In 2025, HR leaders had to face the consequences of something they never thought would happen, which is losing and retaining employees drastically worsened. This is a direct impact of the pandemic. The way people view work has changed; hybrid work models are standard, and employee demands have changed, too.
Losing invaluable resources is not a scenario that is acceptable, considering the global talent deficit is likely to reach over 85 million by 2030. It means higher costs and lower productivity, making it increasingly difficult to fill positions.
Thus, understanding the root causes of employee attrition and how it is calculated is the first step in improving the attrition rate puzzle. This will assist in reversing the downward spiral.
This guide demonstrates the employee attrition calculation formula and provides practical strategies to improve attrition and counter the impact that poor employee attrition has on business growth.
What Is Employee Attrition?
Employee attrition is the gradual phase-out of your manpower as workers are not replaced as they leave your organization.
Unlike turnover, which involves quick replacements, attrition refers to a prolonged decline in staff numbers. This can result from resignations, retirements, or lateral shifts within the company.
Types of Employee Attrition
- Voluntary Attrition: Employees leave for various reasons, for instance, personal or career prospects.
- Involuntary Attrition: As a result of the company funds shortage, the employee is deemed expendable due to performance or restructuring issues. Responsibly rests with them.
- Retirement Attrition: Employees voluntarily retire, which causes a natural decline in the workforce.
- Internal Attrition: Employees move to a different position within the same company, resulting in openings in their previous department.
Why Tracking Attrition Is Essential for Workforce Planning and Talent Retention
Measuring attrition rates helps HR leaders in managing costs and formulating retention plans. Here are a few other reasons why it is important:
- Identify and address issues that lead to employee attrition.
- Decrease attrition levels by retention strategies aimed towards employee satisfaction.
- Increase retention rates by employing retention strategies.
- Focus recruitment efforts on the areas where the workforce is lacking.
Why Employees Leave: Key Reasons Behind High Attrition
Most employees leave because their expectations from the organization are not met, they experience stagnation, or there are better opportunities in the market.
Here are the main reasons why employees choose to leave a company:
- Limited Career Growth & Development
In an environment with limited or no opportunities for career advancement and skill development, employees tend to look for new employment opportunities.
Lack of vertical mobility and training results in boredom, and talented people who want to progress in their careers abandon such companies in favor of those that enable professional growth.
- Compensation & Benefits Not Competitive
Salary remains a top factor in job decisions. Without regular benchmarking and adjustments to meet market standards, employees feel undervalued.
Competitive compensation, along with attractive benefits, is crucial to retain top talent and reduce the attrition rate.
- Work-Life Balance Issues & Burnout
Work-related flexibility is in substantial demand today. Long hours and little to no remote work-friendly schedules largely contribute to the burnout cycle.
Employees are transitioning into different organizations that devote better assistance to work-life balance and mental health research funds campaigns.
- Poor Leadership & Management Issues
Employees don’t quit their jobs; they quit managers. Poor communication, lack of strong vision and unsupportive workplace leads to considerable unhappiness in the workforce.
- Better Market Opportunities & Employer Branding
With access to more information, employees are aware of better roles, benefits, and cultures elsewhere. Companies with weak employer branding or outdated practices risk losing talent to organizations with stronger reputations and modern work environments.
How to Calculate Employee Attrition Rate
Calculating your attrition rate is essential for understanding workforce stability and identifying trends in employee attrition. Here’s how you can do it accurately using a simple formula.
Attrition Calculation Formula:
Attrition Rate (%) = (Number of Attritions / Average Number of Employees) x 100
This formula helps HR leaders track how many employees leave over time, making it easier to develop strategies to reduce employee attrition.
Let’s take Company A as an example:
- At the start of the quarter, Company A has 500 employees.
- By the end of the quarter, it had 480 employees after 20 employees left.
Step 1: Calculate the average number of employees during the period:
(500+480)/2 = 490
Step 2: Divide the number of employees who left by the average number of employees:
20/490 = 0.0408
Step 3: Multiply by 100 to get the attrition rate:
0.0408×100 = 4.08%
So, Company A’s attrition rate for the quarter is 4.08%.
