Employee attrition rates are one of the biggest indicators of employee satisfaction and company morale. Calculating your company's employee attrition rate is not only important but necessary to identify possible issues within the company.
Let's explore the long term concept of attrition rates, focusing on how to calculate them, why it is necessary, and how to improve attrition rates.
What is Employee Attrition?
Employee attrition refers to the rate at which employees leave the company over a specific period of time. This can be over a period of a year or a few months, but as experts suggest, it should be assessed on an ongoing, weekly basis.
Why Are Attrition Rates So Important?
Attrition rates can tell you so much about the health of your business and are necessary to assess company morale. Also referred to as employee turnover and employee churn, employee attrition rates are simple to calculate.
Are Attrition Rates an Accurate Representation of a Company's Success
In a nutshell: yes. Companies that have a high turnover of staff will find that there is a negative impact on productivity and the overall success of the company.
Staff attrition rates could be influenced by employees leaving the company for personal reasons, or it could be because the company culture does not align with their personal values and ethics.
Looking at a company's onboarding processes, the turnover rate of any given period, and assessing where changes can be made are all useful ways to lower the rate of attrition.
How to Calculate Employee Attrition Rates
Using a simple formula, you, too, can calculate your company's attrition rates.
Attrition rates are calculated by taking the number of how many employees that have resigned or left the company during a certain period, dividing it by the average (not total) number of employees in the company in that same period, and multiplying that figure by 100 to give you a percentage.
This percentage will be your company's employee attrition rate.
Average Number of Employees
It is important to note that you need to calculate the average number of employees first. To do this, you take the number of employees you started with, add it to the number of employees that you are left with after some have left, and divide this amount by two.
Here is an example:
Amount of employees at the beginning of the period: 5000
Amount of staff or remaining employees at the end of the period: 4870
5000 + 4870 = 9780.
9780 / 2 = 4890.
The average number of employees would be 4890.
Attrition Rate Formula
Taking this average into account, the formula would look like this:
Attrition Rate = the number of employees that have left / the average number of employees x 100.
130 / 4890 x 100 = 2.7%
The lower the attrition rate, the better. An attrition rate of 2.7% is not bad, but it does show that there could be an improvement in employee retention.
As we have mentioned at the beginning of this article, the rate of attrition could be calculated over a period of a year or as little as a month. It is always a good idea to assess your company's attrition rates often, keeping an eye on why employees are leaving and where there is room for improvement.
Common Causes of a High Employee Attrition Rate
Let's take a very brief look at some of the biggest reasons employees resign from their positions:
- Low employee satisfaction rates
- No growth or development opportunities
- Low company and employee morale
- Poor pay scales
- Poor work-life balance experience, which could increase stress
- Dissatisfaction with their roles
If your company is one that adopts a strategy of conducting exit interviews when employees resign, take note of what the employee's main reasons are for leaving. An exit interview held when an employee leaves can provide important insight into what went wrong.
This is especially useful information that you can use to help reduce high attrition rates and focus on ways to attract employees and keep them happy.
Does Job Satisfaction Play a Role in Attrition Rates?
Job satisfaction is a crucial factor in employee attrition and retention and is often one of the most overlooked aspects. Creating a pleasant work environment while helping full-time employees grow professionally can have a positive effect on employee retention.
How to Reduce Attrition Rates and Improve Retention Rates
It's no secret that happy employees are focused, productive employees. If you are treating your employees like they are nothing more than a cog in the machine, your company will experience high attrition rates.
Here are a few ways to reduce these attrition rates and improve your company's employee retention rates:
#1: Focus on Recruitment Methods
The right recruitment process almost always has a positive impact on the retention rates of employees. Finding the best person for the job right from the start ensures that you have made the ideal hire and allows you to provide clear job expectations from the start.
Some of the most important and necessary aspects of the recruitment process are:
- Clear communication of what is expected of employees
- A positive work-life balance
Spend time perfecting your recruitment methods for new employees, and you will see a positive effect on employee attrition and retention rates.
#2: Build Better Communication Channels
Open, two-way communication between employees and management is key. Providing employees with an open-door policy can help team members feel that their concerns are valued and are vital for feedback.
Another form of communication that has proved effective for management is the use of employee satisfaction surveys. A survey allows employees to share their views on where the company should focus its efforts, any shortcomings that they may be experiencing, and how they feel the company values their efforts.
Surveys are usually anonymous and are the best way to gauge employee satisfaction and, in turn, business performance.
#3: Offering Incentives
Incentives are always great and should not be considered a bribe for employees to stay at the company. Offering a day or two of leave, paid time off, or gift cards as a thank you for a job well done can go a very long way in making an employee feel that they are making a good and valuable contribution to the success of the company.
Share your wins with your employees, and give recognition where necessary. Nurture employees that contribute to the company's success, and you will enjoy a low attrition rate.
#4: Helping Your Employees Grow
No one wants to spend their lives in the same role within a company with no possibility of growth. Providing employees with advancement opportunities and learning possibilities can help them feel valued, which, in turn, has a positive effect on productivity and increases employee retention rates.
An employee who has the opportunity to grow professionally within the company or their role is more likely to stay in their job.
Growth opportunities and learning possibilities could take the form of staff training, increases, and promotions. These can be discussed and agreed upon at performance reviews, giving employees a goal to work towards. Employees develop skills that will help them move up in the chain of command, giving your company the best skill pool.
#5: Fair Wage Possibilities
If your company is still basing its wages or salaries on gender wage gaps, this needs to change and fast. Pay should be calculated according to the role of the employee and should not be based on anything other than their skills and qualifications.
Set clear pay ranges with benchmarks for increases and bonuses. These should be made clear during the recruitment process and be defined in the offer of employment and contract.
If your company is seeing an increase in employee attrition rates, you need to remedy this and address attrition rates swiftly. High attrition rates have a direct impact on productivity, which will affect revenue in the long run.
Keeping your employees happy and engaged is one of the most important aspects of retaining them, and there should be a focus on creating a positive work environment for all.
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