Employee attrition rate: what it is and how to manage it

Published: 8 August 2024 | by Natasha K. A. Wiebusch, Brightmine Marketing Content Manager

A recent global Gallup poll found that more than half (52%) of employees are either watching for or actively seeking new opportunities.

Understandably, the prospect of a climbing attrition rate has HR leaders worried. If employee exits are too high, they risk harming continuity, productivity and even the employer brand.

But attrition rates can also be too low. If you have extremely low to no attrition, it could mean your employees aren’t developing into new roles. Not enough attrition can also promote resistance to change and hamper innovation.

To strike the right balance, you need to know what your attrition rate is and what it means for your organisation. And every organisation is unique. In this article, we provide guidance on what an attrition rate is, what it means and how you can manage it.

Attrition rate meaning

According to Subhashini Sharma Tripathi and Reuben Ray, authors of “HR Analytics In-Depth,” the technical definition of employee attrition is to leave the organisation without a replacement. The employee attrition rate is the rate at which employees leave the company within a defined timeframe. An attrition rate is expressed as a percentage.

Types of attrition

There are generally two primary types of attrition:

Voluntary attrition

Voluntary attrition is when an employee chooses to leave the organisation. Common causes of voluntary attrition include:

• Competing offers: The employee accepts a position at another organisation.
• Retirement: The employee decides to retire from their position.

Involuntary attrition

Involuntary attrition is when an employer terminates an employee’s position. Common causes of involuntary attrition include:

• Termination due to redundancy: An organisation find an employee, or multiple employees, redundant.
• Termination with cause: An employer may terminate an employee because of poor performance or misconduct.

Attrition rate vs. turnover rate

HR professionals often use attrition and turnover interchangeably, but they’re slightly different metrics. The main difference between attrition and turnover is that attrition does not account for replacing the exiting employee. Turnover rate, on the other hand, measures the rate at which employees leave positions that the organisation then refills.

Employee turnover and attrition often get confused because they often have similar causes and the same outcome. That is, attrition does not always mean the position will remain empty.

For example, both retirements and redundancy result in attrition. Organisations typically don’t refill positions they’ve found redundant. However, they generally refill positions left open because of retirement.

How to calculate your attrition rate

Calculating your attrition rate is rather simple because you only need three data points:

1. How many employees exited in a given timeframe.
2. Your headcount at the beginning of the timeframe.
3. Your headcount at the conclusion of the timeframe.

Once you have this information, you can run an attrition rate calculation using the attrition rate formula:

Example: running an attrition rate calculation

Let’s say you’d like to know what your attrition rate was in 2023. To do this, you’ll need to follow three simple steps:

Step 1: Retrieve the three key data points you need for your formula.

Assume you discover that you started the year with 1,500 employees and ended it with 1,520. During that time, 100 employees left the company. These facts provide you with the following data points:

• Employees who exited in 2023: 100 employees
• Your headcount at the beginning of 2023: 1,500
• Your headcount at the end of 2023: 1,520

Step 2: Calculate the average size of your workforce in 2023:

Step 3: Plug your average headcount into your attrition rate formula:

According to the above, your attrition rate for 2023 would be 6.62%.

Managing your employee attrition rate

Managing your employee attrition rate is a complex task. First, you’ll need to determine what a good attrition rate is for your organisation.

Find the right attrition rate for your organisation

Many experts say that a good attrition rate is no higher than 10%. Though this is helpful guidance, there is no global perfect attrition rate organisations can target. Instead of focusing on a specific number, it’s more important to understand the causes of attrition in your organisation.

To understand what a good attrition rate is in your own organisation, consider the following questions:

• What types of attrition is my organisation experiencing?
• Why are employees leaving the organisation?
• Does attrition vary among teams, demographics or other employee groups?
• What’s the average attrition rate in our industry?
• What is our reputation in the talent market?

By answering questions that go beyond the number, you can better understand what attrition looks like in your organisation.

Improve retention of key talent

Aside understanding its causes, you want to ensure that you aren’t losing key talent to attrition. Retaining key talent and their contributions helps sustain organisational performance while building its employer brand.

Today, improving employee retention requires more than leading-market salaries. Top talent, particularly Gen Z talent, have broader expectations of their employers and their employee value propositions. Beyond pay, employees want career opportunities, meaningful work, benefits that fit their needs and more.

