Definition of Attrition Rate

A common Attrition Rate (Churn Rate) definition refers to an employee or staff turnover, but in a broader sense, the attrition rate is a calculation of the number of individuals or items that vacate or move out of a larger, collective group over a specified time frame.

Computing your organization’s employees attrition rate enables you to decide the level of workers that left your business over a predefined timeframe, typically one year. Attrition rate incorporates all representatives who leave the organization, regardless of whether the leaving was deliberately and automatically.

Types of Attrition:

  1. Good Attrition – When less productive employee leaves organization automatically
  2. Bad Attrition – When high productive or an employee who is a performer leaves the organization
  3. Market Driven Attrition – Influenced by Market changes
  4. Process Driven Attrition – When employee leaves organization because of current systems

As such there is no specific formula for calculating employees attrition rate, best formula to calculate attrition rate is:

((No. Of Attritions x 100) / (Actual Employees + New Joined)) /100.



Examples:

1) Actual Employees  (Opening Bal.): 150

    No. Of People left (Attritions):* 20

    No. Of Joined :* 25

    Total Employees (Current Headcount):* 155

    So according to the formula: ((20 x 100) / (150 + 25)) / 100

    Which comes to 0.1142 i.e. 11%

    Now as you had 150 previously and now 25 joined so it makes 150 + 25

    =175

    Now if you calculate 11.42% of 175 i.e. 175 x 0.1142 = 20

    Shows that 175 – 20 = 155, which is your current headcount and at the

    Same time you can say my attrition is 11.42% that shows you lost 20

    Employees of 150 and 25 more joined which makes count to 175.

2) Actual Employees (Opening BAL) :* 100

    No. Of people left (Attritions) :* 50

    No. Of Joined:*  0

    Total Employees (Current Headcount):* 50

    This is the special case where we are considering attritions only keeping in

    mind that nobody has joined in a particular month.

    So according to the formula: ((50 x 100) / (100)) / 100*

    Which comes to 0.5 i.e. 50%

    Now as you had 100 previously and now 0 joined so it makes 100 + 0 =100

    Now if you calculate 50% of 100 i.e. 100 x 0.5 = 50

    Which clearly shows that 100 – 50 = 50, which is your current headcount

    and at the same time, you can say my attrition is 50% that shows you lost

    50 employees of 100 and 0 joined which makes count to 50.

3) Actual Employees (Opening BAL):* 500

    No. Of people left (Attritions) :* 200

    No. Of Joined:* 100

    Total Employees (Current Headcount):*  400

     So according to the formula: ((200 x 100) / (500 +100)) / 100*

    Which comes to 0.3333 i.e. 33.33%

    Now as you had 500 previously and now 100 joined so it makes 500 + 100

    =600

    Now if you calculate 33.33% of 600 i.e. 600 x 0.3333 = 200

    Which clearly shows that 600 – 200 = 400, which is your current headcount

    and at the same time you can say my attrition is 33.33% that shows you

    lost 200 employees of 500 and 100 more joined which makes count to 400.

Effect of High Attrition Rate:

  • High Recruitment cost
  • Loss of knowledge and expertise
  • Low productivity
  • Give negative impact to other team members.

While turnover rates vary by industry, high turnover usually suggests a problem with employee engagement. Engaged employees are generally happier, perform better, and stay with a company longer than disengaged employees. A turnover rate of approximately 10% is considered normal and healthy.

Employee Attrition rates can uncover hidden problems within organizations. A high turnover rate is a warning sign you shouldn’t ignore. Review your recruitment processes, change your compensation and benefits plan or incorporate a succession planning policy. Ultimately, if you respond to turnover issues proactively, you will improve your company and retain great employees.

 “Engagement = Motivation = Performance = Productivity = Profitability”