Understanding the effect that employee attrition rate has on your company

 employee attrition rate

There’s one metric that employee engagement and HR professionals all look at, regardless of the industry. It won’t come as a surprise to veterans of these fields, but improving it is always worth the conversation and exploring related strategies. That metric is—the employee attrition rate. 

This term is also often referred to as “churn rate.” It’s used to describe the rate that employees leave your company. It’s without a doubt one of the most important to measure. Successful companies excel at doing the reverse, which is known as “retention” or having a high “retention rate.” 

A simple and easy way to calculate employee attrition rate is by dividing the number of full-time employees who have left the company in a given month (i.e., leavers) by the average number of employees, and then multiplying that amount by 100. Doing this every month is standard for most organizations—whether it’s done by the HR and employee engagement teams or not—because it allows companies to keep a running track record of the turnover that they’re experiencing at their companies. They can then use this data to measure their success over time. At Workify, we have a calculator (seen below) that you can use to determine the cost of losing employees at your company. The spreadsheet is view only, so make a copy to adjust the fields. 

Sample Cost of Turnover Calculator:

We’ll go into further detail on possible differences between “attrition” and “turnover” later in the article. To start, we want to set the stage on why these terms matter, including some of the positive results that you can see when retention is high

What’s a good employee attrition rate

Of course, it’s unrealistic for companies to think that they’ll never face the loss of any workers. Employees leave for various reasons, whether it’s better pay, a promotion, or in unfortunate scenarios, problems with an organization or as a consequence of poor work performance. Workers who are fired are often factored in separately from attrition, and there are various strategies that you can implement to retain employees. 

Having an increased employee attrition rate is an added possibility because of Covid-19 and the Great Resignation. Workers across most sectors feel an increased enthusiasm to find new opportunities, make career changes, retire, or leave the workforce for other reasons. Since the trend of worker movement is likely to keep up for some time—especially due to the advantages for employees because of remote work—it’s important to make sure that you’re on top of attrition numbers at your company. 

So, what is a positive employee attrition rate anyways? According to business.com, companies should aim for an employee turnover rate of 10%. Most companies actually fall into the 12% to 20% range, but variation can depend on the nature of certain jobs and industries. It’s good to note that some work will naturally have higher turnover, either because of how difficult it is, the hours demanded, or maybe it’s a job that workers take on as part of a segue into the workforce. 

All of these various factors should be considered when you measure attrition. It might be hard to account for individual circumstances in big companies, but it’s important if you can. This is where successful exit surveys through an employee engagement program come into play. These exit surveys can be catered to the specific circumstances and factors related to jobs at your company, and employee engagement specialists can make sure that you’re well prepared to get the best, and most accurate information out of surveying. 

How do high retention rates help companies? 

High retention rates can help companies in a number of ways. Some are clear—like retaining top talent and saving money by not having to onboard new workers—and others are more subtle. Or, to put it more succinctly, you may have to look into certain organizational metrics to see how high retention is helping (like high company morale or worker praise about company culture). Either way, high retention will improve your company’s bottomline, and help you in many different ways. 

Here’s a breakdown of some of the ways high retention can help you: 

  • More productive employees—There’s a number of reasons turnover can impact productivity, like requirements to train new workers, low morale from losing coworkers or general disgruntledness, as well as underlying issues that are causing turnover. Raising retention will likely mean solving some of these possible issues. 
  • Increased revenue—Avoiding high turnover will mean that your company will keep more money in its pockets. This will happen because of lower hiring and onboarding costs, as well as the possible downstream effects that an engaged culture can have on customer experience and how a brand represents itself to employees (known as employer branding). It’s often the case that increased revenue is also a good measure of return on investment (ROI) for engagement programs, so it’s important that employee experience workers highlight their successes to senior leadership. 
  • Institutional knowledge—When workers are at a company for a long time, they build relationships across the organization, with third-party vendors, or with clients (depending on the type of organization you have). It’s hard to fully measure the loss of severed relationships, losing third-party tools, or institutional knowledge that can happen when workers leave an organization. Talented workers are likely to find new opportunities, but it’s important to retain talent, make sure they’re engaged, and to try to build a sense of loyalty to your culture and company. 
  • Happy customers—It’s no secret that internal culture has an effect on the type of experiences that customers or clients have. If there’s dysfunction, strife, and frustration on the inside, those negative emotions will leak out when your workers are engaging with people on the outside. High retention is likely to correlate with engaged and motivated employees, a healthy culture, and a positive environment that will ensure positive interactions for anyone that connects with your company. 

As you can see, there are many ways that high retention can help a company or attrition can hurt a company. These are only some of the criteria and metrics to look at, but others will depend on your organization and the structure of your business. 

Is there a difference between employee turnover and attrition? 

Depending on how your organization is tracking these metrics (or how you’d like to), it is possible that employee turnover and attrition could mean different things. Companies that separate the two usually do so by defining attrition as the general ebb and flow of workers leaving a company, and turnover as the rate that workers leave a company because of poor hiring or a difficult work environment.

It’s not always the case that companies separate these numbers—because they may deem it more important to know overall loss of employees—but it is wise for companies to use surveying to identify specific reasons why employees are leaving. This can help prevent loss or fix solvable problems. Generally, if you are tracking turnover separately than attrition, just remember that turnover is often a reflection of issues with a company (rather than workers leaving organically). 

We encourage companies that when they start out with an engagement program or surveying, they shouldn’t get too bogged down immediately in different definitions or the ways terms can vary. What’s important is to start getting a general sense of what your company needs to track and solve for, then engagement tools can show you more specific metrics that will be explained by the specialists that will be helping you solve the problems that are impacting your organization. 

Workify is here to help 

Is your company ready to boost its retention and lower the employee attrition rate? Workify is here to help, and we’ve got a number of tools at our disposal. Our engagement specialists can keep you updated on industry trends, possible culture changes that can help your company, and even how employer branding can make a difference.

Whether you’re building your first employee engagement program or revamping exit surveys, connect with Workify today to get started. Our tools and programs are backed by industrial and organizational (IO) psychologists, and our dashboards and features will keep your company looped in on the right metrics that you should be tracking. We’ve helped startups and established corporations improve their engagement strategies, and we’re here to share those valuable same insights with you.