This is a common business saying that means that the company’s employees are its most valuable resource. While some people might think this is a cliché, it is actually very true.
No matter what sector you work in, attracting and keeping hold of the best staff is essential for developing a successful company. But your job doesn’t stop at recruiting. You also need to retain those employees.
This all comes down to your corporate culture. How you develop your career, the relationships you have with customers, and the benefits you receive can all affect corporate culture.
The attrition rate formula is a simple calculation. This metric is calculated by dividing the number of team members who have left the business by the average number of employees over the same period.
Employee turnover is a growing concern for companies everywhere.
Employee satisfaction and corporate culture are the most important factors in retaining employees. There are many aspects of corporate culture, such as career development, relationships with co-workers and customers, and benefits packages.
Employee satisfaction is an entirely different beast. The success of the organization largely depends on who is managing it and what type of environment the employees are working in.
If managers are good and the workplace is cooperative and transparent, employees will feel heard and valued. This is one of the best ways to retain employees.
However, many businesses will focus more attention on recruiting new employees rather than retaining the employees they have. This can hurt their attrition rate over time.
It is important to understand how much your employees are leaving and how this affects your company. We believe that monitoring this metric is one of the most important ways to manage human resources.
What is the Attrition Rate?
The attrition rate is the percentage of staff that leave an organization over a specified period. The term “employee turnover” refers to the rate at which employees leave your company. A high turnover rate can be costly and disruptive to your business.
If more people are leaving your company than the average rate, which is 12%-15% per year, it’s something to worry about.
However, the rate at which people leave their jobs varies depending on the company, industry, and even city. The above equation demonstrates an attrition rate that is just barely below the level at which employees would begin to voluntarily leave the company. This should cause you to stop and consider your company policies and how they may be negatively impacting employees.
You want your employee attrition rate to be low because that means your employees are content and support the company’s mission. A high rate of employees leaving indicates issues within the work environment and company culture.
When an employee chooses to leave the company for another opportunity, it can be seen as a shame. A mass exodus of employees is cause for alarm.
An increase in the rate of attrition may be indicative of an issue within the company. Employees might not be happy with management, the business model, or feel like they are being heard.
You should be careful not to make things too simple because there are many things that can affect the attrition rate. Try to identify the main reasons for the figure to make sense of it.
What’s the Difference Between Attrition and Employee Turnover?
These two terms are often used together, but there is a slight difference between the two that is worth noting.
In other words, employee attrition refers to a gradual decrease in the number of employees over time, while turnover refers to a more sudden decrease in the number of employees.
HR teams typically handle turnover by quickly filling gaps in employment. If a company has a problem with attrition, it is more likely to be a long-term issue that can have a negative impact.
If a company has a few employees leave within a short period of time, that is considered a turnover. If a company has a high employee turnover rate, meaning that a lot of employees leave within a year or several years, that would be regarded as attrition.
This is done to avoid the costs associated with recruiting and training new employees to fill those vacancies.” This means that when an employee leaves their position, the company does not immediately replace them in order to save money on the recruiting and training process. Turnover, in contrast, is a more short-term metric.”
What Influences Your Attrition Rate?
There are several factors that can cause a higher internal attrition rate. What are some of the most common types of turnover rates? What do they say about your organization?
Some of the more common types of employee attrition factors and types of attrition include:
- Voluntary resignations. This is the most relevant resignation to consider in your rates of attrition – employees who choose to leave the organization for their reasons. They might be unhappy in their role or not aligned with the company vision, or they may just have been offered a better position somewhere else. Each case will be different here, so you’ll need to use your exit interview carefully to identify the personal reasons for each person, so you can look for more significant trends if there are any. But if you notice a high number of voluntary resignations, that can be cause for concern.
- Necessary layoffs. Sometimes, as a business, you will need to fire employees for a variety of reasons, and this will play into your company’s involuntary attrition rate. Whether it is layoffs due to a budget issue or one based on performance or behavior, it is hard to let an employee go. No one likes to do it, and it can be a long and challenging decision for managers. This step should, of course, always be a last resort after trying various other means of reconciliation, but sometimes – it just needs to be done.
- Redundancy. As a business grows and technology advances, you’re likely to see specific tasks and roles lose their relevancy over time. This is especially pertinent in modern times as automation of all types threatens many jobs currently out there in the market. When an employee becomes redundant, and they are either moved internally or leaves the company altogether, that will affect the employee attrition rate. You shouldn’t worry too much if occasionally someone is let go or moved around internally due to this factor, but if it becomes a big reason behind an increasing attrition rate, you’ll need to look more closely at it.
