negative?

Unless you’re currently dealing with unusually high rates of attrition, then the answer to this question is simply “No.” Both turnover and attrition are part and parcel of running and managing a business, and they’re both very normal events that we should expect from time to time.

Some cases, especially those related to internal turnover and attrition, can actually point to a positive trajectory for your company, as some of your most talented employees move on to more valuable and rewarding positions within your company.

Staff attrition: Best practices for when employees leave

Despite your best efforts, sometimes employees’ choices are out of your hands, and that’s to be expected. What can you do, then, when one of your team members breaks the news that they’re going to leave? Let’s take a look at some best practices to implement.

Conduct exit interviews

One of the biggest mistakes you could make when any employee leaves is not running a thorough exit interview. These meetings are incredibly valuable opportunities to unearth potentially endemic issues within your company and to become more proactive when designing recruitment, training, and retention strategies.

Offboard with dignity

Regardless of their reason to leave, every employee deserves a smooth, stress-free, and dignified send-off. You never know, that same person who’s now leaving might be so impressed with your offboarding process that they might become a brand ambassador — or even a boomerang candidate.

Knowledge transfer

When a particularly talented person leaves the company, you must implement strategies to ensure their expertise and skills don’t depart with them, too. Consider shadowing, mentoring, training, and in-depth internal resources and knowledge bases that remaining employees can leverage to access, learn, and refine those skills.

Recognize and reduce your company’s attrition rate

Understanding the importance of employee attrition rates is crucial when spotting problems with your company and taking proactive measures to fix them.

If your company is experiencing high attrition, then Vonage can help. With AI-powered tools like Vonage Contact Center, for example, Vonage can support businesses in the creation of more efficient, flexible, and nurturing work environments, particularly in customer-facing roles.

In addition, Vonage CRM integrations simplify workflows, while analytics and coaching features support employee growth and recognition. Altogether, Vonage empowers professionals with the tools and flexibility they need to stay engaged, satisfied, and committed.

Contact us today to find out more about how we can help your company thrive.