Employee turnover represents the number of individuals who leave a company when compared to the overall number of employees. Calculating attrition places quantitative figures onto this activity. The best tips for calculating attrition include using a simple formula, attaching a cost to employee turnover, and reviewing the numbers frequently. The human resource department is often the department responsible for handling this process. Owners and managers, however, are often responsible for reviewing and interpreting this data.
Attrition formulas can be wide ranging, depending on the data required by companies. A simple formula is often sufficient, however, for calculating attrition. The most popular formula divides the number or employee separations by the average number of employees in a given period and multiplying the result by 100. For example, a company can take these numbers from a single month, six months, or an entire year. The formula’s wide-ranging use increases its popularity and usefulness in the employee turnover management process.
For example, a company has a monthly average of 90 employees. In recent months, the company is experiencing seemingly high employee turnover. The owner tasks the human resources department with calculating attrition. In the past three months, the company lost 13 employees. The company’s attrition rate is 14 percent.
A company’s attrition rate may be meaningless if the owner or other executives do not attach a cost to the figure. Companies often compute how much money they lose when losing an employee or replacing this individual. Costs often include money spent during the separation process, overtime for employees to pick up slack, advertisements for finding new employees, and time or capital spent while training a new worker. The costs are often different based on the type of employee leaving and whether he or she is a skilled or unskilled worker. Other factors in a company can also change these costs.
Companies should review their employee turnover numbers frequently. Calculating attrition is often the start of this process. Owners and executives, however, need to benchmark this figure in order to fully understand it. For example, a company can review its current employee turnover against its previous figures. When a company consistently calculates attrition, it has a trend by which to measure its turnover rate. Companies experiencing worse or better turnover can look for factors driving this activity.
Calculating attrition also leads companies to compare their activities to other businesses. Owners may need to compare their operations to other businesses. This allows owners to assess how their turnover compares to other companies, meaning a company may have better or worse operations.