Attrition rate: There is no standard formula to calculate the attrition rate of a company.

This is
because of certain factors as:

• The employee base changes each month. So if a company has 1,000 employees in April
2004 and 2,000 in March 2005, then they may take their base as 2,000 or as 1,500
(average for the year). If the number of employees who left is 300, then the attrition figure
could be 15 percent or 20 percent depending on what base you take.

• Many firms may not include attrition of freshers who leave because of higher studies or
within three months of joining.

• In some cases, attrition of poor performers may also not be treated as attrition. Calculating
attrition rate:

Attrition rates can be calculated using a simple formula:

Attrition =(No. of employees who left in the year / average employees in the year) x 100

Thus, if the company had 1,000 employees in April 2004, 2,000 in March 2005, and 300 quit in the
year, then the average employee strength is 1,500 and attrition is 100 x (300/1500) = 20 percent.
Besides this, there are various other types of attrition that should be taken into account. These are:

• Fresher attrition that tells the number of freshers who left the organization within one year.
It tells how many are using the company as a springboard or a launch pad.

• Infant mortality that is the percentage of people who left the organization within one year.
This indicates the ease with which people adapt to the company.

• Critical resource attrition which tell the attrition in terms of key personnel like senior
executives leaving the organization.

• Low performance attrition: It tells the attrition of those who left due to poor performance.

Attrition Costs
One of the best methods for calculating the cost of turnover takes into account expenses involved to
replace an employee leaving an organization. These expenses are:

A. Recruitment cost
The cost to the business when hiring new employees includes the following six factors plus 10
percent for incidentals such as background screening:

• Time spent on sourcing replacement

• Time spent on recruitment and selection

• Travel expenses, if any

• Re-location costs, if any n Training/ramp-up time

• Background/reference screening

B. Training and development cost

To estimate the cost of training and developing new employees, cost of new hires must be taken
into consideration. This will mean direct and indirect costs, and can be largely classified under the
following heads:
 • Training materials

• Technology

• Employee benefits

• Trainers’ Time

C. Administration cost
They include:

• Set up communication systems

• Add employees to the HR system

• Set up the new hire’s workspace

• Set up ID-cards, access cards, etc.

Hi Aditi,

Am attaching the excel sheet for as a ready reckoner for the calculation of Attrition
rate.

Yes, you are right that there are many formulaes available and the question arises
which ones to use? well , i suggest take the one which best fits your organization and
simple formula to be used is :-

Total Number of Resigns per month (Whether voluntary or forced) divided by (Total
Number of employees at the beginning of the month plus total number of new
joinees minus total number of resignations) multiplied by 100.

Attrition rate by itself doesn't reveal much or is rather ham handed when this topic is
raised in the Management meetings. The attrition rate to be meaningful has to be
analyzed well from different perspectives

Suggest that you further break up the data pertaining to attrition rate in the
following manner:-
• Experienced professionals with particular proficiency like Java or C++,
• Number of people who served for x years,
• Retirement
• Forced attrition rate – people who have been asked to leave for non-performance.
• Joining competitors- further can be broken into two categories viz C&B and
areas/new technologies or platforms working on
• Attrition rate department wise or city wise
If you wish to know more attrition rate & find ways to contain it – then I suggest
refer the website link on a seminar for the same.
http://www.naukri.com/mailers/salahk...05/mailer4.htm - 32k

Hope this is of help to you.

Dear Friends,

Can any one help me in understanding how attrition % is calculated. I'm trying to understand the
process what we follow is as per industry or not.

We calculate as follows:

Formula : Attrition for the month/Total Headcount * 100

Ex : 3012 Headcount for the month (Last month Headcount 2812 + 200 new joinees) 65
resignations for the month.

65/3012 * 100 = 2.15% I'm not convinenced with the formula......

We recruit every month 200 - 250 members (continuous recruitment), should we include new
joinees while calculating attrition % ? if so, we will not know correct % any time.

