For executives and key decision-makers in the company, their attrition and turnover rates are some of the most vital metrics they can measure.
They show how a company takes care of the most important organ of the company, its staff. We know that keeping your staff engaged at work makes them less likely to leave, for whatever reason.
This leads us here today to break down any misunderstandings between the terms attrition and turnover, to look at how they’re calculated, and to propose solutions to fix a high turnover or attrition rate.
So let’s get into this.
Defining Attrition and Turnover
Sometimes the terms ‘attrition’ and ‘turnover’ are used interchangeably, as they explain similar things. There can however be mistakes made if you don’t understand the small differences. Both terms refer to employees who leave, yet they have distinct meanings in the context of HR and organizational management.
Attrition
Attrition refers to the gradual reduction of the workforce through natural means, such as:
- Retirement: Staff who retire once they hit retirement age.
- Resignation: Employees who leave voluntarily, for personal reasons, better opportunities, or relocation.
- Illness/Deaths: Sadly, this does happen as employees pass away or become extremely sick.
- Promotion/Transfering: Staff might move to a different role or department in the same company. This sometimes leads to positions that remain unfilled if they aren’t backfilled.
Attrition is seen as a natural part of the employee lifecycle, and it doesn’t really reflect that the company is performing badly.
To expand this further, ‘regrettable attrition’ occurs when the employee who leaves is someone the company would rather have kept. They are often high-performing staff, key talents, or future leaders with critical skills. These people are of course difficult to replace.
If it goes unchecked, regrettable attrition can cause real damage to the company, as Amazon found out in 2022. They were scrutinized for their estimated $8 billion-a-year attrition costs. Their business practices of churning through workers at a fast rate showed that their attrition costs soared way above industry averages, to a worrying level.
Naturally, losing staff through regrettable attrition can have a massive impact on company culture and competitive edge too. By keeping an eye on this metric, companies are better equipped to keep hold of their best employees and avoid the damage regrettable attrition causes.
Turnover
This term is a bit more dynamic and refers to how quickly and effectively employees leave and are then replaced. This includes:
- Voluntary turnover: Employees who decide to leave for their own reasons and choices. Perhaps they see a better job elsewhere or feel dissatisfied with their current role.
- Involuntary turnover: This comes when the company decides to let employees go. This could be the result of layoffs, firing, performance issues, or company restructuring.
It’s crucial to consider that the company turnover rate often raises the eyebrows of company executives, as it might illustrate some deeper issues like poor job satisfaction or a lack of career growth.
According to the Bureau of Labor Statistics Data, turnover rates increased rapidly in 2020, then continued to rise for a few years, before dipping in 2023.
Even though retention rates became more stable in 2023, a Gallup Poll showed that in the same year, 50% of employees were not engaged with their work, or ‘quiet quitting.’
Turnover rates are not a perfect measurement of company performance, as the context of job roles and the company’s industry completely change annual numbers. The rate can also vary from company to company, as small and midsized businesses (SMBs) often experience slightly higher turnover rates than large companies.
In general, companies should aim for the ideal number of a 10% turnover rate or lower.
Key takeaway differences
Turnover rate: shows which employees left and were replaced, covering all kinds of departures and focuses on positions being refilled.
Attrition rate: tracks employees who leave without being replaced, including natural reductions like retirements and resignations. Also focuses on permanent reductions in the workforce.
Calculating metrics for attrition and turnover
Here we’ve provided the basic layout for calculating metrics for turnover and attrition, followed by some tips to follow if your company attrition rate is high.
Calculating employee turnover rate:
To figure out if you have a problem with your company turnover rate you can use a calculation. First, you have to use a measurement of a set period of time. One year usually works best. You then need three key pieces of data for the calculation:
1. The number of employees who left during that period (both voluntary and involuntary).
2. The number of employees at the beginning of the period.
3. The number of employees at the end of the period.
To get to the average number of employees, add the starting period number and the ending period number, then divide by 2. Then use this formula to calculate your turnover rate:
Turnover rate = (Employees who left ÷ Average number of employees) x 100
So let's say we want to calculate the turnover rate for a company over the course of one year:
Number of employees who left during the year: 20
Number of employees at the beginning of the year: 150
Number of employees at the end of the year: 130
Calculate the average number of employees:
Average Number of Employees = (150 + 130) x 2 = 140
Calculate the turnover rate:
Turnover Rate = (Number of Departures ÷ Average Number of Employees) x 100
Substituting the numbers:
Turnover rate = (20 ÷ 140) x 100 = 14.29%
So, the company’s turnover rate for the year is roughly 14%.
Calculating employee attrition rate:
To find the attrition rate, the causes of attrition like resignations, retirements, and illnesses need to be accounted for. Again, use a set period of time. For convenience, we’ll say over a 1 year period. Let’s set out our 3 key pieces of information for the calculation.