Common mistakes in attrition calculations and how to avoid them
Most human resource departments struggle with making an accurate calculation of attrition rates. The data provided can be erroneous. Here are the top three mistakes and how to avoid them:
- Use of Inconsistent Timeframes: Blending two data compilations, such as an annual and monthly report, will yield inconsistency in results. Steady periods of compilation must be used, such as year, quarter, or month, for more accuracy.
- Excluding Certain Employee Categories: In your calculation of attrition rates, fellow part-time, seasonal, and contract workers must be included to ensure accuracy over the entire workforce. Without these categories, the calculation will not be genuine.
- Incorrect Employee Count: The attrition calculation is flawed when one only makes use of starting or ending figurative figures and chooses not to make use of average employee figurative figures. Make use of figurative employee averages throughout the entire phase to accurately compile the results.
What is a Good Attrition Rate? (Industry Benchmarks)
As the years go by, the retention ratio differs on factors such as the size of the business, the industry of focus, and the current market scenario.
However, in general terms, the accepted figure is stiff, rounding 10% to 20% annually. A lower or higher regulatory rate comes with retention challenges.
Industry-Specific Attrition Rate Averages
- Construction: 54% – An extremely high amount of attrition is seen, primarily because the work is based on specific projects and seasonal employment.
- Manufacturing: 37% – The retention issues are related to strenuous working conditions and limited growth opportunities.
- Trade, Transportation, and Utilities: 49% – The combination of challenging working conditions and competitive salaries caused high turnover rates.
- Information (Tech): 32% – The demand for skilled professionals is so high that many people feel the need to switch jobs frequently.
- Finance: 29% – While higher salaries do succeed at retaining some of the skilled workers, the long working hours drive the employees to look for better opportunities elsewhere.
- Professional & Business Services: 57% – The high competition for business, as well as the influx of freelancers or startups, have resulted in high rates of attrition.
- Education & Health Services: 39% – Employees tend to leave because overstress combined with a lack of adequate remuneration leads to burnout.
- Leisure & Hospitality: 79% – This sector has the highest employee turnover rate due to the nature of the industry, which comprises seasonal employment, low wages, and high workload.
- Government: 18% – It has better benefits and pensions associated with government jobs translates to lower turnover rates.
Strategies to Improve Attrition Rate
A combination of effective HR practices can bring down attrition rates by focusing on the experience, satisfaction, and loyalty of employees.
Below are some measures an HR manager can take to improve attrition rates alongside retaining the best talent:
Improve Employee Engagement & Work Culture
Retention practices should be built on a foundation of high employee engagement and a great workplace culture. Business-wide adoption of recognition systems for goals, achievements, and efforts can result in significantly lower attrition rates owing to employees’ commitment. Appreciation helps foster commitment to any business.
As a part of organizational development, offering good career plans should be a norm to ensure employees appreciate the organization at large. Feedback, in particular, should be routine, and HR managers should use employee engagement systems to proactively manage the feedback cycle, ensuring concerns are dealt with promptly.
Solutions like PeopleStrong’s Talent Management Suite provide the necessary tools to enhance employee engagement, making it easier to develop retention strategies that resonate with the workforce. Investing in engagement initiatives helps build a motivated, loyal team while minimizing turnover risks.
Offer Competitive Salaries & Benefits
Equal pay is one of the top reasons companies lose or keep employees. Secondly, to improve the attrition rate, HR teams should benchmark their salary offerings against other top companies within the industry.
Thorough payment packages and lifestyle benefits matter, too. Constructing total rewards programs like bonuses, health, wellness, and retirement plans boosts employee morale.
Ensuring all employees feel valued and fairly compensated for their contribution to the firm is done through regularly reviewing and adjusting payment packages.
PeopleStrong’s Compensation & Benefits Module can help you simplify salary benchmarking and reward management. This enables HR leaders to maintain competitive compensation strategies that retain talent and reduce turnover effectively.
Provide Career Growth & Learning Opportunities
Employees are more inclined to stay when growth opportunities exist within the company. Providing learning and development (L&D) programs keeps employees engaged as they enhance their skills and motivates them to stay with the company.
Here are a few tips that can help you through:
- Offer personalized training programs based on employee strengths.
- Promote from within whenever possible to boost loyalty.
- Conduct regular training sessions, mentorship programs, and certifications to boost employee morale and productivity.