To help meet these expectations, consider retention efforts for key stages throughout the employee journey. By approaching retention holistically, you can ensure an excellent employee experience for new hires and long-term veterans alike.

Consider the following tips to improve retention at key stages in the employee journey:

1. Recruitment

Find the right talent to build a team with the right skills and values.

Improving key talent retention starts with recruiting the right people for each team. To be successful, recruitment leaders must be able to create qualified talent pools, provide a great first impression and set the right expectations for future team members. As an employer, it’s also important to be transparent about the organisation’s expectations, opportunities and culture.

Recruiting the best candidate for the job also requires safeguards against discrimination. This includes implementing clear policies and processes for resume screening, interviews and other evaluations. It also requires thorough training for everyone involved in the hiring process.

2. Onboarding

Empower talent so that they feel welcome and ready to take on new challenges.

According to a survey by BambooHR, 70% of new hires decide whether they’ll stay with their employer within the first 30 days of work. For employers, this means onboarding may just be the most important factor in improving retention of key talent.

Creating a successful onboarding experience requires clear, consistent processes to support new employees through their first year with the company. A popular framework for building an onboarding journey is Dr. Talya N. Bauer’s 4 C’s of Onboarding. It includes the following four components:

3. Performance

Inspire success to guide your talent towards shared goals.

Inspiring high performance is a continuous effort, and it requires employers to monitor several factors. This includes employee engagement levels, wellbeing, productivity and more. Though there is no silver bullet for performance, leaders can focus on leading practices, such as:

• Setting clear expectations and objectives for employees.
• Supporting employee wellbeing through benefits, flexibility and work-life balance strategies.
• Ensuring employees feel valued and respected.
• Prioritising psychological safety.
• Implementing manager training to ensure they have the right people management and communication skills to coach employees.
• Providing employees work that is meaningful and aligned with their values.
• Offering ample career development opportunities.

4. Development

Nurture growth to provide talent with the skills they need and career opportunities.

Having excellent professional development opportunities leads to notable positive talent outcomes. According to Gartner, organisations that strategically invest in employee development are 11% more profitable and twice as likely to retain employees. With today’s rapidly changing employee skills needs, growth opportunities are even more important.

Employers that do not invest it career development, on the other hand, will risk losing key talent. In a recent study, 25% of employees said they’ll likely quit within the next six months because of the lack of career support from their employees.

According to researchers from MIT, employers need to do more than empower employees to chart their own career path. They instead recommend taking a more active role in their employee’s career development. This includes helping employees search for new internal opportunities and supporting their efforts to prepare for new roles. They also recommend providing employees with coaching and feedback.

5. Reward

Recognise achievements so that employees feel valued and respected.

Rewarding employees helps improve retention by recognising their achievements. Compensation – one of the most common ways of rewarding employees – is usually the number one priority for employees in the job market. It can also be a top reason for leaving. Research from Mckinsey found that it was the second most common reason employees quit their jobs in 2022.

To help retain employees, ensure your compensation is competitive in the market and fair. Even if you can’t pay the highest salary, ensure employees understand the value of their total reward.

Fair pay and retention

You can also improve retention of key talent by ensuring fair compensation. According to research from Gartner, employees who believe their pay is not equitable are less engaged and less likely to stay. Specifically, the study found that they have a 15% lower intent to stay with their employer.

6. Succession

Retain talent contributions to support future leaders.

Finally, it’s important to recognise that you can’t retain employees forever. In some cases, employees will retire – in others, they’ll move up or simply move on to new opportunities. In these instances, the best you can do is retain your exiting employees’ contributions to the organisation. You can achieve this through strategic and purposeful succession planning.

Succession planning involves identifying and preparing employees to take on new leadership roles that will eventually become vacant. Indeed, the focus of succession planning is often on developing a talent pipeline. However, another key objective of this process is to prevent knowledge loss. That is, succession planning helps organisations retain the knowledge the tenured employees developed throughout their careers.

So, while creating a succession plan, in addition to identifying talent to develop into new roles, consider what institutional knowledge you’d like to transfer to those new leaders. To facilitate this, you might consider job shadowing, exit interviews and other strategies to document the employee’s knowledge.

Leverage HR tech

People leave organisations all the time. The key is to understand why so that you can retain key team members and create a company culture that celebrates success. We have tools that can help. Learn more about our HR tech solutions and how they can help you manage your attrition rate and retain top talent.