Attrition refers to companies that reduce the size of their workforce by not replacing the employees when they are leaving. It can also be used to describe the shrinkage of the customer base of a company when leaving customers are not replaced by new ones.
What Causes Employee Attrition?
Employee attrition can occur in multiple scenarios such as when organizations are facing financial difficulties or when positions become obsolete.
Employee attrition can occur over a long period of time as the resignation of employees is voluntary.
What Is the Employee Attrition Rate?
Employee attrition rate refers to the measurement of employees who are leaving but not being replaced within a company, over a specific period of time. The employee attrition rate is often expressed in percentage.
Employee attrition rate is not a synonym to employee turnover rate.
How to Calculate Employee Attrition Rate?
The formula to calculate employee attrition rate is:
(Number of employee who left voluntarily ÷ (Number of employee at the beginning of the period + Number of employee at the end ÷ 2)) × 100 = Employee attrition rate
For example, a company has 200 employees at the beginning of the year and 190 employees at the end. During this period, 12 employees left voluntarily. The company has an employee rate attrition of 6.15% ((12 ÷ (200 + 190 ÷ 2)) × 100 = 6.15%).
Why Is Employee Attrition Important?
Employee attrition is important for organizations that are trying to cut their labor costs or to downsize their activities due to a change in their industry, for example.
Employee attrition rate is a metric that helps companies understand how they manage the talent retention in their organization. Organizations need to tread carefully when dealing with a high employee attrition rate because it can have negative impacts on their culture and on the morale of their employees.