For example, retention rates can improve significantly by providing internal courses and training. Moreover, encouraging movement between positions within the company can reduce turnover rates.
Optimize Work-Life Balance & Hybrid Work Models
A flexible work environment is not anymore regarded as an incentive, but a requirement. Implementing remote work policies, flexible schedules, and hybrid models supports employees and improves their work-life balance.
Wellness breaks, wellness leaves, and other mental health programs are equally important in combating burnout. Here are some new strategies you can utilize:
- Introduce “no-meeting” days to prevent burnout.
- Provide access to wellness apps and mental health support.
Strengthen Leadership & Management Training
Leadership effectiveness also determines employee retention. Employees are likely to leave because of bad management, whereas effective leaders build trust and motivation, which makes employees loyal.
Investing in managerial effectiveness programs that include leadership seminars, problem-solving training, and communication skills workshops can help.
As an example, consider allocating significant financial resources into leadership seminars for your branch’s store managers and you will experience higher employee retention.
PeopleStrong Leadership Development Solutions allows you to customize the training as per the specific team’s requirement to ensure that they actually support and retain their teams. Here are some suggestions that may assist:
- Implement 360-degree feedback to help managers improve.
- Offer coaching sessions for new managers.
Use Predictive HR Analytics to Reduce Attrition
Data-driven HR strategies are essential for predicting and preventing attrition. Leveraging AI-powered analytics helps HR leaders identify at-risk employees by analyzing patterns like declining performance, lack of engagement, or absenteeism.
For example, you can use software to predict employee attrition and successfully reduce turnover through early intervention.
PeopleStrong’s Workforce Analytics Solution offers real-time insights, helping HR teams develop proactive retention strategies by forecasting resignation trends.
Leveraging HR Tech to Manage and Reduce Attrition
In today’s world, automation helps HR leaders manage attrition rates swiftly and provide immediate explanations for employee turnover and retention problems. HR technology has reshaped how businesses manage their attrition rates. With HR automation features, employers can track and manage changes as they happen.
Retaining employees and proper workforce management are facilitated by advanced HR artificial intelligence tools. AI-powered HR technologies examine employee records with the goal of detecting personnel’s departure intentions and highlighting phenomena that cause employees to leave.
For instance, AI can monitor engagement levels, absence patterns, or performance losses and allows HR teams to make important decisions regarding employment early enough.
When choosing an HR analytics platform, look for features like:
- Predictive Analytics: Forecast employee attrition trends and identify at-risk employees.
- Real-Time Dashboards: Get up-to-date insights into workforce metrics and attrition rates.
- Customizable Reports: Tailor reports to your organization’s specific needs for better decision-making.
- Seamless Integration with Existing HR Systems: Ensure smooth data flow across all HR functions.
- AI-Driven Insights: Leverage machine learning to analyze employee behavior and improve retention strategies.
- Employee Sentiment Analysis: Track employee engagement and satisfaction through surveys and feedback tools.
- Automated Alerts and Notifications: Receive instant alerts on critical workforce changes or potential risks.
PeopleStrong’s HR Tech 4.0 platform offers comprehensive solutions across the employee lifecycle—from recruitment and onboarding to performance management and succession planning.
Its AI and machine learning capabilities empower HR leaders to make data-driven decisions, enhance employee experiences, and implement effective retention strategies.
With tools like Jinie, an AI chatbot, and real-time employee sentiment analysis, PeopleStrong helps enterprises across APAC simplify workforce management and retain top talent efficiently.
Future-Proofing Your Workforce with PeopleStrong
Tracking employee attrition is essential for enterprise HR teams to maintain workforce stability, reduce costs, and enhance productivity. By understanding why employees leave and using accurate attrition calculation formulas, organizations can address root causes and implement strategies to improve attrition rate effectively.
Adopting data-driven HR strategies ensures better decision-making, proactive retention efforts, and long-term employee satisfaction. Tools like predictive analytics, real-time dashboards, and AI-driven insights help HR leaders stay ahead of attrition challenges.
To build a resilient, future-ready workforce, explore PeopleStrong’s HR Tech solutions. Our comprehensive platform empowers enterprises to simplify HR processes, enhance employee experiences, and retain top talent efficiently.
Partner with PeopleStrong to transform your HR strategy today.
