Difference between revisions of "Calculate Attrition Rate"
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#* The average number of employees for the quarter was <math>(150 + 160)/2 = 155</math>. | #* The average number of employees for the quarter was <math>(150 + 160)/2 = 155</math>. | ||
#* The attrition for the second quarter of 2015 was <math>(30/155)*100 = 19.35</math>, or 19.35 percent. | #* The attrition for the second quarter of 2015 was <math>(30/155)*100 = 19.35</math>, or 19.35 percent. | ||
| − | #Calculate the annual attrition rate. For this calculation, you need to know the total number of attritions for the year. Then, you need to calculate the weighted average of employees. Using the weighted average is more mathematically accurate since it smooths the effect of seasonal changes in the number of employees a company has throughout the year.<ref>https://www.knewton.com/resources/blog/test-prep/what-the-heck-is-a-weighted-average/</ref> | + | #Calculate the annual attrition rate. For this calculation, you need to know the total number of attritions for the year. Then, you need to calculate the weighted average of employees. Using the weighted average is more mathematically accurate since it smooths the effect of seasonal changes in the number of employees a company has throughout the year.<ref name="rf1">https://www.knewton.com/resources/blog/test-prep/what-the-heck-is-a-weighted-average/</ref> |
#* Suppose the telecommunications company in the above example had a total of 62 attrition for the year. | #* Suppose the telecommunications company in the above example had a total of 62 attrition for the year. | ||
#* They typically hire 20 percent more employees for the last quarter of the year for their busy season. So, they have an average of 155 employees for the first three quarters, and an average of 186 employees for the last quarter. | #* They typically hire 20 percent more employees for the last quarter of the year for their busy season. So, they have an average of 155 employees for the first three quarters, and an average of 186 employees for the last quarter. | ||
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=== Projecting the Attrition Rate === | === Projecting the Attrition Rate === | ||
#Understand the value of projecting the attrition rate. While it’s valuable to look at the historical attrition rate, businesses need to be able to project the attrition rate to gauge the company’s future performance. The projected attrition rate can be compared to attrition rates in other businesses in the same industry or sector. If an unfavorable attrition rate is projected, businesses can implement strategies now to reduce employee turnover. | #Understand the value of projecting the attrition rate. While it’s valuable to look at the historical attrition rate, businesses need to be able to project the attrition rate to gauge the company’s future performance. The projected attrition rate can be compared to attrition rates in other businesses in the same industry or sector. If an unfavorable attrition rate is projected, businesses can implement strategies now to reduce employee turnover. | ||
| − | #Learn the formula for annualizing data. If you know the number of attritions for a few months, you can extrapolate this information for the rest of the year. Remember that this number is a projection. It may not take into account seasonal changes that may impact the true attrition rate.<ref>http://www.readyratios.com/reference/analysis/annualized_rate.html</ref> | + | #Learn the formula for annualizing data. If you know the number of attritions for a few months, you can extrapolate this information for the rest of the year. Remember that this number is a projection. It may not take into account seasonal changes that may impact the true attrition rate.<ref name="rf2">http://www.readyratios.com/reference/analysis/annualized_rate.html</ref> |
#* Use the formula <math>R_a = 1 + R_c^{12/N} - 1*100</math>. | #* Use the formula <math>R_a = 1 + R_c^{12/N} - 1*100</math>. | ||
#* <math>R_a</math> = annualized attrition rate | #* <math>R_a</math> = annualized attrition rate | ||
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#* The projected attrition rate for the second quarter is 2.73 percent. | #* The projected attrition rate for the second quarter is 2.73 percent. | ||
=== Analyzing the Impact of Attrition Rate === | === Analyzing the Impact of Attrition Rate === | ||
| − | #High attrition rates can damage a company’s brand. Customers rate their satisfaction with a company largely on their relationship with its employees. Customers may think they are purchasing inferior products or receiving diminished services because of the change in personnel. They may attribute this to lower staffing levels or lack of morale and motivation on the part of the remaining employees.<ref>http://www.strategy-business.com/article/re00229?gko=bfe45</ref> | + | #High attrition rates can damage a company’s brand. Customers rate their satisfaction with a company largely on their relationship with its employees. Customers may think they are purchasing inferior products or receiving diminished services because of the change in personnel. They may attribute this to lower staffing levels or lack of morale and motivation on the part of the remaining employees.<ref name="rf3">http://www.strategy-business.com/article/re00229?gko=bfe45</ref> |
| − | #Attrition rates impact the bottom line. If businesses lose customers due to high attrition rates, this naturally impacts the bottom line. One [http://jsr.sagepub.com/content/15/4/460.abstract study] concluded that high attrition rates impacted one company’s profitability by as much as 400 percent. They looked at different branches of a temporary help services firm. The branches with the highest attrition rates tended to be about four times less profitable than those with the lowest attrition rates.<ref | + | #Attrition rates impact the bottom line. If businesses lose customers due to high attrition rates, this naturally impacts the bottom line. One [http://jsr.sagepub.com/content/15/4/460.abstract study] concluded that high attrition rates impacted one company’s profitability by as much as 400 percent. They looked at different branches of a temporary help services firm. The branches with the highest attrition rates tended to be about four times less profitable than those with the lowest attrition rates.<ref name="rf3" /><ref name="rf4">http://jsr.sagepub.com/content/15/4/460.abstract</ref> |
| − | #Improving employee retention rates can save businesses money. When an employee leaves, a company may spend as much as one-fifth of that employee’s salary to replace that employee. If a business experiences a high rate of attrition, this can represent a significant cost. Productivity losses when someone leaves, the cost of hiring and training a new employee and slower productivity until the new worker learns the job contribute to these costs. Companies can avoid these expenses by implementing policies that improve employee retention. Workplace flexibility, accrued sick time and paid family leave may help reduce loss of employees.<ref>https://www.americanprogress.org/issues/labor/report/2012/11/16/44464/there-are-significant-business-costs-to-replacing-employees/</ref> | + | #Improving employee retention rates can save businesses money. When an employee leaves, a company may spend as much as one-fifth of that employee’s salary to replace that employee. If a business experiences a high rate of attrition, this can represent a significant cost. Productivity losses when someone leaves, the cost of hiring and training a new employee and slower productivity until the new worker learns the job contribute to these costs. Companies can avoid these expenses by implementing policies that improve employee retention. Workplace flexibility, accrued sick time and paid family leave may help reduce loss of employees.<ref name="rf5">https://www.americanprogress.org/issues/labor/report/2012/11/16/44464/there-are-significant-business-costs-to-replacing-employees/</ref> |
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