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What is Employee Attrition and How Does it Impact Staffing?

What is Employee Attrition and How Does it Impact Staffing?

Employee attrition may be tied to staff turnover, but the two are quite different in how they work, how they’re measured, and what they say about the health of an organization. From a basic definition to the types of employee departures that impact the measurement, find out what you need to know about employee attrition.

 

What is Employee Attrition?

Employee attrition is a staffing metric that determines the natural rate of team member departure within a given organization. In these cases, when an employee leaves the company, their position isn’t filled or replaced by a new hire. 

A good attrition rate is typically low, as it indicates that the company is growing by adding new positions or filling vacancies instead of eliminating a position altogether. Meanwhile, a bad attrition rate is typically high.

However, according to Continu, it’s more important to understand the underlying trends associated with attrition than the rate itself. For example, if a company had a very low attrition rate in the first quarter of the year but a much higher rate in the middle two quarters, this could be cause for concern.

 

Differences Between Employee Attrition and Turnover

Attrition calculates the rate of employee departures that aren’t replaced by new hires. It’s typically used to measure a staff’s growth over time. 

On the other hand, staff turnover calculates a company’s rate of replacement when employees depart the organization. Employers use turnover to measure how well they can retain team members over time.

 

How to Calculate Employee Attrition Rate

To calculate employee attrition rate, take the total number of employees who departed in a specified time frame and divide it by the average staff size throughout that same time frame. 

For example, if your company had 26 people leave in 2020, began the year with 238 employees, and ended the year with 214 employees, the employee attrition rate would be calculated as follows:

  • 238 + 214 = 452
  • 452 / 2 = 226
  • 26 / 226 = 11.5%

In this example, the employee attrition rate would be 11.5%.

 

What Types of Employee Departures Impact an Organization’s Attrition Rate?

There are several different types of departures that impact an organization’s attrition rate. These can include:

  • Retirements
  • Deaths
  • Layoffs/downsizing
  • Resignations
  • Illnesses

Attrition can be voluntary and involuntary. For example, an employee who decides to retire would be considered voluntary while layoffs would be considered involuntary.

 

How Can Employers Improve Employee Attrition Rates?

In many ways, employee attrition is a measure of the growth of an organization. As a result, there’s no single solution that will “fix” a high attrition rate. In fact, a higher attrition rate may mean that the company is able to remain financially solvent—e.g., if an employer must downsize to stay in business. 

With this said, employers can streamline certain processes that make their operations more efficient—and possibly improve the growth of their company. These can include:

  1. Adopt an HRIS: With a human resources information system (HRIS), HR professionals can automate many of the most time-consuming, error-prone, and expensive tasks. The best HRIS platforms have onboarding features, an applicant tracking system (ATS), benefits administration, and more—all of which can cut costs that keep businesses viable. 
  2. Focus on Culture: Culture may not be directly tied to the financial output of an organization, but it can impact how effectively employees perform their job duties. Effective cultures can also improve employee retention and productivity. Start by adopting a Culture Guide that reflects the company culture of your organization, then be prepared to adjust when necessary. 
  3. Encourage Employee Development: Oftentimes, employees leave a company for a new role because they want to advance in their careers. Organizations can keep talented teammates on staff by encouraging professional development throughout the year using 1:1 meetings.
  4. Rethink Compensation Strategy: People also leave their existing jobs for better pay. HR should work with leadership to revamp the organization’s approach to employee wages—and even consider adopting a target compensation strategy.

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