Regards,

Prashant Thakkar

Message From: hr.hitesh Total Posts: 20 Rank: Beginner

Post Date: 15/09/2006 12:56:59 Points: 100

I guess attrition % is calculated as a Annualised figure. Hence, if you are calculating the Attrition
rate (monthly) then the formula is Attrition for the month / Total Head count * 100 * 12

In your example the attrition rate (annualised one ) has to be 2.15*12 = 25.8 % (ho, i guess it is
quite huge).

To test this formula, assuming 65 resignations per month is constant and that Head count of 3012
stands constant (i.e. 200 new joinees) every month, the total no. of resignations is 780 in a year. It
accounts to 25.8 %. The same figure that you have obtained for the monthly annualised attrition
rate.

Hope this gives some clarity to you.

Message From: sweta_hr12@yahoo.com Total Posts: 1 Rank: Beginner

Post Date: 10/02/2009 01:09:12 Points: 5
Hi Prashant,

Attrition in an organization simply refers to resignations in a particular month,quarter or year.To

simplify it further, it refers to the number of employees who leave an organization.And formula for
calculation fo attrition % is

Attrition%=(No. of Employees Quit) /(Avg. Employees during that time frame) %100

Inputs for computing Annualized Value is

Monthly – Multiply the Value by 12
Quarterly – Multiply the Value by 4
Half Yearly – Multiply the value by 2
Annual – Do not multiply :-)

Just to elaborate with example with respect to data shared below is:

If in a month there are 65 no. of quit cases and average no. of emp strength till date was 3012
then:

Attirition%YTD=65/3012*100=2.15% hence,monthly attrition %(YTD) for that month will be

2.15%*12=25.8%

Hope this clarification will help you with fair enough understanding on Attrition analysis.

Message From: savi989 Total Posts: 58 Rank: Beginner

Post Date: 20/02/2009 10:50:30 Points: 290

There are different ways of calulating attrition. it could be calculated on monthly, quaterly, bi-
annually, or annually.

for monthly calculation it is imp to calculate average headcount and attrition is always calculated on
the base value. for monthly basis:

opening bal+closing balance/2=avg head count

closing bal=opening+new joinees-exits

attrition= involuntary exits/avg headcouny*100*12

i hope this solves ur query

Message From: Taranminhas Total Posts: 1 Rank: Beginner

Post Date: 13/04/2009 02:05:59 Points: 5

HI!

Formula for Attrition is supported here by giving a suitable example.:

No of Head Counts in a Month start : 100

No of additions in a month : 50

Attrition : 20

Closing Head Counts at the end of the month : 100+50-20=130

Formula for calculation of Attrition is : 20*100/130 =15.38%

I hope it will clear your doubts.

Regards

Taranpreet Minhas

Message From: sanjaibabu.j Total Posts: 2 Rank: Beginner

Post Date: 23/04/2009 07:05:08 Points: 10

Dear Prashanth,

Pls find the formula that we use.

Annual attrition rate: Total number of resigned employee in past 12 months / (headcount at month
1-Jan + headcount at month 12-DEC)/2
Monthly attrition rate: total number of resignees in a month/(headcount in the begining of the mth
+ headcount at the end of the mth)/2

Opening Balance = 415

New addition = 115
Attrition = 129
Attrition formula to % = 129/472.5*100
= 27.3%

Message From: bharatraiverma Total Posts: 1 Rank: Beginner

Post Date: 06/01/2010 04:30:07 Points: 5

Dera Prashant, PFB the attrition formula. opening count + closing count divided by 2 then divided
by the number of attrition count Example: 1. December opening count was : 25 2. Resigned in
December : 4 3. Employees Left : 21 4. New Joinees in December : 4 5. Now December closing
count : 25 Now the calculation would be: 1. 25+25 = 50 2. 50/2 = 25 3. 4/25 = 16% So attrition
rate for December was 16% Thanks & Regards Bharat Rai Verma
High Attrition Rate: A Big Challenge

Defining attrition: "A reduction in the number of employees through retirement, resignation or death"

Defining Attrition rate: "the rate of shrinkage in size or number"

Introduction: In the best of worlds, employees would love their jobs, like their coworkers, work hard for their
employers, get paid well for their work, have ample chances for advancement, and flexible schedules so
they could attend to personal or family needs when necessary. And never leave.

