What is the Attrition Rate?
Simply put, the attrition rate (also known as churn rate) refers to the percentage of your staff that leave your organization over a specified period of time. You might hear this referred to as employee turnover or your turnover rate.
There are so many reasons why people leave their jobs, but if your voluntary attrition rate is higher than the average, which is about 12% to 15% annually, it is cause for concern.
However, attrition rates vary depending on the company, industry, and even city. The attrition rate in the above equation would be just on the brink of a voluntary attrition rate that should make you stop and consider your company policies and how they’re impacting employees.
In most cases, you’re hoping that your employee attrition rate is as low as possible because that shows that your employees are happy and believe in the company’s vision. A high attrition rate indicates issues within the work environment and company culture.
It’s a shame when one employee leaves the company for another opportunity. When employees start leaving the company all at once, it’s a significant cause for concern.
When the rate of attrition starts to rise, it can be a sign of something going wrong internally. Employees might be having bad experiences with management, are unhappy with your business models, or are not feeling heard on an individual level.
All that being said, be wary of oversimplifying things here because there are a number of things that can influence the attrition rate, so you have to do the work to identify what the major contributing factors are in order to make any sense of the figure.
What’s the Difference Between Attrition and Employee Turnover?
These terms are often used interchangeably, but there is a slight difference that is worth noting.
To make it simple, employee attrition is a long-term concept, while turnover refers to more of a short-term issue.
Turnover is usually handled by HR teams, quickly filling gaps in employment. Attrition is more of a long-term issue that can impact a company.
If a company goes through a brief month-long period of losing a few employees, that would be considered a turnover. If over the course of a year or several years, a company loses many employees, that would be regarded as attrition.
According to HR Toolbox, “vacancies left by attrition aren’t immediately filled up. Turnover, in contrast, is a more short-term metric.”
What Influences Your Attrition Rate?
There are a number of different things that can influence whether you have a higher internal attrition rate. We will look at some of the most common and what they might say about your turnover rates.
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 own 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.