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Understanding attrition rate is crucial to any company striving for long-term success.
This is because attrition rate can tell you a lot about the health of your company and your employees, indicating positive growth or concerning issues that need to be addressed before they worsen.
In this helpful guide, we will define and calculate the attrition rate and share actionable tips for improving employee retention and engagement.
What is an attrition rate?
An attrition rate is the percentage of employees who leave a company over a specified period. It shows at what pace employees are leaving an organization, whether voluntarily or involuntarily.
This key metric can give HR managers and team leaders insight into employee retention.
Attrition signifies a decrease in the overall workforce as positions become vacant. Typically, the vacancies caused by attrition are not immediately filled with new hires. In some cases, these open positions will permanently close.
Attrition rate vs. employee turnover: What’s the difference?
While attrition and turnover are frequently used interchangeably, there are some key differences:
How do you calculate the attrition rate?
Although most companies use workplace analytics software to track important metrics such as attrition rate, HR managers and team leaders should know how to calculate it manually to fully understand what it measures.
You can do this by using the following attrition rate formula:
Employee attrition rate = (# of employees who left during a specific period / average # of employees working during that period) x 100
So, let’s say that a company with an average of 1,000 employees for the year had 15 employees leave. Plugging these numbers into the attrition rate formula, you would get a 1.5% annual attrition rate:
1.5% attrition = (15 / 1,000) x 100
What is a high attrition rate?
A high attrition rate is a percentage exceeding the industry average or company benchmarks. It indicates a shrinking workforce and issues like low employee satisfaction and poor workplace culture.
Employee attrition rates vary depending on the industry or the size of the company.
That said, a rate of attrition of over 20% annually is typically considered high.
What do employee attrition rates say about your business?
Employee attrition rates give you insights into the health of your company and its workplace culture.
A high attrition rate can reveal issues like:
- Employee dissatisfaction
- Low productivity and performance
- Negative company culture
- Lack of employee loyalty
- Recruitment misalignment
While a high attrition rate is negative, a low one typically indicates an organization's positive aspects. Your company is likely to have a healthy workplace culture with high employee engagement and commitment.
Types of employee attrition
There are four types of employee attrition, and understanding the different types can help you tailor retention strategies and improve employee engagement.
Voluntary attrition
Voluntary attrition occurs when an employee decides to leave the company. An employee might quit due to a career change, retirement, job dissatisfaction, or personal reasons.
Involuntary attrition
With this type of attrition, the company initiates the end of employment. An employee is involuntarily let go due to layoffs, downsizing, or termination.
Internal attrition
Internal attrition occurs when an employee accepts a different position within the same organization. In this case, the employee leaves their current role and will either move to a different department within the company or be promoted within their current department.
Demographic-specific attrition
Demographic-specific attrition occurs when large numbers of employees of a certain demographic—such as age group, ethnicity, or gender—leave an organization. It’s important to quickly identify the cause of this attrition and engage in solutions to promote diversity, equity, inclusion, and belonging in the organization.
Common causes of high attrition rates
There are many reasons why a company’s attrition rate is high, and when left unchecked, it can negatively impact employee morale and operational efficiency.
Below, we look at some of the common causes of high attrition.
Work/life imbalance
An unhealthy work/life balance can exacerbate any company's attrition rate. This is when professional responsibilities overtake personal life, increasing the chances of chronic stress and fatigue. Long working hours and lack of time off will negatively affect employee morale and work performance.
Constantly pushing your employees with ever-increasing workloads can lead to employee burnout, where they feel overwhelmed, overworked, and undersupported. Burnout culture is harmful to both employees and their company, as it can build resentment and decrease productivity and company growth.
Inadequate compensation
An unattractive compensation package is a big reason for high attrition rates, and it can include:
- Low salary
- Inadequate time off
- Lack of bonus structures
- Lack of health insurance
- Inadequate retirement package
Without sufficient compensation, employee morale and motivation will be low. Ultimately, this will lead to poor performance and an increase in attrition as employees leave to seek job opportunities with better pay and benefit structures.