But then there's the real world. And in the real world, employees, do leave, either because they want more
money, hate the working conditions, hate their coworkers, want a change, or because their spouse gets a
dream job in another state. So, what does all that turnover cost? And what employees are likely to have the
highest turnover? Who is likely to stay the longest?

Background of article

The IT enabled services (BPO) industry is being looked upon as the next big employment generator
(Nasscom predicts 1.1 million job requirement by the year 2008). It is however no easy task for an HR
manager in this sector to bridge the ever increasing demand and supply gap of professionals. Unlike his
software industry counterpart, the BPO HR manager is not only required to fulfill this responsibility, but also
find the right kind of people who can keep pace with the unique work patterns in this industry. Adding to this
is the issue of maintaining consistency in performance and keeping the motivation levels high, despite the
monotonous work. The toughest concern for an HR manager is however the high attrition rate.

In India, the average attrition rate in the BPO sector is approximately 30-35 percent. It is true that this is far
less than the prevalent attrition rate in the US market (around 70 percent), but the challenge continues to be
greater considering the recent growth of the industry in the country. The US BPO sector is estimated to be
somewhere around three decades old. Keeping low attrition levels is a major challenge as the demand
outstrips the supply of good agents by a big margin. Further, the salary growth plan for each employee is not
well defined. All this only encourages poaching by other companies who can offer a higher salary.

The much hyped "work for fun" tag normally associated with the industry has in fact backfired, as many
individuals (mostly fresh graduates), take it as a pas-time job. Once they join the sector and understand
its requirements, they are taken aback by the long working hours and later monotony of the job
starts setting in. This is the reason for the high attrition rate as many individuals are not able to take the
pressures of work.

The toughness of the job and timings is not adequately conveyed. Besides the induction and project training,
not much investment has been done to evolve a "continuous training program" for the agents. Motivational
training is still to evolve in this industry. But, in all this, it is the HR manager who is expected to
straighten things out and help individuals adjust to the real world. I believe that the new entrant needs to be
made aware of the realistic situation from day-one itself, with the training session conducted in the nights, so
that they get accustomed to things right at the beginning.
The high percentage of females in the workforce (constituting 30-35 percent of the total), adds to the high
attrition rate. Most women leave their job either after marriage or because of social pressures caused by
irregular working hours in the industry. All this translates into huge losses for the company, which invests a
lot of money in training them.

If a person leaves after the training it costs the company about Rs 60,000. For a 300-seater call centre
facing the normal 30 percent attrition, this translates into Rs 60 lakh per annum. Many experts are of believe
that all these challenges can turn out to be a real dampener in the growth of this industry. This only raises
the responsibility of "finding the right candidate" and building a "conducive work environment", which will be
beneficial for the organization. The need is for those individuals who can make a career out of this.

All this has induced the companies to take necessary steps, both internally and externally. Internally most
HR managers are busy putting in efforts on the development of their employees, building innovative
retention and motivational schemes (which was more money oriented so far) and making the environment
livelier. Outside, the focus is on creating awareness through seminars and going to campuses for
recruitment.

