Employee Exit

Understanding your Company's Attrition Rate

Put simply, your Company Attrition Rate is the percentage of your people that leave over a given period. A high attrition rate means that people aren't sticking around very long for whatever reason.

11/18/2021

Put simply, your Company Attrition Rate is the percentage of your people that leave over a given period. A high attrition rate means that people aren't sticking around very long for whatever reason. A low one means that your employees are staying with your organisation which is typically a good thing.

A company's attrition rate is typically expressed for a given year. E.g. ACME had an attrition rate of 7% for 2020. This means that 7% of all the staff working at ACME left during 2020.

How to calculate it with an example

Attrition rate = (number of leavers / number of employees) * 100

Example: ACME had 500 staff at the end of 2020 and 40 left during 2020.

(40 / 500) * 100 = 8%

We can thus say that 8% of ACME's staff left during 2020 in this example.

Understanding the types of Attrition Rates

There are many ways of expressing attrition. You filter the leavers and the whole company across any demographic like gender, for instance.

An example for the Female Attrition Rate for ACME would be: 24 of the 40 leavers for 2020 were women and the total number of women on staff was 240 of the 500 total as of the end of 2020.

(24 / 240) * 100 = 10%

What the above is telling us is that 10% of females left during 2020 versus 8% for the whole company. Why are women leaving faster than men? This would be something for the leadership team to pursue.

Another key way to look at attrition is by looking at voluntary versus involuntary attrition.

  • Voluntary Attrition - When an employee chooses to leave.
  • Involuntary Attrition - When an employee is dismissed.

Both forms of attrition are bad but their interpretation is different. If your involuntary attrition is high then it typically means that those hires were a bad fit for your company. You need to fix whatever is broken in your hiring for that. This attrition is costing you valuable resources.

Yes, there are some reasons for involuntary attrition to be ok. A common one would be changing business needs where an employee can't add value anymore and can't be repositioned within the business despite best efforts.

Voluntary attrition is also bad. This means that you're spending resources hiring and training people and they choose to leave causing those resources to be wasted. Those employees are also walking out of the door with vital business knowledge that is often challenging to transfer internally.

How high is too high?

Before you fall into a state of total panic, bear in mind that it's impossible to reduce attrition to zero. It's the job of all leaders to play their part in hiring well and retaining employees well. This will keep your attrition down.

That said, when SHOULD one worry? That depends on your industry and the trends impacting it as it can vary wildly.

Statista shows here that the rate for the Professional Services sector was 11.6% in 2020 but 8.9% in 2014. Another survey by XpertHR found that Sales and Marketing staff in the UK had an attrition rate of 31% in 2019.

So you'd need to benchmark against your industry and potentially even on particular roles. You might find that your software developers have a noticeably higher attrition rate than the rest of your company but it still might be close to the global average for those roles.

You could also benchmark against yourself! Measure your attrition rate in one year and try to beat it in subsequent years.

Reasons that people leave

People rarely leave because of something that happened recently. Their decision to leave is typically the outcome of their total experience over the preceding months or years. Every interaction between them and your company is what we call Employee Experience. It includes every performance review, payroll run, leave request, company communication, manager feedback (or lack thereof!) and so much more.

The people who are best suited to tell you why your attrition rate is high are, you guessed it, your employees. If company trust and maturity are high, you should be able to ask them directly. If not, you can use tools like anonymous surveys to get feedback from them on various topics.

This is something that our Engagement Platform does really well. We have a free forever starter plan for you to check out here. It comes preloaded with questions and allows you to automate regular Pulse Surveys.

Alternatively, we've written articles on how to run manual surveys using Google Forms or Survey Monkey so check them out.

Some common themes to keep an eye on are:

  • Remuneration: Are you paying in line with the market? Are you properly reviewing salaries as staff develop and grow their skills?
  • Belonging: A new theme we're seeing is that employees are looking for a sense of belonging within an organisation. Do the mission and work resonate with them? Do they fit in well with their peers?
  • Mental Health: Another COVID theme is that everyone is overworked and straining from external pressures. Employees eventually leave for the sake of their mental health. Could your company be doing better to support them?

What to do when they leave

A powerful tool that can drill into why people are leaving is the exit interview. Well performed, this could really provide insight into why each of those employees left and help you understand larger trends.

It's also very important to allow the employee to leave on good terms. This will protect your employer brand as that employee is going out into the wild and will take their opinion of you with them.

Start now and have patience

The reality is that even if you start now, you're only going to see your attrition rate move in 6-12 months. It takes time to improve the Employee Experience and thus motivate people to stay longer. The best advice I can give is to start measuring it now and start collecting feedback from your people on how to improve.


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WRITTEN BY
JP Olivier
Co-Founder of Roslin, chartered accountant, self-taught coder, entrepreneur and investor. JP loves working with technology and is passionate about good management and leadership. He is active on Linkedin and Twitter.