- Retirement. Employees will retire and leave a company for that inevitable life change at a certain age. Depending on your company’s demographics, this might be a key factor influencing your employee attrition rate. This is an unavoidable fact of doing business; people retire. So this shouldn’t be a concern when it comes to your attrition rate.
- Rapid Growth. On the other side of the equation, it’s worth noting that if you’re rapidly hiring new employees, it can make the employee attrition rate look better when compared to previous periods. Because you have more employees on board, your equation will be slightly skewed because, even if you lost a few people, you gained even more. So, be sure to be careful as to how you measure your attrition rate when you hire a bulk of new employees, so you don’t underestimate your rate of attrition.
Internal attrition. One possible result of this factor is that it can have a positive outcome. Although it may contribute to employee turnover, moving employees around internally can often be beneficial. But if you’re suddenly in charge of a team that’s half the size it used to be, you have some soul searching to do. If your team has been reduced in size due to layoffs, you need to take a good hard look at what your team is doing and how you can change things to be more effective. Attrition that is caused by employees being promoted is a good sign that you are promoting from within and giving employees motivation to work harder and feel appreciated.
Some of the factors that can lead to a high attrition rate are worrying, while others are just natural trends that occur within any organization. When should you be concerned about your attrition rate, and when should you take action?
When Should You Worry About Your Attrition Rate?
This is just a fact: employees will come and go. However, if this becomes a trend, you should investigate your workplace environment.
Some employee turnover is to be expected and is not a cause for concern, while other reasons may be cause for alarm. This is normal behavior for employees. They switch jobs, retire, or are laid off.
You should be concerned if you see an increase in the number of people quitting, being laid off, or being restructured into redundancy. Try to find out what is causing the problem.
When you’re looking at your attrition rate, the main thing you should be looking at is voluntary turnover. Voluntary resignations signal that your employee was not happy with the company at some level.
There are some things that you cannot control, such as relocation, having children, or switching career paths. Although it may be disappointing when employees leave your company for a similar role at another organization, it can be a helpful opportunity to examine your own business.
Did they leave because they were offered a higher salary at another company? Make sure your salary is on par with others in your field. Did they receive a better offer from another company in terms of salary or benefits? You should consider examining your benefits package more closely.
You should learn from employees who resign. If an employee leaves, this provides you with an opportunity to reevaluate your offerings to make sure they are up to par, before more employees leave for the same reason.
It is important to consider demographics when looking at your attrition rate. If there is an increase in the number of people leaving your organization, try to identify which demographic groups are leaving the most.
Surveys show that young workers feel undervalued compared to their older colleagues, leading to a high voluntary resignation rate.
One demographic that is leaving the organization at an alarming rate should be treated with demographic training and diversity management. If you feel like you are being ignored at work, it is important to take this seriously as it may be a sign of a toxic workplace culture.
Is a high attrition rate always a bad thing? The answer to this question depends on your company’s current situation. If your company is going through a lot of changes, then it might not be the best time to implement new software.
Restructuring can be used as a way for companies to renew themselves and get closer to their desired outcomes. If a company has a low rate of employee turnover, they run the risk of becoming stagnant and unadventurous. When a company has the same employees for a long time, it can be difficult for them to grow and innovate.
The company needs to grow by bringing in new, revitalizing Employees, while at the same time, not losing too much talent by letting go of Employees that aren’t helping with growth.
It’s important to understand your company’s attrition rate and what factors may be causing employees to leave. By Identifying these factors, you can take steps to improve morale and reduce your attrition rate.
Why Your Attrition Rate Matters
What is your company’s attrition rate trying to tell you?
Your company’s attrition rate is a better indicator of employee satisfaction than any survey. The level of employee satisfaction is a clear marker of an organization’s success and how content employees are with their work environment.
It is beneficial to keep experienced employees on staff as it is less expensive than hiring and training new staff.
If an employee leaves their job, it can be costly for the employer in terms of time and money to replace them. If you have a lot of turnovers, the cost of that adds up fast.
When an employee leaves a company, they take their knowledge about the company with them. This hurts the company because they have to spend time and resources training someone new.
It can be challenging to teach a new hire everything they need to know about the company, and it can take a long time to become a complete expert on all aspects of the workplace.
The loss of institutional knowledge when an employee leaves is detrimental not only to the company, but also to that employee’s team and closest coworkers. The old employees will have to work harder while the new person is being trained, and that can cause stress for everyone.
Overburdening employees is a significant factor in employee turnover. If an employee leaves, it can create a domino effect of other employees leaving that department or the company.
Having knowledge of your attrition rate is beneficial. It is important to know and keep track of your company’s attrition rate in order to ensure its growth and success.
What are some things you can do to decrease the amount of turnover in your company per year? Let’s talk about it.
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