Attrition rate
What is Attrition Rate?
Attrition rate, often referred to as employee turnover rate, measures the percentage of employees who leave a company over a specific period. Unlike general turnover, attrition typically refers to employees who leave voluntarily and are not immediately replaced—which can signal deeper organizational trends.
How to Calculate Attrition Rate
The formula for attrition rate is straightforward:
For example, if a company starts with 500 employees, loses 50 over the year, and does not replace them, the attrition rate would be:
(50/500)x100 = 10%
Why Attrition Matters in HR and Recruitment
High attrition rates can be costly and disruptive for businesses. According to Gallup, U.S. businesses lose $1 trillion annually due to voluntary turnover. While some attrition is natural, a consistently high rate can indicate issues with workplace culture, employee engagement, or career growth opportunities.
Types of Attrition
- Voluntary Attrition – When employees resign for better opportunities, work-life balance, or dissatisfaction.
- Involuntary Attrition – When employees leave due to layoffs, terminations, or company downsizing.
- Retirement Attrition – When employees retire, there is a gradual reduction in the workforce.
- Internal Attrition – When employees leave one department for another within the same company.
Real-World Examples: How Companies Handle Attrition
- TCS and Infosys (India’s IT Sector): In recent years, Indian IT giants Tata Consultancy Services (TCS) and Infosys have experienced notable fluctuations in their workforce dynamics. During the fiscal year 2023-2024, both companies reported a decline in employee headcount for the first time in their histories, with a combined reduction of 63,759 employees across TCS, Infosys, and Wipro.
- Amazon’s High Attrition Model: In certain employee levels, attrition rates have been reported as high as 81.3%, with only a third of new hires remaining with the company for over 90 days in 2021.
Key Reasons for High Attrition
- Lack of Career Growth – According to LinkedIn’s 2019 Workforce Learning Report, a significant 94% of employees indicated they would remain with their employer longer if the company invested in their learning and development.
- Workplace Culture Issues – Toxic work environments are a significant driver of employee turnover. On the other hand, companies that foster a positive and inclusive workplace culture tend to experience much lower attrition rates, as employees are more likely to stay in environments where they feel valued and supported.
- Compensation & Benefits – Competitive compensation and benefits play a critical role in employee retention. Many employees consider salary a key factor when deciding whether to stay with or leave an organization, highlighting the importance of fair and transparent pay structures.
- Work-Life Balance – Burnout and rigid work policies drive employees to companies offering flexibility.
How AI and HR Tech Reduce Attrition
Companies are turning to AI-powered HR tools for predictive analytics, identifying flight risks before employees leave. AI-driven insights help HR teams:
- Track employee sentiment trends through surveys and feedback tools.
- Personalize career development paths to boost retention.
- Identify patterns in exit interviews to address common issues.
Final Thoughts
A high attrition rate isn’t just about losing employees—it’s about losing time, money, and productivity. Businesses that prioritize employee experience, growth opportunities, and work-life balance will see lower attrition and a stronger workforce. Understanding and addressing attrition is key to long-term recruitment success.