1. The number of employees who left during that period (all resignations, retirements, and other natural causes).
2. The number of employees at the beginning of the period.
3. The number of employees at the end of the period.
To find the average number of employees, add the number you started with to the number you ended with, then divide that total by 2. Then use this formula to figure out your attrition rate:
Attrition Rate = (Employees who left ÷ Average number of employees) x 100
Here’s an example to illustrate, calculating the attrition rate for a company over the course of one year:
Number of employees who left during the year: 30
Number of employees at the beginning of the year: 180
Number of employees at the end of the year: 160
Calculating the average number of employees:
Average Number of Employees = (180 + 160) ÷ 2 = 170
Calculate the attrition rate:
Attrition Rate = (Number of Departures ÷ Average Number of Employees) x 100
Substituting the numbers:
Attrition Rate = (30 ÷ 170) x 100 = 17.65%
So the company's attrition rate for the year is around 18%.
How to reduce a high attrition rate?
Simply put, for turnover and attrition rates, the lower the better. If your calculations show a high company attrition rate, here’s a collection of retention strategies to get it down for the future:
Conduct exit interviews
When the door is closing on an employee, there’s a goldmine of valuable information that can be learned from them. Use By setting up a healthy chat with them, you get to know better what’s working and what’s not.
You might also consider choosing an interviewer who has a good relationship with the person who is leaving, to get the most honest and genuine feedback about their exit decision. Conducting positive exit interviews with genuine interest is a sign of a mature decision-maker.
Keep pay and perks competitive
Reduce a high attrition rate by making sure the company pay and perks are competitive within your industry. Employees regularly have ideas of what competitors can offer in pay and perks, so realistically you have to match and meet employee expectations to keep attrition down.
You could create regular engagement surveys to gather feedback on the compensation and benefits you currently offer. Bring in changes based on this feedback to show your pay and perks are competitive. For remote teams, you might have to consider further factors, like their geographic locations and cost of living.
Promote work-life balance
Promoting work-life balance is crucial for a company with high attrition rates. A balanced work-life environment creates a happier, more productive workforce who are less likely to leave. Spend some one-on-one time with your staff and show genuine interest in whether they’d like more flexible working hours.
Showing empathy for employees who need support with their family responsibilities is a great way to build team culture. Staff turn up to work feeling like they’re part of a team who cares about them, rather than feeling alone in difficult times. Make sure you show you’re into promoting a healthy work-life balance.
Smooth out onboarding
Towards the end of an employee lifecycle, many managers try to focus on the later stages to find out where things might have gone wrong. By paying special attention to improving your onboarding processes, you can make the most of the first stages of the employee lifecycle, and hopefully continue the positivity from there.
Spend time making sure your orientation program is top-notch, with well-written and welcoming handbooks for new employees. Assign mentors and develop buddy systems to get rid of those early worries new employees so often have. By keeping a supportive atmosphere in the onboarding process, team cohesion develops faster than if they feel like they’ve just hit the ground running.
Offer Employee Assistance Programs
To tackle high turnover and attrition rates, make use of employee assistance programs (EAPs). Show you’re there to lend a helping hand. Start by setting up a relaxed focus group to get a sense of any common stressors found within your teams.
Using a slightly more casual setting, you might be surprised by the responses. Staff who trust you more are likely to express any physical or mental health challenges they are facing. Use this information to look into counseling or financial help services to support them at work. Make sure you spread the word about company EAPs for everyone to hear.
High rates of attrition and turnover are caused by teams who aren’t engaged. Try one of our work retreats to boost them!
Here at Surf Office, we know that high turnover rates can be helped by getting your teams more engaged with work. One of the best ways to do this is by organizing a team retreat. A twice-annual retreat gets your staff feeling refreshed and reenergized for work.
We've had the pleasure of organizing over 700+ retreat experiences, including remote teams, for many different companies. Here’s what we offer:
- Des transferts sans stress ? On vous a eu ! ✅
- Un hébergement de qualité assuré ? Fait ✅
- Engageant activités de développement de team building? Notre spécialité ✅
- Réservations de restaurant ? C'est pour nous ! ✅
- Assistance experte pour la planification d'un séminaire ? Bien sûr, nous avons tout prévu ! ✅
- Un accompagnement sur site, adapté à vos besoins ? Absolument ✅
Non seulement cela, mais nous avons également accès à plus de 160 destinations en Europe, en Asie-Pacifique, aux États-Unis, en Amérique latine et maintenant en Afrique, ce qui signifie que le ciel est votre limite lorsqu'il s'agit de choisir la bonne destination pour vous et votre équipe.
Keep staff feeling valued and engaged with an unforgettable trip, filled with team-building activities and group challenges. Our corporate retreats will certainly have those turnover and attrition rates down, as they share unforgettable memories. Spaces are limited, get in touch now.
