Attrition refers to the progressive decline of a workforce caused by employees leaving or retiring. The attrition rate is frequently used to measure this reduction. Most companies like a low attrition rate since it indicates that employees are happy and that they do not need to recruit and train new employees.
Every business owner understands that retaining good staff makes their company stronger. And many firms, particularly small ones, consider their employee to be family. However, not all things go as expected. Employees quit for a number of reasons, including improved career opportunities and job dissatisfaction. Understanding why attrition rate is something that allows business owners to take action to potentially reduce it? And what can business leaders do to make a difference?
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Attrition Rate Formula
Being able to describe any attrition rates inside a company as a specific statistic is crucial. By focusing on any concerns that are driving high attrition, business leaders may be able to address those concerns and see a decrease in attrition rates in the next cycle.
There is a reasonably simple formula to calculate the attrition rate. Divide the number of employees who have left the company by the total number of employees during that time period and then multiply by 100. Let us clarify with an example. Suppose that a company employs 2,500 workers. In one year, 63 employees leave for various reasons. Divide 63 by 2,500 and multiply the result by 100 to get an annual attrition rate of 2.52%.
How To Lower The Attrition Rate In A Company?
The demand to reduce the attrition rate will be determined by how significant it is and the causes for it. Any company should anticipate some natural attrition; in those circumstances, no action is likely required. However, if the attrition rate is significant, top leadership may need to take further steps.
Focus On Employee Satisfaction
Employees frequently quit a company for a new job opportunity because they are unsatisfied with where they are. Perhaps they dislike the business culture, feel undervalued, or would prefer to take on new tasks at work. All of these concerns may be mitigated if business owners or executives prioritise employee satisfaction, as it significantly helps in reducing the attrition rate.
Offer Competitive Wages
Another action that needs to be taken to lower the attrition rate is offering fair compensation to the employees. People are significantly less likely to leave a company if their pay is the same or more than the business competitors. A skilled employee seems to have little reason to stay with the company if they can make more money elsewhere. Top leadership in the company should conduct market research to identify the standard pay for employees to compensate their personnel fairly.
Good recruiting procedures can help to avoid high attrition rates in the future. When hiring new employees, the human resource professionals in the company should carefully examine them to ensure that they are a suitable match not just for the role but also for the environment of the company. “For how much time do you consider yourself in this position?” is one of the finest interview questions that should be asked. Essentially, the recruitment department should investigate more to determine whether the candidate is prepared to make a long-term commitment to work for the company.
Staff turnover affects your business performance negatively. Therefore, it is vital to understand the status of the attrition rate. A business will feel its impact with the cost of new recruitment. The executive expertise will leave the organization if there is no inclusive handover process. This is nearly impossible to hand over all of an employee’s skills and expertise he gained over the years. So, as a business or company, you must neutralise staff turnover to keep your business in a position where staff departure is lower and goes through an inclusive process.