In addition, companies that offer inadequate compensation will have a difficult time attracting and retaining top talent. Because of this, companies will suffer financially from the high costs of frequently recruiting and hiring new prospects.
Lack of appreciation and recognition
Failing to acknowledge your employees' hard work and achievements can cause them to feel undervalued, which will affect employee morale and performance in the long run. Employees who don't receive appreciation and recognition are more likely to leave a company due to job dissatisfaction.
Because of the lack of appreciation, the workplace culture might be viewed as toxic, which makes it difficult to retain hardworking personnel. Ultimately, businesses that take their employees for granted will see a dip in productivity and a higher attrition rate.
Inadequate career advancement
When there are few opportunities for growth or advancement, employees may seek positions elsewhere that offer career development opportunities. Without the potential for career progression, job dissatisfaction will set in, and employee engagement and loyalty will decrease.
Lack of opportunities can lead to high attrition rates and can give your company a negative reputation that can deter qualified hires. In turn, this can lead to increased recruitment and training costs that will affect your bottom line.
Best tips for employee retention
Employee retention is essential for maintaining a stable and motivated workforce, but it can be challenging to manage effectively. Talent management software can help you attract and retain top talent by tracking recruitment, employee engagement, and learning opportunities.
In addition to helpful software, the tips below highlight how organizations can foster a more positive work environment that will help reduce employee attrition and increase productivity.
Work/life balance
It’s important to have policies in place that foster a healthy balance between work and personal time. Employers that prioritize a positive work/life balance will have an easier time attracting and retaining talented employees. Consider things like:
- Flexible work schedules
- Remote work options
- Compressed work week
- Adequate PTO and vacation time
- Workload management and regular check-ins
Promoting a positive work culture that revolves around open communication and collaboration can help prevent employee burnout and, ultimately, high attrition.
When communicating with employees, respecting their personal space is important. You can use text-based interactions to communicate since they’re often less invasive than calls or in-person meetings. In fact, research shows that Gen Z workers are 47% more likely to prefer text-based communication and 26% less interested in voice interactions than previous generations. Adapting to these preferences can help you foster a more supportive work environment.
Competitive compensation package
Fair compensation is crucial in retaining and attracting good employees. Adequate pay and benefits are a huge motivator to get people to accept job offers and show up to work performing their best. While also boosting employee engagement, a good compensation package will help foster a positive work environment and culture.
Be sure to regularly review and adjust compensation packages to ensure they are competitive within your industry and reflect how much you value your employees.
Employee appreciation and recognition
Expressing gratitude to employees for a job well done has a positive effect on employee morale and performance. Those who experience frequent appreciation and recognition are often more motivated and dedicated to their work, leading to higher productivity and improved performance.
Simple gestures, such as verbal appreciation or written thank-you notes, can go a long way in motivating your employees. To further express gratitude, consider creating an employee rewards and recognition program that offers tangible benefits, such as extra time off, to acknowledge the achievements of your hardworking employees.
Employee career advancement opportunities
Providing employees with career advancement opportunities shows that you are invested in their futures. Establishing clear paths for advancement encourages them to work hard and grow within the organization.
Offer opportunities to stimulate employee career growth, such as:
- Ongoing learning and training programs
- Mentorship programs
- Promotion opportunities
Plus, companies that prioritize development will be more attractive to potential hires, leading to cost savings in the recruitment process.
One of the biggest benefits of providing professional growth opportunities is having a skilled and committed workforce that will drive your company’s long-term success.
Final thoughts
Understanding and managing your company’s attrition rate is more than just a numbers game—it’s about creating a workplace where employees feel valued, supported, and motivated to grow.
A low attrition rate is a clear indicator of a thriving, resilient company, one where employees are not just present but genuinely invested in your collective success.
It’s a simple metric that will tell you a lot about your organization’s health. And it’s time to start tracking it.
Mentorship programs in the workplace are a proven method to boost employee engagement, facilitate cross-functional connections, and fuel career growth. Mentoring software (like Together) fosters professional growth and learning by matching individuals with experienced mentors in your company. Learn more by talking to one of our experts.