Major Worries for the Industry

• Reckless Start-ups- a vast majority of the 310 start-ups are headed for a dead-end (according to
Nasscom). Their capacity utilization is less than one of the three shifts. Many of these companies
that converted their empty basements and warehouses into BPO units or firms with $10 million-20
million VC funds that ran out of cash without creating anything more than white elephants. They
have driven down prices to grab business, but have failed to deliver. They were always clueless
about people, processes or technologies- the three key elements of the BPO business.
• Poor Infrastructure- the industry has more to worry about than just reckless start-ups. Primary
among those is infrastructure. While telecom networks are state of the art, getting a connection still
takes up to three months. Unreliable power supply is forcing units to create their own back-ups.
Roads are bad and airports are in dire need of repairs and upgrades.
• High Attrition-another major problem is the high attrition and growth aspirations of the workforce. At
least 60,000 of the 171,000 workforce change jobs every year. About 80% of them look for better
leaders. Team leaders want to upgrade to supervisors, quality professionals or operations heads.
The HR problem threatens to soon become grave. Good agents are becoming hard to find and with
tardy infrastructure, big moves to the much talked about smaller towns will take longer. This means
costs will rise making it difficult for small VC-funded companies to survive.

Attrition rates

US 42%
Australia 29%
Europe 24%
India 18%
Global Average 24%

* Source-Times News New York

Purpose of Writing this Article

Staff attrition (or turnover) and absenteeism represent significant costs to most organizations. It is odd,
therefore, that many organizations neither measure such costs nor have targets or plans to reduce them.
Many organizations appear to accept them as part of the cost of doing business - a sign of increasing job
mobility and decreasing staff loyalty perhaps, a matter to be regretted but just 'one of those things.' They
add a sum in their budgets for 'temp staff' and 'recruitment' and forget about it.

However, it seems to be one of the areas in which HR can make a difference - and one that can be
measured in quantifiable, financial terms against targets.

An attrition rate in call (or contact) centres has become legendary. Indeed, the attrition rates in some Indian
call centers now reach 80%. This is an extreme figure but the average attrition rates in Indian call centers
are up around 30-40%.

However, it is interesting to note that the attrition rates in India - and the costs associated - are so high that
they can override the benefits of lower wage costs. While wages in call centres in Indian are less than one-
eighth of those in Northern Europe, it has been reported that Hewlett-Packard have found the cost per
'ticket' (the cost of processing a query) has doubled "due to the inability of the staff to resolve customer
queries efficiently because of language barriers and inexperience." It is said that this increased cost has
made HP's move from Ireland to India "completely pointless," and that it can never recover the (substantial)
costs of the move. It is further reported that GE Capital has moved a call centre back to Australia "after staff
attrition rates of 70% wiped away any potential cost savings."

The issue is not with the quality or education of the staff - and still less with the investment in technology. It
is simply attrition - people do not stay long enough to be taught or to learn the job. The staff may be cheaper
but if they cannot do the job, what's the point? Managing attrition is not just a 'nice thing to do' in Indian call
centres. It is the route to their survival.

Far from accepting attrition rates as part of the cost of doing business, it is surely something that all
organizations should address, and equally surely it is an area in which HR can take a lead - measure
attrition, seek its causes, set out solutions and target performance.

Components to be taken into consideration, while calculating attrition rate

I request HR professionals not to drive their own formulas to calculate attrition rate. In terms of numbers,
attrition rate means:

Total Number of Resigns per month (Whether voluntary or forced) divided by (Total Number of employees at
the beginning of the month plus total number of new joinees minus total number of resignations) multiplied
by 100.

If calculating in monetary terms, it includes the following:

Costs Due to a Person Leaving

1. Calculate the cost of the person(s) who fills in while the position is vacant. Calculate the cost of lost
productivity at a minimum of 50% of the person's compensation and benefits cost for each week
 the position is vacant, even if there are people performing the work. Calculate the lost productivity
at 100% if the position is completely vacant for any period of time.
2. Calculate the cost of conducting an exit interview to include the time of the person conducting the
interview, the time of the person leaving, the administrative costs of stopping payroll, benefit
deductions, benefit enrollments.
3. Calculate the cost of the manager who has to understand what work remains, and how to cover
that work until a replacement is found.
4. Calculate the cost of training your company has invested in this employee who is leaving.
5. Calculate the impact on departmental productivity because the person is leaving. Who will pick up
the work, whose work will suffer, what departmental deadlines will not be met or delivered late.
6. Calculate the cost of lost knowledge, skills and contacts that the person who is leaving is taking
with them out of your door. Use a formula of 50% of the person's annual salary for one year of
service, increasing each year of service by 10%.
7. Subtract the cost of the person who is leaving for the amount of time the position is vacant.

