Attrition rate is a metric that helps companies identify ways to retain productive employees and loyal customers. Learning to calculate attrition rate can help businesses keep track of average employment duration as well as the costs of recruitment and training, maintaining a customer base, and marketing. An attrition rate can be calculated monthly, quarterly or annually to monitor progress.

Attrition rates help you understand how well you’re retaining your talent. For instance, a high attrition rate indicates that your employees are leaving frequently, while a low rate shows that you’re keeping your employees for longer periods of time. Usually, employers look to reach a low attrition rate since it means that their employees are satisfied and they don't have to invest in hiring and training new people.

Having a clear view of your employee attrition rate is essential to help you understand where your company stands in terms of candidate retention. If you find that your employee attrition rate is high, for instance, it can mean that you’re not providing enough benefits or the best work environment to keep your top-performing employees.

By measuring and analysing your attrition rate, you can identify the problems you need to solve to make sure that you keep your employees from leaving you. To calculate your company’s attrition rate, divide the number of employees who have left your company by the average number of employees over a specific period of time.

The employee attrition is of four types – Voluntary, Involuntary, External and Internal:

• Voluntary – when an employee chooses to leave the company. Employees may resign for personal reasons, such as taking care of a family member, etc.
• Involuntary – when it’s the company that ends employment. This usually happens when companies eliminate positions to reduce staffing costs or determine that the position is no longer needed. This is a common way for companies to control costs.
• External – when an employee leaves to go work for another company. Usually, it happens when there’s an opportunity to take a position that more closely aligns with the employees’ career path, to get a higher pay or for a shorter commute.
• Internal – when employees accept another position within the same company whether to work in another department or receive a promotion.

The most common causes of employee attrition are:

• Compensation – employees that feel they’re not being paid enough are very likely to leave your company as soon as they get an offer for higher salary. Having an annual pay raise policy can be a good solution to increase retention.
• Recognition – according to Gallup, employee recognition is a “low-cost, high-impact activity”, however, very few employers take this into account and most employees don’t feel appreciated at work. This obviously impacts employee morale and retention.
• Career progression – the opportunity for growth and development is very important for retaining good employees. Top performing employees that feel stuck in their current job are likely to look for career advancement opportunities in other companies.
• Company culture – providing a positive, people-centric company culture is essential for retaining your best employees. But even before that, it's also very important to hire for cultural fit and bring in the right people.
• Stress – employees that often feel overwhelmed by their workload or experience extreme stress situations at work often end up leaving the company.

Here are a few key steps to take in order to improve retention and reduce your company's employee attrition rate:

• Recruit And Hire the Right People: Hiring the right people for your company helps you increase retention and lower the attrition rates. Using predictive assessments is a great way to determine whether a candidate is the right fit for your company and for the role they’re applying to.
• Offer Competitive Compensation & Benefits: Being fairly paid is one of the most valued aspects of a job for employees. Make sure you have a competitive compensation policy and don’t forget about offering good benefits. Flexibility is one of the most valued benefits you can offer to your employees. Allow them to determine their own schedule or work from home a few days per week or per month.
• Promote Employee Engagement: Employee satisfaction is crucial for retention as well. Make sure to keep your employees engaged. Ask them for feedback about management or the workplace on a regular basis and create a positive environment where they feel valued and heard.
• Give Recognition to Employees: Whenever possible let your people know they’re doing well and give them praise for their achievements. Feeling appreciated will make them feel motivated and committed to work.
• Offer Career Progression Opportunities: Your employees will feel more engaged and confident if they see that their employer is concerned about their growth and provides them with opportunities to reach individual career goals while fulfilling the company's mission. Implementing career paths can also have a direct impact on the entire organization by improving morale, career satisfaction, motivation, and productivity.

While employee attrition isn’t necessarily a bad thing, you should do your best to monitor the pulse of your workplace to stop it in its tracks as early as you can. It’s an important metric that tells a lot about your employer branding, hiring practices, and overall workplace culture.