Recruitment Costs

1. The cost of advertisements; agency costs; employee referral costs; internet posting costs.
2. The cost of the internal recruiter's time to understand the position requirements, develop and
implement a sourcing strategy, review candidates backgrounds, prepare for interviews, conduct
interviews, prepare candidate assessments, conduct reference checks, make the employment offer
and notify unsuccessful candidates. This can range from a minimum of 30 hours to over 100 hours
per position.
3. Calculate the cost of the various candidate pre-employment tests to help assess a candidates'
skills, abilities, aptitude, attitude, values and behaviors.

Training Costs

1. Calculate the cost of orientation in terms of the new person's salary and the cost of the person who
conducts the orientation. Also include the cost of orientation materials.
2. Calculate the cost of departmental training as the actual development and delivery cost plus the
cost of the salary of the new employee. Note that the cost will be significantly higher for some
positions such as sales representatives and call center agents who require 4 - 6 weeks or more of
classroom training.
3. Calculate the cost of the person(s) who conduct the training.
4. Calculate the cost of various training materials needed including company or product manuals,
computer or other technology equipment used in the delivery of training.

Lost Productivity Costs

As the new employee is learning the new job, the company policies and practices, etc. they are not fully
productive. Use the following guidelines to calculate the cost of this lost productivity:

1. Upon completion of whatever training is provided, the employee is contributing at a 25%

productivity level for the first 2 - 4 weeks. The cost therefore is 75% of the new employees full
salary during that timeperiod.
 2. During weeks 5 - 12, the employee is contributing at a 50% productivity level. The cost is therefore
50% of full salary during that timeperiod.
3. During weeks 13 - 20, the employee is contributing at a 75% productivity level. The cost is
therefore 25% of full salary during that timeperiod.
4. Calculate the cost of mistakes the new employee makes during this elongated indoctrination
period.

New Hire Costs

1. Calculate the cost of bring the new person on board including the cost to put the person on the
payroll, establish computer and security passwords and identification cards, telephone hookups,
cost of establishing email accounts, or leasing other equipment such as cell phones, automobiles.
2. Calculate the cost of a manager's time spent developing trust and building confidence in the new
employee's work.

Lost Sales Costs

1. Calculate the revenue per employee by dividing total company revenue by the average number of
employees in a given year. Whether an employee contributes directly or indirectly to the generation
of revenue, their purpose is to provide some defined set of responsibilities that are necessary to the
generation of revenue. Calculate the lost revenue by multiplying the number of weeks the position
is vacant by the average weekly revenue per employee.

Conclusion: It is clear that there are massive costs associated with attrition or turnover and, while some of
these are not visible to the management reporting or budget system, they are none the less real. The 'rule of
thumb' appears to be very inaccurate indeed and, while it depends upon the category of staff, it is probably
better to estimate around 80% of salary as a truer rule of thumb - and this will be on the conservative side.
What does this mean? Well it means that if a company has 100 people doing a certain job paid 25,000 and
that turnover or attrition is running at 10%, the cost of attrition is:

(Total staff x attrition rate %) x (annual salary x 80%)

• 100 staff at 10% attrition means 10 people leave and are replaced each year.
• A replacement cost of 80% of a salary of 25,000 means the cost of each replacement is 20,000.
• The cost of turnover is therefore 10 x 20,000 or 200,000 a year.
• The oncost to the overall salary bill is 8%.

(Saving 8% of salary costs would make the average HR manager a hero.)